Hate doing your own laundry? Procter & Gamble (NYSE:PG) is now offering a subscription service that will do it for you, including home pickup and delivery, as well as mobile ordering. This new service is called "Tide-Spin" and here's why it's an important step for P&G.
Laundry to go -- coming to a city near you
"We're focused on simplifying the chore of laundry for our customers," it says on TideSpin.com. This mobile app-based service allows consumers to log in and schedule a pick up, or set up a recurring schedule in which they leave their laundry bag out, and it gets cleaned and delivered back without hassle. Other than convenience, the company promises the cleaning will be done by trained experts using only premium Tide detergents, and it guarantees coverage for any lost or damaged clothes.
For all of this, Tide Spin charges customers just $1.59 per pound of regular laundry, or set fees for dry-cleaned items. As of now, the service is only being tested in Chicago, but it could be expanding to other cities soon.
P&G gets ahead of laundry disruption
P&G's grooming segment was its worst-performing segment in fiscal year 2016 ended June 30. The segment's earnings from continued operations during the year were down 13%. Part of the reason for this bleak segment performance was a little start-up called Dollar Shave Club. This simple but innovative company that markets itself by spreading humorous but absurd videos has been highly successful. It takes on a fun and fresh persona in an old and tired industry, and offers the convenience of setting up an online subscription and having fresh razors periodically shipped to a consumer's house.
Dollar Shave Club was recently acquired by Unilever (NYSE:UL), a pricey acquisition that, at $1 billion -- or five times Dollar Shave Club's expected 2016 revenue -- looks to be a big bet on a market shift. Gillette has tried to respond by starting a similar Gillette razor subscription service, but the company was late to understand changing consumer preferences, and that has certainly hurt its business.
Procter and Gamble has learned the value of getting in front of this kind of consumer product category disruption. While grooming was the worst segment, fabric and home care -- which includes laundry products -- was Procter and Gamble's best performing during the year. This segment is not only the company's largest, it was also the only one during the year to post positive sales volume growth.
Procter and Gamble's Tide-Spin looks like a response to what the company learned from Dollar Shave Club. While this test service may not be moving the needle right now in terms of sales, it's valuable for the company to continue trying to stay at the forefront of changing consumer habits. Other than this home delivery laundry service, Procter and Gamble also started "Tide Wash Club" in select cities, which is subscription delivery of home laundry products.
Procter and Gamble's transition
This interesting new service shows that the company is not afraid to try and reinvent its business to stay relevant and grow in new ways. P&G has also taken on a bold initiative to cut more than half of its brands in the last couple of years to focus only on those that show growth potential, a transition that could prove valuable over the long term as P&G grows the remaining segments.
So far, the transition looks to be performing well for the company. In the fiscal 2017 first quarter, P&G reported organic sales up 3%, and earnings per share up 5%. Along with holding leading positions in most markets that its brands fall into, and paying a healthy dividend above a 3% yield, P&G stock looks worthy of holding through its transition for long-term gains.