Alice.com is an e-commerce retailer with a unique business model. It enables CPG manufacturers to sell basic household items like toilet paper and toothpaste direct to the consumer. Free shipping, automatic coupons and other manufacturer-sponsored promotions, as well as store-comparable pricing, entice consumers to give the service a try, says CFO David Slayton.
"Consumers are not willing to spend $18 for a bottle of Tide that they can buy in a local Walmart for $10 just to have it shipped to them, he says. "But if you can offer them a better selection, low pricing and convenience, then it all comes together."
And not just for consumers. CPG manufacturers until now have been prevented from capitalizing on the trend toward direct-to-consumer sales. "Dell sells its computers online and you can even buy Callaway golf clubs directly, but you can't buy Huggies diapers directly from Kimberly-Clark or Colgate toothpaste directly from Colgate," says Slayton. It is not economically feasible to ship these products separately from each company, nor is the consumer willing to shop for these products at many different locations, he says.
At the same time, CPG manufacturers have had to contend with a sharp rise in competition from private labels. "Manufacturers spend all kinds of money to drive customers to the retail store and at that moment of truth when the customer is actually making the purchase decision, the retailer puts a private-label product right next to the branded one - at a significant discount and with no marketing dollars spent. This is a big concern for those manufacturers," Slayton says.
"We thought, what if we created a platform where CPG manufacturers all could offer their goods, which would go in a shared box to the consumer? It would feel like a retail store experience because the consumer would be able to order a bottle of Tide from Procter & Gamble and a box of Huggies from Kimberly-Clark and a carton of Splenda and put them all in one box with shared shipping and fulfillment costs," Slayton says.
Sharing fulfillment brings costs down to where Alice.com can justify providing free shipping and reasonable pricing, he notes. Additionally, the e-commerce retailer can offer a better selection of products in many categories because it is not limited to the shelf space at a store.
Selling goods and fulfilling orders is not how Alice.com expects to make money, however. "We view ourselves as a data and marketing company, where we work with manufacturers to provide a number of different advertising and marketing opportunities -- and that's where we'll make our profits," says Slayton. "Our manufacturers can do direct email campaigns where everything is very targeted, from couponing and sampling to product reviews." While emphasizing that no personal information on consumers is ever shared, Slayton says that Alice.com has a lot of information on the consumer in terms of their buying behavior and patterns. "If a manufacturer wants to target only customers that are using a particular product, for example, we can enable a targeted coupon offer just to those consumers," he says. "This model was not designed with the goal of making money on the fulfillment side of the business."
Fulfillment is crucial to Alice.com's success, however, and when the startup went looking for a logistics partner it teamed up with OHL, a third-party logistics provider based in Nashville. "We wanted to find a logistics partner that could bring a lot of experience to the table with regards to a pick/pack/ship operation for e-commerce," says Slayton. "OHL had a lot of direct-to-consumer experience already, so they understood what it takes to do each-level picking and get those orders out to the consumer. They also realize that they are the touch point with our end consumer and that the way they fill and package orders definitely impacts the perception of the Alice brand in the marketplace."
Packing the many types of products that make up a typical Alice.com order does require some special handling, says Nathan Sanders, senior vice president at OHL. "Most household goods are designed for ease of use and not for direct-to-consumer shipment," he says. Liquid detergents, for example, don't have a sealed cap. "We had to figure out how to secure the caps for packing so there would be no leaks or spills during transit," he says. Another example is dryer sheets, which are put in a plastic bag so the strong scent does not overpower another item in shipment.
OHL also packs with environmental issues in mind, Sanders says. "We always try to use the least amount of packaging material possible while still protecting the shipment."
Alice.com uses dedicated warehouse space at OHL's large facility near Indianapolis to receive and store its manufacturers' inventory of CPG goods. "It was important to us to have a partner who could flex with us and accommodate our growth, without our having to pay for space we were not using," Slayton says. "The neat thing about OHL is that if our order volume flexes up during a particular week by 20 percent, they can pull labor from other accounts to help meet our needs. They are able to provide us with a flexible solution that keeps our costs down and that allows us to expand as we grow."
Alice.com likely will open a West Coast distribution center as soon as volume warrants to be able to service its clients in that region a little faster, Slayton says. "Currently, we have a four-day delivery to the West Coast. Our goal would be to open up something, probably at OHL's campus in Sparks, Nev., to bring those shipping times down to one or two days via ground service. All Alice.com orders ship via UPS ground.
"Overall, we were looking for flexibility and expertise and OHL just stood out from the crowd," says Slayton.
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