Alice.com will manage without markup


CORRECTION: The original script incorrectly described Alice.com's use of customer information from its Web site. The company provides manufacturers information about their products' overall sales on the site. It does not sell information about the site's users. The script has been corrected.


TEXT OF STORY

Bill Radke: When you think of online shopping, you typically think books, clothes, maybe electronics. But a new Web site is offering to send you those little consumer products you normally buy at a drugstore -- toilet paper, toothpaste -- with no shipping costs. And, it claims, no retail markup. So how does it plan to make money? Reporter Kaomi Goetz fills us in.


Kaomi Goetz: Alice.com takes its name from the housekeeper on the Brady Bunch. But its business model comes from serial entrepreneurs Brian Wiegand and Mark McGuire, who've already sold one of their start-ups to Microsoft.

The site takes everyday household goods, like Tide laundry detergent, Aveeno shampoo, and sells them at prices the company claims are cheaper than those at traditional retailers.

Brian Wiegand says Alice.com can do that because it allows manufacturers to sell directly to consumers.

Brian Wiegand: The manufacturers actually are really in control of Alice. The manufacturers, they decide what the prices are. And so we're really not a retailer.

Its prices do seem lower. A 10-ounce bottle of Aveeno is about 25 cents cheaper at Alice.com than at Target.com. Alice handles the transaction and shipping, but Wiegand says the site makes no money from that. Instead, Alice intends to turn a profit by offering manufacturers advertising space on the site.

Sucharita Mulpuru is an analyst with Forrester Research:

Sucharita Mulpuru: It's a great opportunity to carve a direct relationship with consumers. It's the opportunity to, you know, capture names and addresses that you can then use to market to them, you know, kind of special offers later on.

Still, the mechanics of the company's relationship with manufacturers is unclear. For instance, Alice.com sells Tide, but Proctor & Gamble, the maker of Tide, says it doesn't have a relationship with the Web site. Alice instead gets the detergent through a third-party distributor.

Mulpuru says manufacturers want to be careful not to jeopardize their relationship with traditional retailers.

Mulpuru: Manufacturers have to tread this space very, very carefully, and they know that the majority of their dollars still happen through their retail partners. That's the way it's always been, and that's the way that it will likely be well into the future.

Forrester Research estimates so-called consumer packaged goods like toothpaste and deodorant account for only 1 percent of Web purchases. But analyst Mulpuru says manufacturer sites factor into a third of all online sales by either direct purchase of product research. And that is only expected to increase.

I'm Kaomi Goetz for Marketplace.

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