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Business Week reports on a new online marketplace called Alice.com that debuted yesterday that is described as “a platform for consumer-product makers to bypass traditional retailers and go directly to shoppers.”

At present, the site reportedly offers 7,000 SKUs – almost all household items, with relatively few food products - from 55 manufacturers that include Procter & Gamble, Colgate-Palmolive, and Clorox.

According to the Business Week story, “Instead of buying the goods from manufacturers, marking up the price to make a profit, and then selling them—the traditional retail model—Alice makes no money on the sale of the goods. The manufacturer sets the price, while Alice handles fulfillment and customer service, passing along those costs, which are about 35% of the selling price, to the manufacturer. Shipping is free, and the company pledges to offer low prices that are competitive with discount retailers like Walmart … To get around the issue that it's tough to make money by selling one tube of toothpaste at a time—a lesson e-commerce pioneers painfully learned—shoppers at Alice.com are required to purchase at least six items before checking out. In beta testing, the average purchase on Alice.com came to around $50 from 11 items.”

According to the company’s website, “The Alice co-founders, Brian Wiegand and Mark McGuire, have a spent their careers building customer-focused companies. Their formula is simple: use the web to disrupt existing business models and shift more power to end consumers. With a strong team in place, Alice is ready to shift the power back to you one trash bag, toothpaste tube and pack of diapers at a time.”

In fact, Business Week notes, Wiegand and McGuire are “serial entrepreneurs” who “sold their last endeavor, online ad business Jellyfish, to Microsoft (MSFT) for a reported $50 million in 2007.

While there is no dearth of competition from online retailers such as Amazon.com and Drugstore.com, not to mention the dozens of retailers that are affiliated with the MyWebGrocer system, experts seem to feel that the success of Alice.com is almost completely dependent on manufacturers’ willingness to engage with the system.
KC's View:
The key, I would agree, will be manufacturers’ interest in bypassing traditional retailers. This interest could increase as retailers get more focused on private brands; they’ll never abandon national brands altogether, but this could signify a tougher struggle in the balance of power between retailers and suppliers.