P&G Retail Push Makes Sense, Risks Aside

Last Updated Jul 31, 2009 11:13 AM EDT

Proctor & Gamble, the manufacturer of products that adorn the aisles of stores around the world, is making a push lately to acquire and open its own retail outlets. It makes sense that a mega company with so many different brands highlights those goods in a direct-to-consumer format, but P&G needs to be careful that it doesn't step on the toes of its valuable retail partners.
The company recently acquired The Art of Shaving, a 36-unit upscale men's grooming store. Earlier this year also picked up the 14-location Carnett's car wash outfits in the Southeast that uses it's Mr. Clean-brand detergent, and the firm also operates three Tide-branded dry cleaning stores in the Kansas City area. Last year P&G purchased hair-care company Fekkai, which owns eight high-end salons in luxury markets.

So far, so good. P&G is expanding its retail portfolio in a very measured manner. The company is going after particular niches where there is no undeniable retail leader, and the products that these stores offer jive well nicely with the P&G's portfolio of brands. It's also comforting that the company isn't rolling out stores by the hundreds or purchasing huge chains, biting off more than it can chew.

Just as importantly, P&G isn't going head to head with the retailers that purchase its goods. Can you imagine how Wal-Mart or Target would respond if P&G opened a massive chain of "Proctor & Gamble Outlet Stores," selling Iams pet food, Pampers diapers, Duracell batteries, Gillette razors and its countless other products at deep discounts? Retailers would pull P&G products off the shelves, launching a war with few winners, however interesting retailer-industry observers would find the conflict.

But these same retailers might one day force P&G into a more extensive retail program. Chains like Costco, Safeway and nearly everyone else are aggressively pushing their own private-label brands on shelves, and those cheaper items are rapidly increasing in sales, especially during the recession. On P&G's first quarter earnings call, executives acknowledged as much. "There is some trade down, there's obviously pocketbook pressure," said Chairman A.G. Lafley. "Frankly more consumers will try private-label brands and retailer brands then would try them in normal economic times."

It's doubtful that private-label items will ever push P&G's goods out of stores. But if a worst-case scenario ever ensues, at least the company is getting a jump start on its store-management skills.