Alice.com–a response to trading down and RFID tags

Alice.com, a shopping website supported by makers of packaged goods, came into being in beta a few days ago.  The idea is that you order brand-name consumer staples–from pet food to soap to cosmetics to batteries,  pay Wal-Mart-like prices and your purchases are sent directly to you.  Shipping is free.

Alice can track your product usage, remind you when she thinks you may be running out, offer you coupons, introduce you to new offerings, gain your trust by encouraging shopping-related networking.  The one thing you won’t see from Alice is house brands.  From the consumer staples’ manufacturers’ point of view, the whole point of Alice is to leapfrog over the supermarket/discount store and deal directly with the product user.  That way, the shopper may never enter the staples part of the store, and thus may never see the signs, the displays and the other forms of in-store advertising that steer the consumer away from the name brands to the cheaper store brands.

In a lot of ways, this is the ideal time for something like Alice to start.

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Consumer Staples–trading down may be more severe than Wall Street expects

When investors focus on consumer staples, their first thought is that income growth is slow but steady, therefore that the stocks have a defensive character.

Then they look for exposure to emerging markets for the possibility of faster growth, and exposure to foreign countries with harder/weaker currencies than the dollar for the possibility of foreign exchange gains/losses.

Finally, they consider the pattern of raw materials prices, for the possibility of margin expansion or contraction, since staples companies can typically only raise prices in line with overall inflation in their markets.

A recent article in the Financial Times suggests that in the current recessionary environment, there’s another big issue to consider–trading down.  The article reports on a two-year study done of supermarket and drug store loyalty card purchase patterns.  Its conclusion?  Over 50% of previously highly loyal customers from 2007 had wholly or partially shifted away from their previously favorite brands in 2008.

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