P&G’s eStore will operate on a different model. It will sell only P&G products, but e-commerce specialist PFSweb Inc. will buy the inventory, set prices, and fulfill orders. It will also pay expenses out of its own margin. Unlike Alice.com, which never charges shipping fees, all orders at P&G’s eStore will include a flat $5 shipping charge.

“P&G is not a retailer, and the eStore is not an indication that we are striving to be a retailer,” Long said.

If P&G was really looking to get into retailing, it would have gone about it in a much bigger way, said Jim Hertel, managing partner of Willard Bishop, a Barrington, Illinois-based consulting firm to retailers and their suppliers. He thinks P&G’s motivation is to help retailers sell more of its products online.

“It’s no secret that online grocery shopping has been a challenge for everybody who’s been involved in it,” Hertel said.

The big manufacturers support retailers’ efforts to reduce the number of products they carry, he said, because the proliferation of products has hurt the power brands most. With so many different items to stock, the quantities of each product on the shelves have been reduced, causing the most popular brands to run out more frequently. Cutting the number of brands a store stocks tends to hurt the third- and fourth-tier brands more than P&G’s, he said.

‘A Complex Relationship’

Private-label products are another issue, though, and Kroger has one of the best programs in the industry, according to Hertel. That puts it in competition with P&G, but it has little choice if it’s going to compete with Wal-Mart and other grocery chains at the top and bottom of the value chain. Higher-margin private-label products have become the main way retailers differentiate themselves. Branded products, which everyone carries, don’t generate enough margin to fund their businesses, he said.

“It’s a complex relationship, without a doubt,” Hertel said.

P&G does want to increase its online sales, now about $500 million annually, but it has not disclosed an online sales goal.

While P&G is establishing its eStore in conjunction with PFSweb, it is not pulling back from online efforts with brick-and-mortar retailers such as Wal-Mart and Target and with other online-only retailers, including Amazon.com, Drugstore.com, and Diapers.com.

“Absolutely not,” Long said. “They are important to our success in e-commerce.”

For example, Wal-Mart recently increased the number of product categories it sells online, and P&G now has several hundred products available on Walmart.com.

Its objective is to help consumers learn about P&G products and buy them, whether they are shopping online or in-store, she said. The company intends to share the insights it gains through its eStore with all of its retailer partners.

The incentive for such online initiatives is coming not only from retailers but also from increased competition in general, McGuire said.

“We’ve have been talking about it for years, but I think 2010 is shaping up to be a watershed year for this,” he said.

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Jon Newberry writes for the Business Courier of Cincinnati.