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 Wal-Mart. “On average we are at or slightly above [the prices at] big-box retailers,” says McGuire.
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. “It’s a pretty interesting idea,” says Neil Stern, senior partner at retail consultancy McMillan Doolittle, adding that Alice’s model still could be challenged by shipping bulky items like paper towels for free.
I’m not sure if that’s a sustainable business model, but packaged goods manufacturers need every avenue to keep their brands in consumers’ minds. So if Alice starts gaining traction, marketers will want in–and will salivate over a database that tracks customer purchase habits.