Levi, P&G, Mattel Tackle E-Tailing

Move over, Amazon. Consumer-products makers, squeezed by private-label goods at retailers like Wal-Mart, are hawking their wares directly to buyers online

By Joseph Galante

Alex Garcia loves his Levi's. He hankered for a plaid trucker jacket from the clothing maker but couldn't find it at any of the stores near his home in Los Banos, Calif., in the state's Central Valley. So Garcia logged on to the Levi Strauss & Co. Web site and bought one straight from the source. "I wear nothing but Levi jeans," says Garcia, 34. "They're just great jeans."

To attract more customers like Garcia, San Francisco-based Levi Strauss has taken steps to spruce up its Web site. A growing number of consumer-products companies, including Procter & Gamble (PG), Mattel (MAT), and Columbia Sportswear (COLM), are beefing up online retail operations to cater to budget-conscious buyers.

These companies, some of them newcomers to online retail, are also fending off a rising threat from often cheaper private-label products crowding shelves at retailers such as Target (TGT) and Wal-Mart Stores (WMT). "There's a wide variety of folks that have been historically considered manufacturers that are now positioning themselves as retailers," says Sally McKenzie, a former executive at Expedia (EXPE) and Eddie Bauer Holdings who consults e-commerce companies. "It's harder and harder for their products to stand out. The Web is a phenomenal opportunity to assert their brand authority."

Direct Sales

Direct sales by consumer-brand manufacturers are one of the fastest-growing areas of online retail, increasing almost 13% in 2009 to $487.6 million, according to Vertical Web Media, a Chicago-based research firm. Online sales from chain retailers and companies that sell through catalogs declined last year, while Web-only retailers such as Amazon.com (AMZN) gained 25%.

Besides peddling products, consumer companies also use sites to entice customers to interact with their brands. El Segundo (Calif.)-based toymaker Mattel opened an online store last year, MattelShop.com, where customers can buy Computer Engineer Barbie and Hot Wheels Tub Racers while playing Uno with friends. "These sites are not only a way for them to sell and gather margin, but also a way for them to form a direct connection with consumers," says Jack Brown, president of In-Depth Research in Tiburon, Calif.

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