Hershey Kisses Good-Bye E-Commerce
Written by Evan SchumanConcluding that “its current (E-Commerce) business model is not sustainable,” Hershey has shut down its direct-sale Web site, killing the jobs of about a dozen Web employees. But whether this is more of an E-Commerce issue for the $5 billion chocolate maker or a channel conflict issue is unclear.
Hershey’s chocolates will apparently continue to be sold by a wide range of online retailers, suggesting that the nation’s largest chocolate company was simply cleaning up its channels, finding little extra profit in selling product directly. The site closure is “a strategic decision. Our present business model is not sustainable and we will continue to evaluate all options in E-Commerce, including strategic partnerships and licensing agreements,” said Hershey spokesperson Kirk Saville. But with many major retailers—including Canadian Tire and Borders–stepping back from E-tailing altogether, it’s hard to not look hard at any multi-billion-dollar player pulling out of the Web business without some concern.
-Marc
July 9th, 2009 at 9:23 am
What is disconcerting is that a brand like “Hershey’s” cannot use the web effectively to make a profit. They should own chocolate in the USA. To fail in e-commerce with their brand power is a management and fulfillment issue. This is not an economic or e-commerce problem.
July 9th, 2009 at 9:46 am
Editor’s Note: I agree with Greg that this is not likely an economic or E-Commerce problem, but I have to disagree that it’s necessarily an indictment of the brand. They are not having a problem–as far as I can tell–with selling their product, both domestically and globally, so their brand is fine.
It’s merely a channel conflict issue. Given that their product is widely distributed in grocery locations and other brick-and-mortars and a mountain of E-Commerce sites, they couldn’t get enough people to buy from them. Shipping chocolate is something that consumers could be hesitant of, but if they’re not, they have plenty of choices.
The product is the same and the pricing is well controlled, so there’s not much reason for a consumer–who wants some Hershey’s chocolate–to go to Hershey’s directly.
Direct E-Commerce sales typically work where consumers in certain regions have difficulty getting that product through traditional channels. Hershey’s doesn’t have that problem. Maybe I’m being naive, but this doesn’t signal a fundamental problem with Hersheys to me.
July 9th, 2009 at 11:51 am
Did you ever think about the economics of shipping a $7.95 chocolate Hershey’s Kiss to Texas in August? At a certain point the costs of product, warehousing, logistics, fulfillment, insulated packaging, dry ice, freight charges to UPS/Fed-Ex, customer service to field a 10 minute call from a consumer whose Kiss melted on their front porch, replacement, ecommerce management team, technology costs, credit card fees, telecommunications cost, etc. actually might not be “sustainable” after all… Sure, it can generate “revenue” but can it generate meaningful profit, and will consumers want to actually PAY for the fully-burdened cost of getting a Kiss to their front door in great condition? If someone in Texas really wants a giant Hershey’s Kiss, can’t they just drive 2 miles to Walmart and get it today for 1/2 the price of purchasing it online an paying shipping?
July 14th, 2009 at 2:57 pm
Yep – I have Tom. I wouldn’t ship a $7.95 Kiss to Texas in August.
However they should have considered leveraging their retail fulfillment network (the people who get those Kisses to the store)? It can be done efficiently if planned properly.
Further, it is more about selling the brand. Hershey’s lovers want mugs, erasers, dog chew toys, bed spreads, beach towels, etc. I would sell only exclusive Hershey’s merchandise online (stuff you can’t get in the store or from other licensed retailers).
Perhaps they have diluted the brand and over licensed and are competing too much with their licensed retailers?