Chocolate icon Hershey fails at online retailing

Lacking both Internet skill and vision, The Hershey Company closes its Hershey Gifts website.

For over 92 years members of my family have had a unique relationship with The Hershey Company, so sadly on July 31, The Hershey Company will be closing Hershey Gifts, its catalog and web business. A not too surprising demise given the alarming volume declines of Hershey candy shipments over the past several years (Page 21), and definitely in my opinion the unfortunate result of Hershey's total lack of Internet skill and vision.

Why do I believe Hershey lacks Internet skill? Well, it was just a little over 2 years ago that Hershey outsourced its entire online retail operation to e-commerce vendor, GSI Commerce, resulting in the lay off of Hershey's skilled online retail workforce. And why do I believe Hershey lacks Internet vision too? With an iconic consumer brand like Hershey, it's inconceivable to me for Hershey NOT to be building and expanding its online retail operation. According to Don Davis - Editor-in-Chief of the online retail industry trade magazine Internet Retailer, Hershey is bucking the online retail trend: "Hershey’s decision runs counter to that of many other manufacturers that have invested more heavily in selling directly to consumers via the web. That includes companies in a wide range of verticals, from Philips in consumer electronics, to Under Armour in athletic apparel, to Oneida in housewares. "While it’s possible that candy is not as easy to sell online as, say, books or laptops, there are many items that are being sold online today in high volume, such as shoes and apparel, that not that many years ago people said consumers would never buy on the Internet. "The real question for manufacturers is how to get the benefits of selling online, including the higher margins that come with selling directly to the consumer, without being seen as a competitor by retailers that account for the majority of your sales. "In the case of Oneida, for instance, they consciously maintained a low-key presence online for fear of offending retailers. But then the retailers told them they should have a bigger web presence because seeing Oneida more prominently on the web, the retailers concluded, would drive more consumers into stores to buy Oneida products. That example shows how a manufacturer can both create a bigger presence online and still maintain good relations with store-based retailers." Davis provided the following estimates of Hershey Gifts' annual sales taken from his Internet Retailer Top 500 Guide: 2008 - $22 million 2007 - $22 million 2006 - $23 million 2005 - $21 million 2004 - $15 million Furthermore, a source familiar with Hershey Gifts said Hershey had been hoping to achieve $50 million in annual online retail sales, however, the operation was never taken seriously or even fundamentally understood by Hershey's management. Tellingly, the source also indicated that the fate of Hershey Gifts became doomed upon the announcement that its operation was being outsourced to GSI Commerce. Note: Neither The Hershey Company nor GSI Commerce responded to requests for comment. Meanwhile, Hershey's main competitor Mars Inc., appears very successful with its online retail operation, My M&M's - Personalized Chocolate Candy Messages website. Interestingly, a source familiar with Hershey had this to say about the closing of Hershey Gifts:

"I can fully appreciate Kirk Saville's public statement that this niche business does not fit the company's business model. Historically, the company's success has come from focusing its energies on the overwhelming core sector where consumers purchase their confectionery needs, which is out at retail (bricks and mortar). The company's strength has come from developing and fostering strong retail partnerships where frequent, joint marketing efforts/events are established in creating credible reasons for consumers to purchase their confection needs throughout the year at store level. While there is some incremental business to be had through the internet, I believe and know from past experience, it does not have enough critical mass to chase those sales for the size of the company that Hershey is. Candy is a unique and high impulse food category where the overwhelming pounds purchased by consumers occurs out at retail rather than over the internet and the company is merely going to or focusing their energies where the fish are."

What's your take, will Hershey miss the future of online retailing? BradReese.Com Cisco Refurbished - Services that protect, maintain and optimize Cisco hardware Contact: Brad Reese | Twitter: http://twitter.com/BradReese

  1. Juniper tries to pound spike into Cisco's heart
  2. Wall Street analyst suggests Cisco may recover lost market share during 1Q10
  3. Does Cisco discriminate against CCIEs by not promoting them to management?
  4. Cisco's Ottawa Bluesfest resonates with newly laid off Cisco employees in San Jose and Research Triangle Park
  5. Is Cisco NetFlow the only solution for application management in a virtualized world?
  6. Cisco multimillionaire goes broke, loses $300 million fortune
  7. Cisco expected to guillotine more employees this Thursday
  8. Why HP ProCurve is dismantling Cisco's market share on a deal-by-deal basis
  9. Cisco lost market share in network security appliances and software in 1Q09
  10. Cisco CEO John Chambers quacks up the Cisco workforce and is an Internet sensation to boot
  11. The sudden and unexplained departure of Cisco data center marketing honcho, Douglas Gourlay
  12. Is Marc Andreessen betting $300M against Cisco's successful acquisition model?
  13. Enterasys NAC sales triple
  14. New NTIA administrator owned Cisco stock when Cisco granted coveted NTIA Buy American exemption
  15. New worldwide Cisco CCIE count surpasses historic 20K milestone
  16. Average tenure of a senior Cisco executive is 11.5 years
  17. It appears Agito Networks has surpassed competitors on mobile handset technology
  18. Cisco selling refurbished Linksys directly to end users
  19. Will Liquid Computing pour cold water over Cisco's ambitious unified computing system?
  20. View Brad Reese on Cisco Story Archives
Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.
Must read: 10 new UI features coming to Windows 10