Though not luring women in droves, Procter & Gamble is sticking with Reflect.com. Will the custom beauty site shine–or leave P&G with an unsightly blemish on its record?

Perhaps you can teach an old dog new tricks. Makeup tricks, at any rate. Procter & Gamble’s $80 million investment in Reflect.com is an attempt to break new ground on a couple of levels: It is the first-ever business to offer customized beauty products over the Internet. For P&G, it is also a sign that the consumer products giant–long the standard bearer of drugstore items from diapers to detergent–is committed to becoming a more technologically savvy While P&G has been looking for ways to boost revenues and cut costs to help its bottom line in the wake of last month’s restructuring, it does seem to be putting up the necessary financial muscle and sticking with some of its more forward-looking experiments, including leasing marketing and technological expertise through its Magnifi venture and its joint deal to produce juice drinks with Coca-Cola.

Reflect.com, meanwhile, is the company’s first foray into e-tailing and mass customization. While other sites like Beauty.com and the now-defunct Eve.com and Beautyjungle.com have all offered essentially the same array of products available in stores, Reflect is the first online marketer that allows users to create their own cosmetics– everything from skin and body care items to hair care, color cosmetics, fragrances and accessories.
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Started during the regime of P&G’s former CEO Durk Jager and currently headed up by ex-Hasbro CEO Ginger Kent, Reflect was formed in September 1999 along with venture capital firms Venture Partners and Redpoint Ventures. Though P&G has a 65% stake in the San Francisco-based firm, it operates as a separate and privately owned company Now with 80 employees, Reflect is, as insiders refer to it, “the best of both worlds,” combining ex-P&G staffers and Internet entrepreneurs.

Yet the jury is still out on whether the experiment is working. “We’re learning that customization is powerful,” Kent said. “We’re learning how to have strong relationships with consumers … what’s exciting is that [Reflect] is a self-discovery process, and people love that.”

Kent said the site is “well on its way to profitability,” though she would not commit to a time frame other than “before five years.”

On the plus side, Reflect.com is now generally considered the No. 2 visited beauty Web site, second to Sephora.com. The company recently announced that it has done over a million “customizations” since it became operational, though it would not divulge how many of those resulted in bona fide sales.

According to Internet consultant Angela Kapp, former svp/head of Estee Lauder’s online operations, the one million figure is not especially impressive. Dot-com gurus say the typical conversion rate (site visitors who make purchases) is about 5%. In the case of Amazon, which has one of the best, the rate is 9%. Reflect won’t reveal its conversion rate, but analysts believe that even to assume it has sold between 300,000 and 400,000 products is estimating on the high side. “I’m guessing, but it seems unlikely that more than 20 or 30% of those customizations became sales,” said Kapp.

Given the relative newness of the venture, it may be too soon to be talking about revenue, much less profits. “With any direct marketing business you really need at least two years to assess financial success,” said Jim Nail, analyst at Forrester Research, Cambridge, Mass. “If Reflect can get close to breaking even that’s good, but probably unlikely,” added Don Pettit, president and CEO of consultancy The Sterling Group, New York, and a former P&G marketer.

Still, things appear to have picked up in 2001. February was a record revenue month and repeat purchases were “very significant,” according to Reflect’s vp-marketing Richard Gerstein, a 13-year P&G veteran who has worked on brands including Pert, Noxzema and Cover Girl. “Our biggest challenge now is how to get consumers to believe in our products,” Gerstein said. “We have lots of visitors, but still need to develop more credibility.”manufacturer and marketer.