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Carsten Kraus, founder and CEO, FACT-Finder

With brands looking to get closer to their customers, there are a growing number selling directly online. Creating and running their own online store offers brands a variety of powerful advantages, including direct contact with the customer, a higher profit margin and the ability to offer the visitor a full brand experience.

Although Procter & Gamble has made a high-profile foray into selling directly online in the US, FMCG is the one sector where we’re not seeing growth. This may be with good reason: a brand shop for FMCG isn’t that attractive to the consumer. People buying groceries look for convenience and speed,with everything from one place. They don’t want to hop from one store to another, and certainly don’t want to be paying double shipping costs. This is in direct contrast to fashion customers.

Nonetheless, there are clear benefits even for FMCG brands to be gained from selling directly, in particular customer insight. Drawing on insight from our top 100 European retail clients, it’s clear that brands can learn a lot about their customers by having their own online store. In a physical store, a retailer watching how shoppers behave would unnerve them and lead to different behaviour. Online, though, brands can easily and unobtrusively measure every click, every viewing session, every item put into every basket and those later removed. This opens enormous possibilities for data mining.

In addition, by analysing the logs of on-site search, brands can discover which products customers expect to find, even if they don’t carry them. They can also spot new trends or keywords, and how customers would name a product in their own words and spelling. This is helpful for future product naming and development, as well as any SEO support the brand may give to its retailers.

Although experience among our clients suggests brand-owned online shops are taking off in most product areas, it’s open to debate whether they’ll be a major threat for grocers. The main stumbling block is shipping costs. For heavy and costly items, such as nappies, where there’s an obvious bulk purchase opportunity, this may not be an issue, but for many other products, unless they can include the cost of shipping in the price, brands are likely to struggle. Of course, with larger profit margins from selling directly, this could be a possibility.

So if retailers want to make sure their brands don’t choose to go it alone, they need to share their insights into customer behaviour.

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Published 31 March, 2011 by NMA Staff

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