Short answer

When developing a multichannel strategy, consider physical brand stores not just as sales points, but as drivers for increased supermarket sales and distribution, while meticulously accounting for their operational costs.

Field: Innovation & Markets
Source: Journal of Marketing (2023)
Method: Before-and-after-with-control-group analysis
Evidence: Strong effect

Establishing a physical brand store can significantly increase a digital-native grocery brand's sales within supermarkets and expand its retail presence, even while partially cannibalizing its own online sales. This innovation & markets research insight is drawn from a 2023 study published in Journal of Marketing. Using Before-and-after-with-control-group analysis, researchers explored how this design variable affects real-world outcomes. The key design takeaway: When developing a multichannel strategy, consider physical brand stores not just as sales points, but as drivers for increased supermarket sales and distribution, while meticulously accounting for their operational costs.

Study

Innovation & MarketsRecentStrong effect

Brand Store Entry Boosts Supermarket Sales and Distribution for Digital-Native Brands

Journal of Marketing · 2023

Key Findings

01Brand store entry boosts supermarket sales.
02Brand store entry positively affects the number of supermarkets listing the brand.
03Brand stores cannibalize company-owned online sales but generate significant own brand store sales that offset these losses.
04While top-line growth is achieved, operational costs of brand stores can impact the bottom line.

Application

Design takeaway

How to apply

Before launching a physical brand store, conduct a thorough financial projection that includes all operational expenses and model the potential impact on existing online and supermarket sales channels.

Project actions

01When researching new market entry strategies, consider the interplay between online and offline channels.
02Quantify the impact of new retail formats on existing sales channels and overall profitability.

Method & Evidence

AimTo investigate the multichannel impact of brand store entry on a digital-native FMCG brand's sales in its existing online channel and in independent supermarkets, as well as on its supermarket distribution, and to assess the net effect on total brand sales and operating profit.

MethodBefore-and-after-with-control-group analysis

ProcedureThe study analyzed sales data and distribution metrics for ten brand store entries by a digital-native FMCG brand, comparing performance before and after the store openings against a control group.

ContextFast-moving consumer goods (FMCG) sector, multichannel retail strategy

Variables

IVBrand store entry

DVSupermarket sales, supermarket distribution (number of listings), company-owned online sales, brand store sales, total brand sales, operating profit

CVSales and distribution data from a control group of similar brands not opening brand stores.

Strengths & Limitations

Strengths

+Utilizes a robust 'before-and-after-with-control-group' methodology.
+Considers both top-line sales and bottom-line profitability.

Limitations

The study is based on a specific brand and market context. Generalizing these findings to all digital-native brands or different retail environments requires caution. The exact operational costs and their impact can be complex and vary significantly.

Reliability & validity

The study's reliability is supported by the use of a before-and-after-with-control-group design, which helps to isolate the effect of the brand store entry. Validity is enhanced by considering multiple metrics (sales, distribution, profit) and accounting for operational costs.

Think critically

To what extent do the operational costs of a physical brand store negate the benefits of increased supermarket sales and distribution for a digital-native brand?

Design Principles

"Physical brand presence can amplify digital-native brand reach and sales across multiple channels, but profitability requires careful cost-benefit analysis."

For brands transitioning from purely digital to a multichannel strategy, understanding the ripple effects of physical touchpoints is crucial. This research highlights that brand stores can act as powerful drivers for broader retail success, influencing both sales volume and distribution reach.

What This Means for Your Design

If a brand that started online opens a physical store, it usually sells more in regular supermarkets and gets into more of them. It might lose some online sales, but the new store's sales often make up for it. Still, the store costs money to run, so the company needs to check if the extra sales are worth the expense.

How to use in your project

1.Use this research to justify the strategic decision to explore a physical retail presence for a digital product or service.
2.Reference the findings when discussing the potential benefits and drawbacks of multichannel distribution strategies.

Add to My Project

Quick Cite

Paragraph starter

Research indicates that for digital-native brands entering the FMCG market, the establishment of physical brand stores can serve as a significant catalyst for increased sales within traditional supermarket channels and for expanding overall distribution reach. While these physical stores may lead to some cannibalization of existing online sales, the influx of direct brand store revenue often compensates for these losses. However, a comprehensive financial assessment is crucial, as the operational costs associated with brand stores can sometimes diminish the overall profitability gains.

Source

Journal of Marketing

Assessing the Multichannel Impact of Brand Store Entry by a Digital-Native Grocery Brand

journal · 2023

View source

Questions About This Research

What does the research say about brand store entry boosts supermarket sales and distribution for digital-native brands?: When developing a multichannel strategy, consider physical brand stores not just as sales points, but as drivers for increased supermarket sales and distribution, while meticulously accounting for their operational costs. Evidence: Journal of Marketing (2023).
Why does "Brand Store Entry Boosts Supermarket Sales and Distribution for Digital-Native Brands" matter for design?: For brands transitioning from purely digital to a multichannel strategy, understanding the ripple effects of physical touchpoints is crucial. This research highlights that brand stores can act as powerful drivers for broader retail success, influencing both sales volume and distribution reach.
How can designers apply this research?: When developing a multichannel strategy, consider physical brand stores not just as sales points, but as drivers for increased supermarket sales and distribution, while meticulously accounting for their operational costs.
What were the main findings?: Brand store entry boosts supermarket sales.. Brand store entry positively affects the number of supermarkets listing the brand.. Brand stores cannibalize company-owned online sales but generate significant own brand store sales that offset these losses.. While top-line growth is achieved, operational costs of brand stores can impact the bottom line.
What research method was used?: Before-and-after-with-control-group analysis.
How strong is the evidence?: Evidence strength is rated Strong effect, based on a 2023 journal from Journal of Marketing.
What should I do differently in my next project?: Before launching a physical brand store, conduct a thorough financial projection that includes all operational expenses and model the potential impact on existing online and supermarket sales channels.
What are the limitations?: The study focuses on a single digital-native FMCG brand, and the findings may vary for different product categories or brand types. The analysis of operational costs is based on reported data and may not capture all nuances.