Brazil bets on free sample stores to lure shoppers

July 12, 2010

* Free sample stores open in Brazil to lure consumers

* Stores seen helping promote consumer goods brands

* Seen expanding outside consumer hub Sao Paulo

By Vivian Pereira

SAO PAULO, July 9 (Reuters) - Retailers in Brazil have hit on a popular way to attract the country's huge army of consumers -- free stuff.

Shoppers in financial hub Sao Paulo are flocking to stores stocked with free samples as a way to test customer tastes and build market share in Latin America's biggest economy, which expanded at an annualized 9 percent rate in the first quarter.

Brazil's consumers played the biggest role in pulling the economy out of its first recession in 17 years last year, and firms like Unilever (ULVR.L) -- the world's biggest maker of non-discretionary household goods -- that rode out the crisis are now ready to capitalize on the better times.

Shoppers, bankrolled by record job creation and resilient incomes, are testing cosmetics, foods and even mobile phones in the free sample stores where products are marketed ahead of their release in major retailers.

Unilever, food-maker Brasil Foods (BRFS3.SA), sugar processor Cosan (CSAN3.SA) and beermaker AmBev (AMBV4.SA) are betting on the stores as a way to create ties with a new wave of consumers, better understand their tastes, and prelaunch or redesign their products.

"Beyond their use as a powerful consumer research tool in a highly competitive market, these stores are pretty much like a laboratory for us," said Lucia Rolla, who oversees conglomerate Grupo Bertin's beauty care and personal hygiene brands.

Clube Amostra Gratis (Free Sample Club), which was launched in May in Sao Paulo, groups more than 200 different products and about 130 companies. To date, it has more than 14,000 customers, who have to pay an annual fee of 50 reais ($28) to register.

With customers packing the store, located in Sao Paulo's hipster district of Vila Madalena, the owners decided to open as many as six branches in other cities. The first will open in the southern city of Curitiba at the end of July, said Luiz Gaeta, one of Clube's two partners.

"Acceptance from the industry as a whole went beyond our initial expectations, which tells us that this could soon become a trend," Gaeta told Reuters in an interview.

Sample Central, the Sao Paulo-based franchise of Australia's Sample Lab, was launched in June. More than 25,000 customers have signed up to date -- or about 25 percent above initial estimates.

"TRYVERTISING"

For companies, free sample stores offer a low-cost research tool for their launches, a technique known as "tryvertising."

Companies interested in showing their products hire shelf space for two weeks and pay for access to survey results. Fees could vary between $2,700 and $5,600, the stores said.

"The investment for a company involves way less money than in a traditional market survey," Gaeta noted.

For consumers, joining a store formally entitles them to take home a number of different products each month. They have to fill out online surveys about the products they test and that entitles them to take part in raffles and earn "extra points" toward additional benefits.

To guard against abuse, expensive goods such as electronics must be tested in the store. Other goods, such as food and cosmetics, may be taken home but are limited to one sample per person.

Sample Central expects the format to succeed in Brazil, as it did in Japan, the United States and Australia. That should fuel expansion across Sao Paulo, Brazil's wealthiest city, and to five other major cities by 2015, said General Manager Joao Pedro Borges. Registered customers pay an annual fee of 15 reais to join Sample Central.

"The atmosphere in the store as well as the differences with more traditional retail stores are appealing to the shopper," Borges said.

Sample Central's store, located in Sao Paulo's upscale neighborhood of Jardins, shocks bypassers with its bright yellow facade. Curiosity mounts when security staff tell visitors that they are only allowed to come into the store if a visit is previously booked online.

As shoppers register online and visit the store, initial curiosity turns into testing, and testing into customer feedback. Brasil Foods marketing staff noticed a bigger-than-expected increase in sales of some cold-cut brand products after placing them in Sample Central shelves.

"For us it's easier to understand how our launch is doing," said Patricia Cantaluzzi, marketing head for Sadia, which became Brasil Foods in a merger last year that is still awaiting government approval. (Writing by Guillermo Parra-Bernal; Editing by Stuart Grudgings and Dave Zimmerman)

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