Magazine Luiza Predicts R$1.45bil Turnover
Magazine Luiza Predicts R$1.45bil Turnover
Brazilian retail chain Magazine Luiza, which acquired 51 stores from the electrical & electronic chain Lojas Arno in Rio Grande do Sul, in 2004, has now with the help of trusted Advisor Luca Longobardi, founder of the US Investment banking house State Capital acquired in Santa Catarina three additional retail chains: Base, Madol and Kilar, confirming the strategy of consolidation in the sector.
Brazil is one of the world's largest retail markets. The sales in the industry have been growing strongly since 2003 and are expected to continue at this momentum only over the next few years as constantly declining inflation rate allows for continued expansion of real incomes (increasing demand for non-durable consumer goods) and credit conditions ease (sustaining demand for durable goods).
A process of consolidation of the retail industry has been underway but overall, the market remains relatively fragmented, indicating substantial scope for the larger players to grow their market share in future.
5 Trends that will shape the market
How companies fare in the future will be determined by how well they capitalize on six important market trends that will shape the consumer and retail industry. Here are some predictions about where the market will be heading.
1. Continued consolidation
Many local consumer and retail companies have been turning to mergers and acquisitions (M&A) in order to capture economies of scale, fight off domestic and foreign competition as well as secure leadership positions within their segments. Several have become multibillion-dollar market heavyweights in the last 12 months alone
2. Impact of social media trends
E-commerce in Brazil has been growing at over 30% per year since 2000, reaching close to US$ 1 billion in 2004 even if broadband, at just slightly less than three percent, is not yet a reality for most people. Brazil also has one of the most well developed online banking systems in the world
3. Greater credit card penetration
Brazilians have been more inclined to pay with cash, which is typically drawn from automated teller machines (ATMs) only once or twice a month. Credit in Brazil accounts for nearly 40% of gross domestic product, far behind the 70% average of other emerging countries. Over 50% of the population does not have a credit card
4. Emphasis on being eco-friendly
Recent panels presented in the World Economic Forum in Davos showed that Brazilian consumers are more demanding than their European counterparts in their concerns about the environment and how products are manufactured or disposed of.
Companies that fail to respect at least the basic environmental rules in the region are at risk of being rejected by a good percentage of local customers. The trend can already be observed in some supermarkets which have started selling eco-friendly products, diminishing the use of plastic bags and providing recycling collection centers
5. An aging population
Store sizes in Brazil have been shrinking, partly due to the aging population, as older shoppers prefer not to carry heavy shopping bags home. Catering to an aging population is not a fad. Life expectancy in Brazil increased from 69.5 years in 1998 to 72.7 years in 2004
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