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Brazilian Retail News

Year 11 - Issue # 402 - So Paulo, August, 29


th
, 2011
Phone: (5511) 3405-6666
BRAZILIAN RETAIL NEWS 1
29/08/2011
Brazilian electronics chain Magazine Luiza is
launching a virtual store called Magazine Voc
(Magazine You). Customers can create their own
virtual store selling Magazine Luiza products on
social networking sites Facebook and Orkut. Each
store can feature certain kinds of products such as
sports equipment, consumer electronics and home
furniture. Users search and select items on the
social network and can use reviews from chosen
contacts. When they reach the checkout stage,
they are re-directed to Magazine Luizas website,
following the regular purchase procedure.
Online retail sales rise 25% on Fathers Day Asics to open frst store in Brazil
Food franchises rise 16.8% in 2010
In Brazil, online retail sales have gone up
25% on Fathers Day, over the same period
l ast year, to R$ 675 mi l l i on (US$ 421.88
million). Average sales reached R$ 340 (US$
212.50) and best-selling categories were Home
Appliances, Health / Beauty, Computing, Books
and Mobile.
Japanese sporting goods manufacturer Asics
is to open its frst exclusive store in Brazil, in
So Paulo, at high-end Oscar Freire street. The
company plans to invest R$ 50 million (US$ 31.25
million) and to open other 19 stores in the next six
years, advancing to be the third-largest brand in
its segment in the country.
A Brazilian Franchising Association (ABF) survey reports food franchises increased its sales by
16.8% in 2010 year-on-year, to R$ 9.2 billion (US$ 5.75 billion). There were studied 4,700 stores in
46 chains. ABF forecasts this year the segment will grow by 18.6%.
O Boticrio acquires minority stake in lingerie brand
Beauty retailer O Boticrio has bought a minority stake in Scalina, owner of lingerie brands Scala
and Trifl. The size and value of the deal were not disclosed but the company expects the transaction
to close within the next 30 days. Scalina is one of Brazils largest manufacturers of lingerie and socks,
with annual sales of around R$ 400 million (US$ 252 million). Asset management and fellow investor
in Scalina, The Carlyle Group said the investment will help to fuel Scalinas growth.
Magazine Luiza launches launch social network stores
Shopping center sales shall grow by 22% this year
Figures reported by Ibope forecast Brazilian shopping centers will generate around R$ 109 billion
(US$ 68.12 billion) in sales this year, 22% more than in 2010, thus making the segment account for
15.4% of total retail sales. In the end of last year, there were 381 malls operating in the country, but
38 will be opened in 2011 and 47 next year.
Brazilian Retail News
Year 11 - Issue # 402 - So Paulo, August, 29
th
, 2011
Phone: (5511) 3405-6666
BRAZILIAN RETAIL NEWS 2
29/08/2011
How the future is going to be
Marcos Gouva de Souza (mgsouza@gsmd.com.br), CEO, GS&MD Gouva de Souza
Momentum
In retailing, the future is the next quarter. And it all points to the fact the country will pass through this cycle of global
turbulence without major consequences or damages. And the reasons for that are the ongoing growth of the domestic
market and the smaller reliance on foreign trade resources.
The country, however, is expected to slow down its growth, due to other factors, among them a lower consumer
confdence and measures to lower risks, specially taken by fnancial groups, who always tend to overevaluate the
consequences of foreign troubles in the Brazilian economy, exactly as they did in late 2008.
Looking at the domestic spending, the high employment level and the income growth have been assuring the expansion
of the mass wage, the main driver of spending, specially when much stronger credit-restrain measures are not applied.
Here there is a much different view from retailers to fnancial institutions. At the slightest sign of economic turmoil,
the self-preservation instinct of the fnancial companies asks for credit-restrain measures, with shorter instalment
conditions, increasing interest rates and harsher credit concession rules, working together to cool down spending.
And, usually, spending is cooled down more than needed.
For the retailers, on the other hand, the approach tends to be the opposite, as, they tend to use credit to boost sales,
thus expanding instalment conditions, reduce the value of each instalment and induce consumers to go shopping.
When done properly without unnecessary risks, it helps offsetting the cool down of the economy. When retailers go
wrong and are too aggressive, and the crisis go deeper than expected, History shows results can be overwhelming.
Todays moment in Brazil is way different of the international reality. The unemployment rate of 6% reported in
August may point to a plain employment state, and the average unemployment rate this year has been in 6.3%, one
percentage point below last year. The trend of the rest of 2011 is for this rate to be stable, but it is feasible to forecast
it dropping in Q4, due to seasonal reasons.
Another factor leveraging spending is the rising average family income. In July, there was a 4% year-on-year rise and
a 2.2% month-on-month growth, repeating a behavior observed in the last years and that, even in the worst moments
of the 2008 crisis, has not shown strong retraction.
The Consumer Confdence Index (ICC) is the only factor that changed direction recently, as in August it dropped
to 118.7, in a 0-200 scale, falling when compared to the months before. In July, ICC had reached 124.4 points, its
all-time high level. As happened in 2008 / 2009, the media reverberations of the global economy turmoil and its likely
impact on employment, spending and Brazilian economy were, for sure, the factor that affected the most the consumer
confdence, specially the longer-term expectations component.
Saved the necessary cautiousness, todays scenario tend to repeat, in a different scale, what happened in the end of
2008, when the consequences of the global crisis in Brazil were exaggerated by the media and by some fnancial and
business leaders, echoing catastrophic forecasts of some analysts, and for some time the country stopped growing.
As the catastrophic approach ran out in the media and the government adopted spending boost initiatives, the market
started recovering early in 2009. In the end, the economy had a strong growth that year.
Today, repeating 2008 in a smaller scale, we shall feel light ripples in the short term, but it all leads retail sales to
grow slightly below the 7% range, a fantastic fgure when compared to the global reality. Brazilhas been in the last four
years among the top 4 countries in retail sales growth. This year, in Q4 the growth index shall slow down a bit, due to
strong comparison basis, as late last year sales rose sharply.
One can believe retails tomorrow will be as positive as the present and the recent past have been.
Brazilian Retail News (BRN) is a weekly newsletter published by GS&MD - Gouva de Souza with the most important news
on the Brazilian retailing. The content can be freely used, once the source is quoted. If you want any information on BRN or our
services, please send an email to publicacoes@gsmd.com.br or access GS&MD - Gouva de Souza at www.gsmd.com.br.
Gouva de Souza & MD Desenvolvimento Empresarial Ltda.
Av. Paulista, 171 - 10 foor
Paraso So Paulo Brazil Zip Code: 01311-904
Phone: (5511) 3405-6666 Fax: (5511) 3263-0066