Brazil: Riding a Wave of Prosperity

By Daniella Giavina-Bianchi

H&M, IKEA, Tesco, Best Buy, The Home Depot, Target, Whole Foods Market, Gap. Apart from being among the world’s top retail brands, what do these brands have in common? None of them has attempted to establish local operations within the Brazilian market. This telling fact reveals something about the recent history of retail in Brazil.

During the dictatorship period that ended in the 1980s, very few international players ventured into Brazil’s stagnant economy. It was a difficult era and foreign brands were not accustomed to dealing with galloping inflation or the fact that the population did not exhibit typical consumer behavior— we stockpiled products in our houses as if we were living in wartime. Yet Avon, C&A and Carrefour had not only established operations, but were so familiar to the Brazilian people, and so much a part of the culture, that the majority of the population might be surprised to hear that they are not originally from Brazil.

More recently, retail brands have been enjoying the benefits of a strengthened domestic consumer market. The wide credit offer, low unemployment rates and government incentives led to the rise of a new middle class and created huge opportunities for the sector.

This context is reflected in the solid performance of Brazilian brands such as Pão de Açúcar, Lojas Americanas, Casas Bahia, Ponto Frio, Extra, Renner, Hering and many others that have grown from respected local brands to national powers, now boasting sales figures that would impress even the most global retailers.

One of the key factors responsible for this excellent performance is the effort that brand managers made to elevate and adjust brand positioning to this new reality, creating more relevant and differentiated offers to a large, diverse and dynamic nation populace.

Hering, operating primarily as a manufacturer for many years, began to take retail seriously. Store redesigns and campaigns with celebrities have not only helped triple sales in the past five years, but also contributed to making Hering one of the most recognized brands in Brazil among people of all ages. The company, one of Brazil’s oldest, is also one of the few big retailers that designs, manufactures and exclusively sells its own products, which has given the brand consistency and fostered customer loyalty.

While in-store experiences are well-developed in most Brazilian retail brands, the digital environment is quite uncertain. On one hand, purchase experiences are improving as brands strive to keep up with the significant growth rate of online retail. Nonetheless, unfulfilled promises remain, leading to issues such as shipping delays and poor responsiveness to consumer needs. As a consequence, customer dissatisfaction reached alarming levels and regulatory institutions started taking action. During the 2012 Brazilian Black Friday, major retail brands suffered consequences for advertising false discounts and being unable to fulfill orders for long periods of time.

On top of that, for many retailers there is a disconnect between the digital and physical brand experience, often as a result of different teams coordinating each environment. The development of integrated services and compelling visual and verbal identities would help celebrate the uniqueness and improve the consistency of these brands as they continue to mature across channels.

As the “retail rhythm” becomes more frantic in this ever-changing market, the main challenge for brands is to find consistency in a country and economy of continental proportions.