Retail and E-tailing: The perfect combination for Latin American brands

By Gonzalo Brujó, Chairman, Latin America and Iberia, and André Matias, Brand Strategy Director, Head of Brand Valuation

“As the middle class increases its purchasing power and foreign competitors with high service standards continue to enter the market, consumer expectations are rising. In this context, the winning retail brands are those that provide a consistent and pleasant customer experience."

Across the diverse terrain of Latin America with its growing middle class, the retail industry has seen impressive changes and an increase in consumer spending. Despite economic uncertainty and a degree of political and social turmoil, Latin American retail brands remain relevant.

Most retailers in the region had strong financial results in 2013, but the devaluation of local currencies in the majority of Latin American countries had a negative impact on brand value.

While sectors such as home improvement, furniture retailers, electronics, and specialty goods are fighting to find their place amongst the top Latin American retail brands, supermarket and apparel brands are the best-represented sectors on the table this year.

What consumers value most

Although there are still many challenges and bureaucratization continues to pose obstacles, service is the main strength of the leading Latin American retail brands. As the middle class increases its purchasing power and foreign competitors with high service standards continue to enter the market, consumer expectations are rising. In this context, the winning retail brands are those that provide a consistent and pleasant customer experience.

Chile’s Falabella department store chain exemplifies how to use good service to stand out in its category and create a bond with customers. Mexico’s Superama has also effectively embedded service into its brand’s essence. While freshness, variety and high quality offerings also differentiate the Mexican supermarket brand, service has been a key brand ingredient, both in traditional and digital channels.

New revenue streams

Major retailers are moving beyond their core businesses and are increasingly profiting from the credit card and financing businesses. With the middle class growing at such a rapid rate, many retailers are helping customers finance in-store purchases as well as offering debit and credit cards to help them with payments outside the store. These options not only make purchasing easier for customers, they also boost income for retailers. Renner, Liverpool, Casas Bahia, Lojas Americanas, Extra, and http://www.interbrand.com/en/BestRetailBrands/2014/Elektra">Elektra are only some of the retail brands that are already benefitting from offering payment solutions to customers.

Latin America’s leading retailers are expanding the ways in which they commercialize in order to bring more convenience and better service to their customers. Bodega Aurrera, a Mexican supermarket brand that is majority owned by Wal-Mart, for instance, has three different types of stores that allow it to adapt its offer to local consumers: Bodega Aurrera, located in popular areas with less than 100,000 inhabitants, Mi Bodega Aurrerá, located in lower-income areas, and Bodega Aurrera Express, an urban concept targeting busy areas in bigger cities.

Similarly, Brazil’s Extra has expanded from hypermarkets to gas stations, drugstores, supermarkets, and neighborhood markets. Its digital store also has a strong online presence.

Expanding into digital e-tailing

Latin American retailers are also taking advantage of the region’s increased internet and broadband penetration rate to shift more selling online. According to comScore’s 2013 Latin America Digital Future in Focus report, this was the fastest-growing region for internet users, with a 12 percent increase over 2012. By comparison, Asia-Pacific’s web-using population increased by 7 percent, Europe’s by 5 percent, and the Middle East and Africa by 3 percent.

E-commerce is becoming more prevalent in the region, and adapting retail formats to accommodate this shift in consumer preferences is proving to be the key to success for many retailers. For instance, Mexican convenience store Oxxo has demonstrated its ability to keep up with consumer preferences by creating mobile apps. “Oxxo siempre ahí” points consumers to the closest Oxxo locations while a mobile game called “Raining Bitz” entertains them. The store also launched a debit card, Saldazo, in partnership with Banamex and Visa, which offers special promotions and helps customers pay for Oxxo purchases, purchases made through other online Mexican retailers, as well as those made through establishments affiliated with Visa.

In the Brazilian market, Extra, Lojas Americanas, Ponto Frio, and Pão de Açúcar are also investing in digital channels to expand sales and offer more convenience to customers.

Untapped retail potential

However promising the retail market remains in Latin America, there is room for improvement. The sheer pace of growth will leave brands with no choice but to become more responsive in order to stay relevant and add differentiating value, especially in terms of integrating the online and physical retail experience.

While not included in Best Retail Brands 2014, brands such as Coto and La Anónima supermarkets—as well as Frávega and Garbarino in Argentina; Benavides and El Palacio de Hierro in Mexico; Plaza Vea, Bembos, and Supermercados Peruanos in Peru; Pollo Campero in Guatemala and El Corral in Colombia—are all proving how much potential there really is for the retail sector in Latin America.

Retail trends and challenges in the Latin American region

  • With a growing middle class and an increase in consumer spending, most retailers are seeing strong financial results
  • Supermarket and apparel brands are particularly strong in the region
  • To meet rising consumer expectations, brands are improving service in both traditional and digital channels
  • Major retailers (Renner, Casas Bahia, Lojas Americanas, Extra, etc.) are using lending (credit cards and financing) to increase revenue as well as customer loyalty

BEST MEXICAN RETAIL BRANDS 2014

As the Best Retail Brands 2014 report shows, Mexican brands are among some of the most valuable in Latin America. With Oxxo leading the way and booming Department Store and Supermarket sectors, the Mexican retail market is indeed hotter than ever. To view a full ranking of the country’s top brands and find out how digital commerce, the diversification of retail formats, and the use of the retail space for banking is changing the way people shop in Mexico, check out the Best Mexican Retail Brands report (in Spanish)​ here

Download the PDF (In Spanish)


EMERGING TRENDS

  • With a growing middle class and an increase in consumer spending, most retailers are seeing strong financial results.
  • Supermarket and apparel brands are particularly strong in the region.
  • To meet rising consumer expectations, brands are improving service in both traditional and digital channels.
  • Major retailers such as Renner, Casas Bahia, Lojas Americanas, and Extra, are using lending (credit cards and financing) to increase revenue as well as customer loyalty.
  • Many brands are taking advantage of the region’s increased internet and broadband penetration.

CHALLENGES AND RISKS

  • Economic uncertainty and a degree of political and social turmoil.
  • Devaluation of local currencies, which can have a negative impact on brand value.
  • Bureaucratization continues to pose obstacles

Lessons for all

  • Adapting retail formats to accommodate the shift in consumer preferences for e-commerce is proving to be the key to success for many retailers.
  • Brands must become more responsive to stay relevant and add differentiating value, especially when it comes to integrating the online and physical retail experience.
  • The winning retail brands are those that provide a consistent and pleasant customer experience.