Opportunity Knocks as Brazil’s Retail Market Moves Online

The Brazilian retail market has suffered large fluctuations over recent years.  At first, from 2004 to 2013, came a period of accelerated growth. Much of this growth occurred due to the income distribution programs initiated during this period. These saw the purchasing power of Brazilians grow substantially. About 40 million people climbed out of the poorer classes and became part of the consumer market. Important factors which drove this growth included the increase in credit availability, higher rates of employment and the control of inflation rates. From 2004 to 2013, GDP grew by 40%, while retail grew three times this.

From mid-2013 onwards, a more moderate increase has been experienced. According to data from Serasa Experian, the revenues generated by retail trade grew by 3.7% in 2014. This expansion has been the lowest for the industry over the past 11 years. In 2013, for instance, the trade increased by 5.2% in its activities. During this period, the creation of formal jobs decreased, the inflation rate began to lose stability, interest rates have grown considerably and finally the outlook for GDP is no longer so encouraging.

This sector is extremely important and an economic beacon for Brazil, because it generates more formal jobs in the country (about 8 million at the end of 2013, according to the IDV) and is the sector with higher revenues (about US$162 billion at the end of 2013).

Online Retail, Crucial for the Resumption of Growth

It is in this context of economic downturn that IT opportunities can and should take shape. In order to optimize processes and reduce costs for retailers, an important part of the retail market is online retail. To have an idea of the size of this market, according to the “31st WebShoppers” report developed by E-bit, the online retail generated revenues of $11.6 billion in 2014 and expects to achieve sales of $13.9 billion in 2015, representing an increase of 20%. The online retail is ceasing to be a niche market and becoming more a kind of a mass market. However, there is still a lot of room for growth, since e-commerce in Brazil represents only 7.1% of total retail. In this year of crisis, contrary to what one can assume, e-commerce should serve as a good replacement of some traditional models because it is more convenient, comparative, effective and often cheaper.

According to the study conducted by Frost and Sullivan, “Digitized Retail 2020: Capturing Emerging Opportunities (Technical Insights)” non-cash transactions will increase from $410 trillion in 2013 to $780 trillion handled by banks by 2023 (worldwide). This study also indicated that revenue in Big Data Analytics for this specific area should reach $55 billion by 2018. This huge market size will be achieved with support from technologies like cloud analytics, predictive analytics and business intelligence that are rapidly penetrating the enterprise sector. Frost & Sullivan expects that by 2019 the number of mobile payments will reach 87.6 million, much higher than the mere 0.8 million in 2013.

IT Trends and Opportunities

The discussion about the evolution of retail and the technology contributions related to this sector has attracted growing interest among large retailers. The Brazilian retail market has not reached maturity in terms of IT adoption yet. According to a survey conducted by CETIC, only 16% of companies sold goods through the Internet and 34% of the companies interviewed had an IT department, for example. Technologies such as mobility, Big Data, social networks, and radio frequency identification (RFID) are expected to profoundly change the way retailers interact with clients. These technologies will create new opportunities for IT vendors in the retail vertical. These trends will be a key connector between traditional retail and online too.

One company that is taking advantage of this gap within the traditional retail market is Guiato, a platform that enhances the media disclosure of retailers by bringing their offers to customers at the moment they are searching for products. Guiato has clients from different retail sub-segments, such as: Pernambucanas, Polishop, Leroy Merlin, Walmart, Carrefour and Makro. Since 2013, the platform has reached 3.5 million unique visitors per month in Brazil, it has partnered with more than 130,000 stores and has 1,700 registered retailers across the country.

Applications like Guiato help retailers reach a greater number of customers at any time and help them save money related to printing brochures. Although sales cannot be directly handled through the platform, it can help customers to compare prices, access products’ information, and finally lead them to making a purchase in either physical or online stores.

Information technologies such as this will create important opportunities for retailers as they begin to adopt them. This adoption will be driven by some business priorities such as customer attraction and retention, cost reduction, productivity improvement, brand image and marketing effectiveness improvement.

One way or the other, we can be sure that the Brazilian retail market presents several opportunities for IT players. Although the Brazilian economic scenario hasn’t been so promising, retailers must take advantage of the e-commerce possibilities aiming to identify and differentiate the customers, improve the interaction with them and, at the end, personalize the services or products according to their real needs. A combination of mobility, Big Data and Analytics will help to merge the distinct but complementary areas of retail: traditional and online.