In 2011 retailing experienced a slight slowdown in growth compared with the strong performance recorded in 2010, due to declining consumer confidence and the threat of a slowdown of the economy, due to problems faced in Europe. Nevertheless, companies continued to invest in opening outlets and mergers and acquisitions in 2011, which showed that retailers were still very optimistic about the socioeconomic indicators in Brazil.
Sales per square metre – an important ratio for retailers
The performance in terms of sales per square metre has become increasingly important in retailing, especially as the price of real estate increased significantly over the review period, and thus forced manufacturers to show a better performance in terms of sales to compensate for the high investment in opening stores or keeping them open. Recently, FIPE (Foundation Institute of Economic Research), in partnership with Zap Móveis, published a survey which showed that real estate in the key metropolitan cities increased by 100% in the last four years. In 2011 the price of real estate increased by 26% in seven cities. The cost to keep a store open increased significantly driven mainly by price of real estate.
Internet retailing suffers from infrastructure problems
The outstanding performance of internet retailing caused some problems for those companies which did not make sufficient investment in infrastructure to meet the growing demand. B2W Cia Global Do Varejo was one of the companies which received a high number of complaints. The state of Rio Janeiro banned the company from selling products through its e-commerce websites in June 2011 due to the growing number of complaints. A similar decision was taken in the state of São Paulo due to the same problems in November 2011. Compra Fácil, owned by, and Ricardo Eletro also faced problems in delivering products on time.
Further mergers and acquisitions
Retailing is going through a period of consolidation, as a result of several mergers and acquisitions over the review period. The positive socioeconomic indicators in Brazil even during the financial crunch in 2008 and the economic slowdown in the eurozone contributed to further investment by major retailers in expanding their presence in the national territory. Mergers and acquisitions are also a way for retailers to expand their presence more rapidly compared with organic growth, and they can obtain synergies with other companies to increase their bargaining power and improve profitability. Parapharmacies/drugstores led in terms of mergers and acquisitions, with Droga Raia and Drogasil merging in 2011, but still operating separately, and Brazil Pharma, a holding of BTG Pactual, making several acquisitions of chained parapharmacies/drugstores in 2010 and 2011 in different regions of the country.
Optimistic outlook for retailing
Although 2012 is not expected to be a great year for retailing, companies are optimistic about the outlook, especially with the country hosting the Football World Cup in 2014 and the Olympic Games in 2016. As a result, there are retailers which are continuing to invest in expansion, and international companies are interested in entering the Brazilian market through acquisition or by opening their first stores in the country.
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