The logo of retail Magazine Luiza in Louveira, Brazil. The company and others are preparing to fight back against attempts by Amazon to muscle in on the country's e-commerce sector. Paulo Whitaker/Reuters
The logo of retail Magazine Luiza in Louveira, Brazil. The company and others are preparing to fight back against attempts by Amazon to muscle in on the country's e-commerce sector. Paulo Whitaker/Reuters
The logo of retail Magazine Luiza in Louveira, Brazil. The company and others are preparing to fight back against attempts by Amazon to muscle in on the country's e-commerce sector. Paulo Whitaker/Reuters
The logo of retail Magazine Luiza in Louveira, Brazil. The company and others are preparing to fight back against attempts by Amazon to muscle in on the country's e-commerce sector. Paulo Whitaker/Reu

Brazil's home-grown e-commerce players set to take on Amazon


  • English
  • Arabic

Claudia Maria de Oliveira is wary of online shopping - but while browsing social media recently, the 49-year-old Brazilian spotted a bargain-priced sandwich press from local retailer Magazine Luiza.

She swallowed her doubts and hit the "buy" button. Two days later she picked up her first-ever online purchase at a mall in Sao Paulo.

"I took the risk," said Ms Oliveira, who cleans offices for a living. "If I have any trouble with it, at least I know I can come back to the store," she told Reuters.

A reassuring physical presence and fast-growing online sales have vaulted Magazine Luiza into the upper echelons of Brazilian e-commerce, lifting shares over 500 per cent last year and 20 per cent so far in 2018.

An employee carries merchandise at retail chain Magazine Luiza. Paulo Whitaker/Reuters
An employee carries merchandise at retail chain Magazine Luiza. Paulo Whitaker/Reuters

The company is relying on deep roots in its home turf to survive an assault by Amazon.com, which is revving up operations in Latin America's largest economy six years after entering the market.

Reuters has reported that Amazon is eyeing a major warehouse outside Sao Paulo, negotiating a nationwide air cargo deal and lining up local suppliers of everything from personal electronics to perfume and home appliances.

But the American giant may struggle to dominate retail in Brazil as it has elsewhere, according to a dozen executives, analysts and investors interviewed by Reuters. They compare the state of Brazilian e-commerce to that of the US market 10 years ago  - only Amazon's slow roll-out in the Latin American country gave rivals a chance to prepare.

But the market is set to blossom. In 2016, retail e-commerce sales amounted to $16.55 billion and are projected to grow to $31.67bn dollars by 2022, according to researcher Statista.

Still, there are significant hurdles for locan and foreign ecommerce entities in Brazil. Despite good prospects, many ecommerce businesses struggle with expansion in the country, according to a United Nations Industrial Development Organsiation report last year. The process of setting up an ecommerce company can be a daunting task.

"To obtain the National Register of Legal Entities (CNPJ), one needs to define the category of e-commerce, the legal form of the company, the name and corporate name, the formulation of the social contract and registration with various government agencies including Board of Trade, Federal Revenue Service, State Finance Office and City Hall," the report said.

"Such burdensome regulations and procedures could take up to 90 days to establish an ecommerce entity. These structural problems make it difficult for local and foreign players to enter the Brazil market."

However, helped by Brazil's richest man and search giant Google, competitors are copying many of Amazon's signature moves. Those strategies have sped up delivery, earned customer loyalty and boosted offerings through partnerships with third-party sellers. And unlike Amazon, home-grown players such as Magazine Luiza have decades of experience with the country's working-class consumers and tangles of red tape - key survival skills in Brazil's retail jungle.

"We see room for several players," Eduardo Carlier, a fund manager at AZ Quest Investimentos, a major shareholder in Magazine Luiza, told Reuters. "We think the winner-take-all model that played out in the United States is going to be tempered in Brazil."

Amazon declined to comment.

With a population of more than 200 million people, Brazil is key to Amazon's global expansion plans. But as in China and India, where it ran into strong competition, Amazon is playing catch-up in Brazil.

Amazon entered Brazil quietly in 2012, peddling e-readers, books and then streaming movies in a fast-growing e-commerce market that has since doubled to $20bn.

Like a predator lurking at the edges of the market, Amazon has kept competitors uneasy, wondering when it would attack their core business.

They got their answer in October, when the world's largest online retailer opened a Brazilian marketplace for third-party sellers of an array of physical products.

Shares in Magazine Luiza, rival B2W Cia Digital, and market-leading MercadoLibre, fell nearly 20 per cent on the news.

Yet all three rebounded quickly in the following weeks. Their shares have continued to climb this year as Brazil's economy picks up and the companies employ strategies that could have been ripped from Amazon's own playbook.

Brazilian billionaire Jorge Paulo Lemann and partners at 3G Capital, the investment firm behind the Kraft Heinz Co merger, have invested heavily in B2W through its brick-and-mortar parent Lojas Americanas. Their backing has let B2W spend aggressively on in-house logistics, a third-party marketplace and efforts to integrate operations with Lojas Americanas.

In a cheeky move, B2W uses the name "Prime" for its shopping club offering fast shipping for annual membership fees, the same moniker used by Amazon for a similar service in other markets. Amazon uses "Prime" only for its streaming video offerings in Brazil.

_______________

Read more:

Amazon sales lift Jeff Bezos's fortune by $12bn in a day 

Amazon forecast shows Internet giant can grow profitably

_______________

Another online rival, MercadoLibre, was founded in Buenos Aires two decades ago to replicate the eBay marketplace model across Latin America. It has held its own against Amazon in Mexico and leads the Brazilian market in online sales, according to market research firm Euromonitor. Its Brazil unit grew 80 per cent last year, providing nearly 60 per cent of net revenue.

Last year, MercadoLibre opened a warehouse near Sao Paulo to store and ship third-party goods, accelerating delivery using a model similar to the pioneering "Fulfilled by Amazon" service.

Brazilian retailers are also getting an assist from Silicon Valley. Alphabet's Google briefed its Brazilian advertisers last year on Amazon's forays into markets such as India and Mexico to help them prepare, two people with knowledge of the matter said.

Google's head of retail in Brazil, Claudia Sciama, acknowledged that Brazilian clients had been asking what a ramp-up by Amazon could mean.

"What we've done is an exploratory study to understand how they might enter different markets," Ms Sciama said. She declined to provide details.

Few Brazilian retailers have done as much to reinvent themselves in recent years as Magazine Luiza.

Founded six decades ago as a gift shop in the shoe making hub of Franca, in Sao Paulo state, the unpretentious retailer became a national player in the 1990s selling appliances, furniture and electronics on credit to poor families ignored by bigger chains.

Chairwoman Luiza Trajano started on the sales floor as a teenager and in 1991 took over the company founded by her aunt. She steered it to a public listing in 2011, expanding operations to more than 800 locations across the country at present.

Yet Magazine Luiza's digital leap, with her son at the helm, may be the most dramatic transformation yet. Frederico Trajano launched e-commerce operations in 2000 and has made it the company's central focus since becoming CEO in January 2016.

Frederico Trajano, chief executive of retail Magazine Luiza. Paulo Whitaker/Reuters
Frederico Trajano, chief executive of retail Magazine Luiza. Paulo Whitaker/Reuters

Using brick-and-mortar stores as delivery hubs to cut costs and win over wary online shoppers, Mr Trajano is accelerating both internet sales and new store openings. Digital sales channels grew 61 per cent last year to make up nearly a third of revenue, while profit more than quadrupled.

Magazine Luiza plans to open about 100 new stores this year, up from nearly 60 in 2017, according to two people familiar with the matter. The company has said it may open more stores in 2018 than last year.

For Mr Trajano, those outlets form the backbone of his digital strategy, putting inventory closer to consumers and cutting the cost of storage and order processing.

Mr Trajano said fulfilment consumes up to 15 per cent of Brazilian e-commerce revenue, compared to as little as 8 per cent in the United States, due to Brazil's lousy infrastructure, high borrowing costs and lower levels of automation.

Each new store is "a free distribution centre," Mr Trajano said at Magazine Luiza's unassuming headquarters by a highway in Sao Paulo.

"Why do you think Amazon bought Whole Foods?" he said.

To be sure, Mr Trajano's vision of seamless integration between e-commerce and physical stores is a work in progress.

When shopper Ms Oliveira went to fetch her sandwich press, she joined a line of impatient customers waiting at the Aricanduva shopping mall on the gritty east side of Sao Paulo.

In the back room, Magazine Luiza staff hunted for her order on shelves piled with plates, shampoo, microwaves and tyres. Recently, Mr Trajano acknowledged the company's stores need to be better retrofitted to handle the flow of online orders.

Magazine Luiza is also sharpening its home delivery operation. The company has around 1,500 dedicated truckers running its own app, updating routes and communicating with sellers, warehouses, stores and customers in real time.

Mr Trajano lauds Amazon founder Jeff Bezos as "the best CEO in the world," but said his company will face a steep learning curve in Brazil, given its notoriously tough business climate.

Case in point: Brazilian consumers have long paid sales taxes on online purchases, unlike in the United States, where internet commerce got a break in its early years.

"If there's one thing the Brazilian government knows how to do, it's collect taxes," Mr Trajano said.

WHY%20AAYAN%20IS%20'PERFECT%20EXAMPLE'
%3Cp%3EDavid%20White%20might%20be%20new%20to%20the%20country%2C%20but%20he%20has%20clearly%20already%20built%20up%20an%20affinity%20with%20the%20place.%3Cbr%3E%3Cbr%3EAfter%20the%20UAE%20shocked%20Pakistan%20in%20the%20semi-final%20of%20the%20Under%2019%20Asia%20Cup%20last%20month%2C%20White%20was%20hugged%20on%20the%20field%20by%20Aayan%20Khan%2C%20the%20team%E2%80%99s%20captain.%3Cbr%3E%3Cbr%3EWhite%20suggests%20that%20was%20more%20a%20sign%20of%20Aayan%E2%80%99s%20amiability%20than%20anything%20else.%20But%20he%20believes%20the%20young%20all-rounder%2C%20who%20was%20part%20of%20the%20winning%20Gulf%20Giants%20team%20last%20year%2C%20is%20just%20the%20sort%20of%20player%20the%20country%20should%20be%20seeking%20to%20produce%20via%20the%20ILT20.%3Cbr%3E%3Cbr%3E%E2%80%9CHe%20is%20a%20delightful%20young%20man%2C%E2%80%9D%20White%20said.%20%E2%80%9CHe%20played%20in%20the%20competition%20last%20year%20at%2017%2C%20and%20look%20at%20his%20development%20from%20there%20till%20now%2C%20and%20where%20he%20is%20representing%20the%20UAE.%3Cbr%3E%3Cbr%3E%E2%80%9CHe%20was%20influential%20in%20the%20U19%20team%20which%20beat%20Pakistan.%20He%20is%20the%20perfect%20example%20of%20what%20we%20are%20all%20trying%20to%20achieve%20here.%3Cbr%3E%3Cbr%3E%E2%80%9CIt%20is%20about%20the%20development%20of%20players%20who%20are%20going%20to%20represent%20the%20UAE%20and%20go%20on%20to%20help%20make%20UAE%20a%20force%20in%20world%20cricket.%E2%80%9D%C2%A0%3C%2Fp%3E%0A
UAE currency: the story behind the money in your pockets
Our family matters legal consultant

Name: Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Read part three: the age of the electric vehicle begins

Read part two: how climate change drove the race for an alternative 

Read part one: how cars came to the UAE

Biography

Favourite book: Zen and the Art of Motorcycle Maintenance

Holiday choice: Anything Disney-related

Proudest achievement: Receiving a presidential award for foreign services.

Family: Wife and three children.

Like motto: You always get what you ask for, the universe listens.

How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.

Schedule for Asia Cup

Sept 15: Bangladesh v Sri Lanka (Dubai)

Sept 16: Pakistan v Qualifier (Dubai)

Sept 17: Sri Lanka v Afghanistan (Abu Dhabi)

Sept 18: India v Qualifier (Dubai)

Sept 19: India v Pakistan (Dubai)

Sept 20: Bangladesh v Afghanistan (Abu Dhabi) Super Four

Sept 21: Group A Winner v Group B Runner-up (Dubai) 

Sept 21: Group B Winner v Group A Runner-up (Abu Dhabi)

Sept 23: Group A Winner v Group A Runner-up (Dubai)

Sept 23: Group B Winner v Group B Runner-up (Abu Dhabi)

Sept 25: Group A Winner v Group B Winner (Dubai)

Sept 26: Group A Runner-up v Group B Runner-up (Abu Dhabi)

Sept 28: Final (Dubai)

%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Nag%20Ashwin%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%20%3C%2Fstrong%3EPrabhas%2C%20Saswata%20Chatterjee%2C%20Deepika%20Padukone%2C%20Amitabh%20Bachchan%2C%20Shobhana%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E%E2%98%85%E2%98%85%E2%98%85%E2%98%85%3C%2Fp%3E%0A
The%20Super%20Mario%20Bros%20Movie
%3Cp%3E%3Cstrong%3EDirectors%3A%3C%2Fstrong%3E%20Aaron%20Horvath%20and%20Michael%20Jelenic%0D%3Cbr%3E%3Cstrong%3EStars%3A%3C%2Fstrong%3E%20Chris%20Pratt%2C%20Anya%20Taylor-Joy%2C%20Charlie%20Day%2C%20Jack%20Black%2C%20Seth%20Rogen%20and%20Keegan-Michael%20Key%0D%3Cbr%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%201%2F5%3C%2Fp%3E%0A
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3EKinetic%207%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202018%3Cbr%3E%3Cstrong%3EFounder%3A%3C%2Fstrong%3E%20Rick%20Parish%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Abu%20Dhabi%2C%20UAE%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Clean%20cooking%3Cbr%3E%3Cstrong%3EFunding%3A%3C%2Fstrong%3E%20%2410%20million%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Self-funded%3C%2Fp%3E%0A
Living in...

This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

Company%20Profile
%3Cp%3ECompany%20name%3A%20EduPloyment%3Cbr%3EDate%20started%3A%20March%202020%3Cbr%3ECo-Founders%3A%20Mazen%20Omair%20and%20Rana%20Batterjee%3Cbr%3EBase%3A%20Dubai%2C%20UAE%3Cbr%3ESector%3A%20Recruitment%3Cbr%3ESize%3A%2030%20employees%3Cbr%3EInvestment%20stage%3A%20Pre-Seed%3Cbr%3EInvestors%3A%20Angel%20investors%20(investment%20amount%20undisclosed)%3C%2Fp%3E%0A
Evacuations to France hit by controversy
  • Over 500 Gazans have been evacuated to France since November 2023
  • Evacuations were paused after a student already in France posted anti-Semitic content and was subsequently expelled to Qatar
  • The Foreign Ministry launched a review to determine how authorities failed to detect the posts before her entry
  • Artists and researchers fall under a programme called Pause that began in 2017
  • It has benefited more than 700 people from 44 countries, including Syria, Turkey, Iran, and Sudan
  • Since the start of the Gaza war, it has also included 45 Gazan beneficiaries
  • Unlike students, they are allowed to bring their families to France
Profile of Tamatem

Date started: March 2013

Founder: Hussam Hammo

Based: Amman, Jordan

Employees: 55

Funding: $6m

Funders: Wamda Capital, Modern Electronics (part of Al Falaisah Group) and North Base Media