Chile's Falabella – Succeeding through an Integrated Retail Strategy
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Case Code: BSTR496 Case Length: 20 Pages Period: 1889-2016 Pub Date: 2016 Teaching Note: Available |
Price: Rs.600 Organization: S.A.C.I. Falabella Industry: Retail Countries: Chile, Latin America Themes: International Business, Brand Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
In January 2016, Chile-based S.A.C.I. Falabella (Falabella) – one of Latin America's leading retailers – announced that it would invest US$ 4 billion in the region during the period 2016-2019 to open 131 new stores and 10 shopping malls (See Exhibit I for Information about Latin America's Leading Retailers). In 2016, the company planned to invest US$ 885 million in the markets of Peru, Colombia, Chile, and Argentina.
While Falabella intended to spend 26% of the projected investment in expanding and remodeling its stores and shopping malls in Latin America, it had earmarked another 20% for improving its infrastructure, logistics, and IT. Sandro Solari, General Manager of Falabella, said, "These investments will enable us to improve efficiency and productivity in our different businesses and to strengthen our physical and digital presence. In line with our profitable growth strategy, we will remain alert to the evolution of the different markets and opportunities that could emerge in the current economic context."
Falabella, a 124-year-old company, was considered a pioneer in the Chilean retail industry. It was the first retail company that expanded nationally in Chile by opening department stores in various cities. Over the years, the company diversified into real estate, insurance, tourism, and financial services, i.e. offering of credit cards and banking services.
In the 1990s, the company set up department stores in Argentina and Chile. However, it put its international expansion plans on hold when the economic environment in the Latin American region deteriorated in the early 2000s. The company then decided to adopt an 'integrated retail' strategy, wherein it planned to expand into other retail areas to gain business synergies.
Accordingly, Falabella acquired retail companies which enabled it to have home improvement stores and supermarkets. The 'integrated retail' strategy paid off and Falabella became one of the largest and most well managed retail companies in Chile and Latin America. Another factor that played a key role in the company's success was its excellent understanding of customer needs in Latin America. The company put in place systems and methods to ensure that customer needs were fully met. This was also a major reason for Falabella’s success at staving off competition from multinationals.
Despite a difficult economic environment in Latin America, which had been continuing since 2009, Falabella managed to maintain its strong financial performance. As of 2015, the company had plans to improve its ecommerce business so as to cater to the rising sophistication of the consumer in Latin America. In addition, the company planned to enhance the product range at its stores.
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