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
Excerpts
Business Expansion Through Integrated Retail
In the early 2000s, the perilous economic situation in Argentina and Peru put the brakes on the international growth plans of many Chilean retailers, including that of Falabella. Chilean retailers – who had to contend with the small size of the Chilean market – sought to expand their business within their own country by adopting the 'integrated retail' strategy. As per the strategy, Chilean retailers entered into businesses that served to complement their retail business and provided certain synergies. The business portfolio of Chilean retailers began to include department stores, home improvement stores, supermarkets, credit card administration, financial services provided through their own banks, and real estate. Analysts pointed out that at a time when global retailers were going in for specialization and standardization of their formats, Chilean retailers were adopting and meshing diverse formats....
Falabella's Customer Strategy
The Chilean retail sector was heavily dominated by large national retailers that pushed out small neighborhood stores and specialist shops. As of 2015, Falabella was the second largest retail company in Chile after Cencosud and one of the largest in Latin America. Falabella had a standard positioning in all its markets, where its target customer group was the middle income consumer. It had a standard design across all stores of a particular format that included a common layout and a uniform style of store decoration. Its products included international, local, second generation, exclusive, and private label brands. In addition, the company's communication strategy and management practices across its various stores were also the same. Its other services, which included CMR credit cards and insurance, were also offered across all markets. In clothing and electronics, Falabella even attempted to standardize the private label brands.....
Retail Competition in Chile
In Chile's small retail market space, Falabella competed primarily with Cencosud and Ripley, which offered the same retail experiences and services. The three major retailers accounted for 80% of all retail sales in Chile. Regional analysts believed that though Chile was a small country of just 17 million people, it provided excellent opportunities for brand building, which was primarily evident in the retail sector. Gabriel Badagnani, Executive Director for Chile at brand analytics company FutureBrand, said, "In the retail sector, Chile is the benchmark worldwide in the development of department stores, Chile leads the way across the whole Latin American market and it is growing strongly in the region. Chile is a small country with a lot of powerful brands. That has to do with a certain orderliness and the country’s economic stability. The Chilean context boosts the brand.".....
Looking Ahead
As of 2013, the controlling group which held 81% of the stake in Falabella was made up of seven business families. The Solari family held 63% of Falabella through a network of two dozen holding companies. According to the Bloomberg Billionaires Index, as of 2013, the family held a net worth of US$ 16.5 billion with seven heirs individually having a 10-figure fortune. The then Chairman of Falabella, Juan Cuneo Solari, held 12% of the company worth almost US$ 3.2 billion. However, analysts observed that none of the families that held a major stake in Falabella featured prominently in any of the key international rankings for wealth. Enrique Briceno, a spokesman for Falabella in Santiago, said, "They're a very low-profile family, very simple. They have no interest in this sort of thing."....
Exhibits
Exhibit I : Top 10 Latin American Retailers, as of 2014
Exhibit II : Information on Ripley and Cencosud
Exhibit III : Information on Multinational Retail Companies
Exhibit IV: Falabella's Regional Footprint (As of June 2015)
Exhibit V: Falabella's Brands
Exhibit VI: Falabella's Market Share, as of 2014
Exhibit VII: Falabella's Awards in 2014 and 2013
Exhibit VIII: Economic Environment in Latin America, as of 2015
Exhibit IX: Falabella's Financial Performance (in millions of Chilean Pesos)
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