Brazil`s Magazine Luiza SA: Changing the Face of Retail in Tune with the Times |
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From the time she was 12, Helena had been working at her uncle and aunt’s store as a clerk, during her holidays. She joined the company full-time at the age of 18. In 1972, Helena graduated with a BA in Law from the Faculdade de Direito de Franca – a Brazilian public higher education institution. She then went on to occupy several senior positions in Magalu before becoming its head... |
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| Over the years, Helena decided to achieve growth and increase the company’s geographical reach through a series of acquisitions. Industry observers thought that Helena acquired several small firms primarily to dominate a regional market and keep out competitors. She was believed to adhere to the motto ‘Eat so you won’t be eaten’... |
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| Helena was credited with devising several sales strategies that dramatically pushed up the sales of the company. One of her key strategies was to give credit to the Brazilian poor and the underprivileged, so that they could make their purchases at the company’s stores. The company offered its products on credit at affordable rates of interest, with customers being expected to pay back in small installments... |
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| Over the years, Magalu offered a variety of financial services, sometimes in collaboration with other organizations. In 1992, it set up a subsidiary called Consórcio Luiza which offered a credit system under which consumers could buy products within groups. It provided customers with access to ‘Letters of Credit’ (LoC) at all of its stores. The LoCs served as a form of savings or self-financing, using which the customers could avail of products (vehicles such as automobiles, motorcycles, boats, and tractors) services (plastic surgery, dental care, travel, building material, post-graduation courses) and real estate... |
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| Magalu’s provision of credit bolstered the purchasing power of the underprivileged in Brazil, which was considered to be Latin America’s biggest consumer market. Despite the risky strategy of giving credit to the underprivileged, it was observed that the company had a 50% lower default rate than the average for Brazil’s retailers who offered consumer finance to their customers. .. |
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| Helena maintained an open communication channel with customers to better understand their issues and be in touch with market reality... |
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| In 1992, under the leadership of Helena, Magalu launched an innovative new retail concept called the ‘Virtual Stores’. The virtual stores did not have any physical product, but they contained various ‘cells’ (small partitioned spaces) with a TV and a VCR ... |
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| In 2000, Magalu launched its first e-commerce site ‘www.magazineluiza.com.br’ with over 5,000 products. The company then decided to incorporate the personal relationship that it built with customers through its salespeople in its physical and virtual stores in its online venture also... |
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| The financial year 2015 was a time of crisis for the company, as it experienced a decline in sales due to Brazil’s poor macro-economic environment that led to a fall in consumer confidence. .. |
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| That Magalu’s ‘Digital Transformation’ strategy had succeeded was evident from the fact that the company quadrupled its net profit within a year. .. |
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Exhibit I: Top 10 Latin American Retailers, as of 2013
Exhibit II: Digitalization of Physical Stores
Exhibit III: Financial Performance of Magalu for 2013-17 (in Billions of R$)
Exhibit IV: Most Popular Online Retailers in Brazil, as of January 2017
Exhibit V: Magalu’s Multichannel Operations
Exhibit VI: Geographical Footprint of Luiza
Exhibit VII: Brazil’s Retail Industry, as of 2017
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