A Brazilian consumer electronics retailer gets a spark from web sales
July 28, 2015 04:16 PM
With e-commerce now approaching 20% of revenue at Magazine Luiza, the company is looking at the web in a whole new light.
When Magazine Luiza, one of the biggest consumer electronics chains in Brazil and No. 8 in the Internet Retailer 2015 Latin America 500 began selling online 15 years ago, Brazilian consumers were just starting to shop online.
But e-commerce is a big business today. Brazilian Internet research firm eBit estimates e-commerce sales in Brazil grew 25.3% in 2014 to an estimated R$35.94 billion reais ($13.99 billion) and are on track to reach as much as R$67.07 billion reais ($20 billion) within five years. With the marketing growing so rapidly, Magazine Luiza is reinventing its approach to e-commerce to drive more sales online, especially through social media, says executive director of sales and marketing Federico Trajano. “We have studied deeply to understand how social networks can be relevant,” he says.
Magazine Luzia is growing e-commerce at a steady pace at the same time retail chains in general are growing sales online. In 2014 the 146 Brazilian chains ranked in the 2015 Latin America 500 grew their combined sales last year 23% to R$16.06 billion reias ($4.79 billion). That’s in line with all Latin America 500 e-retailers in Brazil, which collectively grew year over year 24% to R$46.34 billion reais ($13.82 billion).
At Magazine Luiza web sales grew about 27% in 2014 to R$1.47 billion reais ($577.9 million) and accounted for 12.8% of all sales Rof $11.50 billion reais ($3.42 billion) compared with 12.1% of R$9.62 billion reais ($2.88 billion) in 2013.
By the end of 2015 Magazine Luiza’s online channel could account for 20% of sales, CEO Marcelo José Ferreira e Silva told an investor relations gathering in June. “We are transforming from a traditional retailer with a strong digital area to a digital retailer with physical points of sale with human touch,” he told analysts.
To continue growing its e-commerce base Magazine Luiza is launching new initiatives in social media and mobile commerce and working to coordinate its online assets with its stores. In 2013 the merchant launched a program on Facebook that enables consumers to comment to family and friends on various products—and promote sales to them. The program lets Magazine Luiza Facebook users open a “virtual storefront” and sell products they recommend on MagazineLuiza.com.br to family and friends. The transaction is processed on MagazineLuiza.com.br and the order shipped by the retailer. But for every referral made by a user, Magazine Luiza will pay that user a sales commission of 4%-10% per item.
Magazine Luiza doesn’t break out its overall social commerce sales or sales from its virtual storefront on Facebook, where the number of Likes is about 2.4 million. But in just under two years the retailer has about 150,000 users on Facebook selling products they recommend.
“For the promoters the store in the social networks is an extra income alternative in any time and place through exchange of information with family and friends,” Trajano says. “They act as curators selecting each product they have in their stores and are becoming recognized for their expertise and ability to recommend products.”
For mobile commerce, which Internet Retailer estimates accounted for R$187.8 million reais, or 16.3% of total sales, Magazine Luiza in August will roll out an updated app for iPhones, iPads and mobile devices with an Android operating system. The app features faster checkout, site search activated by voice recognition and bar code scan.
Magazine Luiza is giving web-enabled tablets to associates in about 110 stores, allowing the employees to work with shoppers in the stores to research and find products or order an item online if a product is out of stock in the store.
Earlier this year Magazine Luiza, which operates 760 stores throughout Brazil, launched a buy online and ship to store program for about 100 stores, and plans to expand the program to all locations in a year to 18 months, the company says. Though it has yet to set a release date, Magazine Luiza also has other web initiatives involving stores, including fulfilling and shipping orders from stores.
With a variety of new e-commerce programs under way, the retailer’s main mission in Brazil is to keep growing and diversifying. “We are digitizing the store experience and want to continue to grow above the average,” Trajano says.
Research analyst Sylvia De Oliveira contributed to this report.