Variety Stores in Brazil

2021 DEVELOPMENTS

Store-based experience is not entirely futile for variety stores

While 2020 saw the leading players in variety stores struggle to generate sales growth during the pandemic, 2021 was similar as various restrictions in place limited their ability to operate profitably. Among the main factors placing pressure on players in 2020 was the requirement for all variety stores to remain closed for several weeks during Q2 as this channel fell outside of the official designation of “essential businesses”.

Development of branded, digital solutions for both consumers and other retailers is key

The digital strategies of the leading players in variety stores were already under development prior to the onset of the pandemic and continued in 2021, despite the gradual easing of restrictions. However, these digital strategies gained further traction as the challenges that unfolded, specifically in terms of the ability to attract customers back to stores, brought home to retailers the importance of being able to target consumers in their own homes.

Previous rapid pace of store network growth will take longer to resume

The most notable background trend to have emerged from the pandemic has been the negative impact on the wider Brazilian economy. Indeed, the response to COVID-19 caused significant disruption to commercial activity in key sectors of the Brazilian economy throughout 2020 and in early 2021, when daily death tolls reached their peak in the country with over 4,000 per day.

PROSPECTS AND OPPORTUNITIES

Two types of customers: Final consumers and other retailers

Digital payment methods are expected to continue emerging as a key element of the shift towards online engagement in Brazil’s retailing industry during the forecast period. Indeed, with huge numbers of Brazilians still experiencing low levels of engagement with the financial services system, it offers fertile ground for the development of digital payment systems that enable consumers who do not have bank accounts or who have no access to credit to complete payments for online orders.

Expansion of outlet networks to resume slowly in 2022

One of the more unfortunate outcomes of the pandemic on Brazil’s chained variety stores has been the negative impact that the substantial declines in revenues registered over the course of 2020 and early 2021 have had on their outlet expansion programmes. Leading player Americanas has for several years been engaged in an ambitious programme to extend its reach to numerous key states.

Consumer finance products as a key strategy to increase engagement and diversify revenues

The adverse economic environment and low consumer confidence that have unfolded since the emergence of COVID-19 are likely to remain relevant, with expectations of a substantial recovery for both likely to take time. Amidst such an unfavourable scenario, leading player Americanas partnered with retail bank Banco do Brasil to launch credit card Ame BB through the former’s digital wallet Ame Digital.