Retailing in Brazil: “Virtual Store Business Model Will Gain Ground”

By August 23, 2013
Luiza Helena Trajano

A store with no stock, where customers can try out products and then order them online. This is a concept which is likely to catch on in the coming years in Brazil, a country where e-commerce is growing strongly.

Interview with Luiza Helena Trajano, President of Magazine Luiza, a chain of stores which specialises in electrical household appliances. The company is one of the largest retail operations in Brazil.

L’Atelier: You invented the concept of the ‘virtual store’ in Brazil, long before the arrival of the Internet. Where did the idea come from and, most importantly, how did you manage to make it happen?

Luiza Helena Trajano: In the early nineties, when all the major retail brands were getting out of the small underdeveloped towns in Brazil, thinking that there wasn’t any money to be made there, we stayed, and provided a quality service for the local people, at lower prices. In 1992 we decided to open the first electronic stores. The concept is simple: we keep no merchandise in stock. Customers come to look at videos of products, do a virtual tour of the store, obtain the advice of sales staff and then make their purchases. The products are subsequently delivered to their homes. Of course, at that time, we used the main channels of communication to educate customers in virtual shopping. The idea was not to be seen as ordinary retailers, but to provide a friendly meeting-place. The townspeople used to come to the store to have a good time together. In addition to uniting the community around our products, we used to organise cookery workshops and other such events.

L’Atelier: And when the Internet arrived on the scene?

Luiza Helena Trajano: Then everything became easier for us. At a stroke, we were able to make our huge database of videos and photos available online. Given that not everybody owned a computer, people continued to come to our stores to make online purchases with the help of our sales staff. In a way we had already initiated them, got them used to e-commerce from the very beginning. Today we have 104 ‘virtual’ stores across the country.

L’Atelier: You’ve also gone into social commerce.

Luiza Helena Trajano: That’s right. A year ago, we launched the ‘Magazine and You’ initiative on Facebook. Based on the principle that a customer knows the needs of those close to him/her better than any salesperson, we encourage our customers to open their own stores on Facebook. A customer starts by choosing say 60 products from our catalogue; s/he can then sell them to friends, colleagues and family members on a site which bears his/her name. S/he receives up to 5% commission without having to worry about delivering the products. The platform is highly successful: today we have over 100,000 customer-vendors, although we had estimated at the outset that we would attract only a tenth of that number. Before the arrival of the Internet and Facebook, Brazilians were already keen on door-to-door selling. The ‘Magazine and You’ project is simply a digitised version of this tried-and-tested approach.

L’Atelier: E-commerce and social commerce are really taking off now in Brazil. How do you see the future of physical stores?

Luiza Helena Trajano: Like everyone else, I don’t think physical stores are about to disappear. But they will change their format. In Brazil, customers nowadays tend to look at the information provided on the Internet, go and see the product in the store, and then buy online. That’s why we feel that in future the virtual store business model will gain ground. Currently the only merchandise we stock in our virtual stores is telephones but we’re now thinking about stocking our most popular and best-selling products as well.

L’Atelier: How do you position in-store sales in relation to online sales?

Luiza Helena Trajano: As far as we’re concerned, they should never be viewed separately. They’re two complementary approaches. One feeds the other, in one way or another. E-commerce allows people, for example, to compare prices for the same product and to consult the opinions of other purchasers. So why not transpose this to physical stores? What we’re trying to do is offer our customers a multi-channel shopping experience – in other words, to enable them to buy the products they want, where they want, when they want, via the channel that suits them best, whether that’s the Internet or the physical store.

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