Internet commerce continues to flourish in Brazil, despite a slow-growing economy, says ViewsWire Latin America

Brazilians have continued to embrace Internet commerce, despite a slow-growing economy and recent financial uncertainty. Online retailers report a merrier holiday shopping season than they had expected, with December sales of R650m (almost US$200m), 40% above the year-earlier period. This reflects a widening base of Internet users (even though many of them only have access at work) and growing confidence in online transactions in general.

Online sales statistics can vary, but a Brazilian consultancy, e-consulting, reports a total figure of US$1.43bn for 2002, well above its original forecast of US$800m. The holiday season accounted for more than one-third of the year's online sales, with some retailers more than doubling their Internet-based sales revenues compared with the same period in 2001.

The growth is largely attributable to online sales by car manufacturers--which account for nearly 80% of all online sales, says Daniel Domeneghetti, strategy director at e-consulting.

Consumers may order their vehicles via their home computers, but the bulk of the sales are still transacted from the car dealers' computers. Mr Domeneghetti still includes these sales in its business-to-consumer (B2C) statistics because, even though the transaction is not exclusively cleared electronically, the Internet fosters the deals (10% price discounts for online purchases have also helped). General Motors (US) pioneered Internet-based vehicle sales in 2000.

Vehicles sales aside, online transactions amounted to R1.6bn last year, up 45.5% compared with 2001. (In dollar terms, however, the value of goods transacted remained below US$500m.)

Improved financing terms have also brought buyers online. Some goods may be purchased online under 12-month, interest-free agreements, while in-store sales generally consist of four-month plans. As a result, the average value of online purchases has also increased significantly--up to R700, as in the case of Globex Utilidades's Ponto Frio chain, which specialises in white goods (fridges, stoves, washers and dryers).

As Brazil's online user base expands, its B2C market is consolidating. Bricks-and-mortar companies continue to have the upper hand in establishing online sales operations (as is increasingly the case in the US). Most successful online retailers are traditional chains well known to consumers, such as Lojas Americanas, Pao de Acucar (Brazil/France) or book and CD stores (such as Saraiva and Siciliano).

Click begets mortar
Indeed, bricks-and-mortar operations--availing shoppers the opportunity to "see" and "touch" goods--appear to be crucial for supporting successful online sales strategies. One of the few remaining "pure players", Submarino, whose business model was originally inspired by Amazon.com (US), has decided to launch four pilot bricks-and-mortar stores (one in the interior of Sao Paulo state and three in Minas Gerais state).

Pao de Acucar originally attempted to create a new and specific brand, Amelia, for its online division. When it became clear that the brand-building exercise would be too costly, efforts were abandoned, and the country's largest retailer used its traditional and familiar brands instead, such as Extra, to sell online. The average online purchase (more than R300) is also much higher than it is in its hypermarkets (less than R50). Extra.com reported an increase in December sales of 130% in volume and 60% in local-currency terms over December 2001.

Meanwhile, Lojas Americanas, a popular non-food retailer, has managed to upgrade its brand image via its online sales effort, as its Americanas.com division boasts a more affluent clientele than those who shop at its physical stores.

The presence of physical stores is so important that even manufacturers that do not operate own-name stores in developed markets are investing in physical outlets in Brazil and Latin America. Japan's Sony Latin America, the top supplier of consumer-electronics goods to the region, began building dedicated stores in the region to allow consumer demonstrations and enhance its brand.

Online shopping has particularly boosted sales of consumer electronic and entertainment goods, including DVD players, hand-held computers, flat-screen TVs, digital cameras and Sony's PlayStation videogames, along with traditional CDs.

Two other factors are fostering the development of online sales in Brazil. Security concerns (which continue to plague Latin American telephone-based sales efforts) are waning, as no major fraud has been committed through Internet-based transactions. Delivery operations--which marred online operations in the 2001 holiday season--have also improved.

Source: ViewsWire Latin America.

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