The coronavirus crisis has brought about a significant shift in Brazil’s retail industry, leading to the growth of e-commerce while traditional brick-and-mortar stores struggle to recover. Local online retailers such as B2W Companhia Digital SA, Magazine Luiza SA, and Via Varejo SA are expected to benefit from this shift. Despite facing competition from international players like Mercado Libre and Amazon.com, these local retailers still have the potential to expand their marketplace platforms for at least two more years. Retail and e-commerce analyst, Thiago Macruz, predicts that the increasing migration of customers to online shopping will outweigh the economic challenges.

B2W, which operates popular brands like Submarino and Americanas.com, has experienced a 16% increase in shares this year. This outperforms rivals Magazine Luiza and Via Varejo, who own numerous brick-and-mortar stores. Although Amazon has not posed a significant challenge to its local competitors yet, it possesses the financial resources to change the competitive landscape whenever it chooses.

The online sales growth in Brazil has seen a significant acceleration, with a 30% increase in the past five weeks, according to local e-commerce association ABComm. Stay-at-home measures have attracted more consumers to shop online, leading retailers to migrate their businesses onto digital platforms. ABComm estimates that around 80,000 online platforms have been launched since March, and the number of customers shopping online has increased by almost 1 million.

Maurício Salvador, president of ABComm, believes that despite economic hardships, e-commerce in Brazil, like the rest of the world, has continued to grow. However, he acknowledges that online sales may slow down in the coming months due to rising unemployment and a political crisis affecting consumer confidence. ABComm maintains its initial growth forecast of 18% to 106 billion reais ($19.50 billion) for 2020.

On the other hand, retailers based in malls that sell apparel and other goods face a more challenging path to recovery. Brazil’s largest fast-fashion retailer, Lojas Renner SA, has experienced a 30% decrease in shares this year. Only 60 out of Brazil’s 577 malls have reopened, resulting in tenant stores losing 20 billion reais ($3.51 billion) in sales since the start of the pandemic, according to industry association Abrasce. Although 13 more malls are expected to resume activities by May 4, the demand is unlikely to fully recover this year.

Economist Victor Beyruti highlights that being the first to reopen does not guarantee a quick recovery in demand, using China as an example where it took time for demand to bounce back. Brazil is expected to face an even longer recovery period. In an effort to overcome the crisis, mall operators are in discussions with the state-run development bank BNDES to create a credit line after foregoing 1.5 billion reais in rent payments from their tenants so far.

One upscale mall operator, Iguatemi Empresa de Shopping Centers SA, has reduced spending on renovations by 40% this year, and other operators may follow suit. It has already reopened a single outlet mall in the southern state of Santa Catarina, which was one of the first regions to relax social distancing measures. Rival company Multiplan has also resumed activities in one mall in southern Brazil but expects sales to be affected by high unemployment throughout the year.

Helpful links:
1) The Financial Times – Brazil’s retail giants defy Amazon to keep the digital lights on
2) Reuters – Brazil’s e-commerce sales soar during pandemic, accelerating 2020 growth projections