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Brazilian Retail News

Year 09 - Issue # 373 - São Paulo, February, 07h, 2011

Phone: (5511) 3405-6666

Walmart to have 100% green energy stores in Brazil

Walmart announced last week it intends to make all its stores in Latin America 100% powered by renewable sources.
They will also reduce their waste and sell more sustainable goods. In the announcement, made by Eduardo Solórzano,
president of Walmart Latin America, no timetables or other goals were revealed.

Supermarkets forecast 4% sales rise in 2011

The Brazilian Supermarket Association (Abras) forecasts this year the segment’s sales will go up by 4%, in inflation-
adjusted figures, over 2011. The rising price of commodities shall keep affecting sales volume this year, and the lower
growth of income and job shall lead to a more tepid growth of the segment. Last year, the segment’s sales rose 4.2% in
real terms, below expectations of 4.5%.

Retail sales up 9.8% in January

Retail has opened the year slowing down. Figures reported by Serasa Experian show retail sales rose 9.8% in January
year-on-year, below the 12.8% of December and 11.2% last November. January’s sales were boosted by a 15% rise in
DIY sales, followed by a 10.4% growth in furniture, electronics and computing. The only segment with falling sales year-
on-year was apparel, footwear and accessories.

Santa Lolla opens first shop in the USA

After 18 months of negotiations, Brazilian fashion
footwear chain Santa Lolla opened its first shop in the United
States, in the Tower Center mall, in Boca Raton, Florida. The
160 sq.m. shop is a partnership between Santa Lolla and a
franchisee from Rio de Janeiro. The investments were up
to US$ 500,000 and price tags will be similar as of Brazil,
where Santa Lolla’s shoes are sold in the R$ 200 (US$
111.11) range. The company’s goal is to build a 500 store
chain in the US in ten years.

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Brazilian Retail News
Year 09 - Issue # 373 - São Paulo, February, 07h, 2011
Phone: (5511) 3405-6666

Car sales jump 14% in January

In January, car sales rose 13.9% over the same month last year, according to the National Car Dealers Association
(Fenabrave). There were sold 229,858 units, over 201,744 one year ago, but figures were 11.5% below Fenabrave’s
forecasts. Volkswagen led sales, with 54,511 cars, followed by Fiat (46,625) and General Motors (41,159).

Direct sales up 17.2% in 2010

The Brazilian direct sales segment had a 17.2% growth in 2010 over 2009, according to trade group ABEVD, and total
sales reached R$ 26 billion (US$ 14.44 billion). In inflation-adjusted figures, sales went up 11.3%. In 2009, total growth
was of 18.4% and the segmetn has completed a decade of two-digit year-on-year expansion.

Casas Bahia remains the country’s top

Casas Bahia, Brazil’s top electronics retailer, is the
largest advertiser in the country, according to an Ibope
Monitor ranking. The retailer invested R$ 3.09 billion (US$
1.72 billion) last year, 1.2% more than in 2009, and leads by
a large margin. Unilever goes second, with R$ 1.93 billion
(US$ 1.07 billion invested), followed by Hyundai, Ambev and
Caixa Econômica Federal. The fastest-growing companies
in the list are rivals in the cleaning and health care segment:
Reckitt Benckiser invested 80.3% more last year, or R$ 830
million (US$ 461.1 million) and ranked 8th, while Procter &
Gamble spent 97% more, to R$ 734.2 million (US$ 407.89
million), and is the 9th.

Consumer confidence remains stable

Consumer Confidence Index (ICC) was almost stable in January, dropping by 0.1 point, to 121.6, over December. The
consumers’ evaluation on the current economy conditions fell two points, to 144.2, but expectations index rose 0.8 point,
to 109.7 in a zero to 200 scale.

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Brazilian Retail News
Year 09 - Issue # 373 - São Paulo, February, 07h, 2011
Phone: (5511) 3405-6666

Convenience, value and experience
Marcos Gouvêa de Souza - CEO, GS&MD - Gouvêa de Souza

The study of the US retail store formats, segments and channels in the last 18 years is one of the clearest ways to
understand the movements shaping consumers’ behavior changes throughout time and how it has been used by retailers and
their suppliers.
Some conclusions can be presented observing the behavior of the US retail, the world’s largest and the main driver of
innovations in the past. Specially when compared to the Brazilian reality.
* In the last ten years, from 2000 to 2010, US retail had a real-term sales growth of 44.2%, impacted by the 2000 crisis
and by the latest 2007 crisis, that had its hardest impact in 2008 and 2009.
* In the same period, Brazil had a real-term retail sales growth of 60%, driven by a stronger growth in the last years. In
the 2000-2005 period, sales rose only 7.8%, depressed by the global crisis and by domestic issues; in the 2006-2010 period,
sales rose 48%.
* In the US, value-oriented store formats and the non-store retailing, specially internet, were the ones with faster growth,
gaining market share even in the moments of more exuberant growth. In the 2003-2008 period, sales rose 32.5%.
* DIY segment is the one that has better reflected the recent market behavior during the US crisis. In the 2003-2006
period, sales rose 26% and then, impacted by the real estate crisis, fell 17% from 2006 to 2010. Between 2003 and 2010, in
Brazil sales rose by 30%, suffering hiccups in its growth pace in 2005 and 2009.
* Healthcare and Personal Care have had a very different behavior in the US and Brazil. In the US reality, the segment
has followed the retail’s overall performance, with a 30% in the 2003-2010 period, while in Brazil growth reached 80% in the
same timeframe.
* Furniture and electronics segment in the US had a total sales growth of only 6% in the 2000-2010 period, strongly impacted
by the real estate, financial and economic crisis started in 2007/2008. In Brazil, as one of the segments most positively impacted
by the families’ spending growth, the estimated growth for the period is of 154%, very likely to continue rising in the next years.
* Non-store retailing had in the US, in the 2000-2010 period, an estimated growth of 188%, leveraged mainly by the
expansion of the internet. In Brazil there are no consolidated figures on the growth of the non-store retailing, but internet sales
alone rose 225% in the 2004-2010 period, rising to R$ 14.3 billion (US$ 7.94 billion) last year.
* In the US, supercenters and warehouse clubs segments, the most significant representatives of the value retail, were
the ones with the fastest growth in the 2000-2010 period, rising 169%, more than four times total retail sales growth.
* The department store segment is, in the US, the one most hit by the consumer’s behavior changes, that has reoriented
their preferences to value-driven stores and formats, while department stores were stuck to the image of less competitive prices
and low innovation. The segment’s recent history is of ongoing loss of market share to specialized stores and to value-driven
ones: in the 2000-2010 period, department stores had a 20% sales fall. Completely different from Brazil, where fashion-oriented
department stores have increased sales and market share.
* A very specific situation happens in the US food and beverage segments. In the 1992-2010 period, the segment increased
its sales by 59%, way below the total retail growth of 124%, partially due to consumer’s migration to the foodservice market. In
this latest crisis, pressed by the adverse economic behavior, consumers went back to shopping in supermarkets, increasing the
share of food prepared at home and making the segment increase its sales by 2.4% in 2010 year-on-year.
This comparative analysis shows Value and Convenience have been the most important factors shaping the behavior of
the US consumer, a scenario we’ve been able to confirm recently in Europe as well, where hypermarkets have had a positive
performance, focusing on more competitive prices.
Shopping experience in all consumers’ touch points, considered as an alternative to a growing rationality in the purchasing
behavior, is in fact a new way, if not the only one left, but has not been able to be translated in relevant results in times of crisis,
like the one the more mature markets have been living.
Gouvêa de Souza & MD Desenvolvimento Empresarial Ltda.
Av. Paulista, 171 - 10º floor
Paraíso – São Paulo – Brazil – Zip Code: 01311-904
Phone: (5511) 3405-6666 – Fax: (5511) 3263-0066

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