Retail earns more on the internet than on the street

When Fabrício Garcia started working in the family business, Magazine Luiza, in Franca, São Paulo, was 13 years old. During school holidays, alongside his cousin Frederico Trajano (current president of the retailer), he lived up to the culture of “belly at the counter”, a family tradition to teach the new generations of the company, founded in 1957, how to serve the customer.

Today, at 44 years of age, the business administrator and current vice president of operations at Magazine Luiza needs to do much more for the consumer than showing what he has in store. Even because 71% of all Magazine Luiza sales happen over the internet.

Survey made by Sheet points out that more than half of the sales of three of the largest retailers in the country are made in the virtual environment. Despite the thousands of stores spread across the country, Via (Casas Bahia and Ponto chains), Magazine Luiza and Lojas Americanas have, respectively, 59%, 71% and 76% of all their sales carried out over the internet.

The numbers include the marketplace: when sellers (“sellers”) register their products on the websites of the respective retailers, who earn a commission on the sale of these items and also offer services to sellers, such as delivery of orders.

One of the traditional measures of retail—same store sales (SSS)—is a sign of the new times. The indicator only considers stores that have been in existence for a year or more, excluding the most recent ones, to give a sample of productivity gains and customer retention.

In 2021, sales at these physical outlets grew little or fell in the major chains: up 0.2% at Magazine Luiza and 4.6% at Americanas. Via does not disclose the indicator, it only says that, in physical stores, sales fell 2.3% in the year. Online sales, however, jumped in all retailers: 39% in both Magalu and Via, and a 56% increase in Americanas.

This does not mean, however, that stores are running out: in the last five years, while the share of online sales has grown dramatically, the number of points of sale has also increased, as the survey by Sheet. But today the biggest concern of Fabricio Garcia, Magalu, and the other large retailers is to invest much more in technology and logistics than in store openings, in order to integrate all retail ends and make any product, yours or from third parties, reach the customer.

Store increases space to stock product sold online

In 2021, for example, while it invested BRL 222 million to open 182 points of sale, Magalu invested BRL 790.2 million in technology and logistics. Via allocated R$ 223 million to inaugurate 101 stores last year, during which time it set aside R$ 601 million for technology and logistics.

Now every store needs to have a larger space for stock: it is from there that the product purchased online goes straight to the customer’s home (or it will be delivered to the consumer himself, who bought it on the internet and looked for it in the store). In Magalu, this space corresponds, on average, to 25% of the size of the point of sale (it was at most 15% before the pandemic). At Via, one-fifth of store space is for inventory, up from one-tenth a few years ago.

With high investments in technology and logistics, the main objective is to speed up delivery and reduce costs: the goods no longer need to go to a distribution center (DC) far from the central region. The shorter the delivery time, the greater the chance of winning the preference of the consumer, who is also interested in paying little or nothing for shipping.

“Since the 2000s, many people thought that the importance of the physical store would decrease, a discussion that became even greater with the pandemic and the explosion of online sales”, says Garcia. “But the truth is that stores play a fundamental role in the retail ecosystem, as a point of support for logistics, especially when it comes to the capillarity of the Brazilian market.”

In this new context, the stores also started to have a place for the quick removal of products purchased online, with the right to drive-thru, and reserve a space to separate and ship products from sellers, a work similar to cross docking.

Chain sells tractor washing machine online

At the same time, salespeople don’t just have their stomachs on the counter: they are trained to answer customer questions and close sales through the networks’ application. They also take advantage of the consumer’s visit to the store to try to sell products from sellers registered in the marketplace.

“We even sell tractors over the internet”, says Abel Ornelas, commercial and operations vice president at Via, citing a deal made by Casas Bahia de Irecê (BA). One of the sellers at the store, which is located in an agricultural region, sold a diesel micro tractor, worth R$ 25,700. The product is from one of the network’s sellers and all negotiation with the consumer was done virtually.

“Before, the seller thought that the internet would take away sales from him, but now he considers online his ally”, says Ornelas. “If before he had 3,000 or 4,000 SKUs [itens] to sell in stores, now, with the sellers, there are 41 million”, he says, noting that half of Via’s digital sales go through physical stores. physics going forward.”

One of the novelties that emerged with stores closed during the pandemic, the “Me Chama no Zap” function, installed on the Casas Bahia app, continues to be widely used, even with the reopening of points. “The consumer researches the purchase of an 80-inch TV on the internet, for example. But he has doubts and can enter the application to speak directly with the seller, who has the chance to close the purchase right there or in the store”, he says. . “Hence the importance of being omnichannel.”

Even with all the technology, Ornelas points out the importance of maintaining a close relationship with the customer, something that only the physical store can provide. “In Indaiatuba (SP), we had the case of newlyweds who closed the purchase of the stove and the machine at the store two months ago. They commented that they still needed to buy the rings, and more than quickly our saleswoman said that Casas Bahia offered the product on the website. She managed to sell the pair of rings as well.”

Advancement no longer takes place via store acquisitions, but through sellers

The advance of online sales helped to reconfigure the choice of points in physical stores. For retailers, it is worthwhile to be present in all states of the country, but it is not necessary to be in all neighborhoods of the capitals, much less have more than one point on the same street.

“At the time of the carnet, we had six stores on the same street in Osasco, for example”, says Ornelas. “There were a lot of people to pay the installment and not everyone could fit inside the store. Today the payment is through BanQi, our digital account”.

For consultant Alberto Serrentino, partner at Varese Retail, the physical store plays a key role in the digital transformation of retail. “The store helps to capture and captivate customers,” he says. “So much so that operations that were born in online retail, such as Amaro [moda] or Westwing [decoração]ended up opening physical stores”, he says.

In the opinion of Eugênio Foganholo, from the consultancy Mixxer, retail expansion no longer depends essentially on the physical store – which in the past led to a movement of large acquisitions. “Today the physical presence is important to help leverage online sales, from the customer who buys on the internet and searches in the store, or goes to know the product in the store and then buys on the internet”, he says.​

In the squares where Via opened new stores, digital sales tripled, says Abel Ornelas. “Many customers feel safer making an online purchase if they have the physical store close by,” he says.

Also Magazine Luiza, which arrived in the middle of 2021 in the state of Rio de Janeiro, saw online sales in the region increase after its debut, says Danniela Eiger, retail analyst at XP. “The difference is that before the expansion of networks was only through physical stores, now it is more linked to the marketplace”, she says.

At Magazine Luiza, for example, the sellers themselves go out in search of new sellers to join the marketplace, getting in touch with small retailers around the store, says Garcia. “We want to contribute to the digitalization of Brazilian retail, starting with the small ones, which are often offline.”