Brazilian retailers seek merger and acquisition deals to help e-commerce dominance

August 4 (Reuters) – In March last year, Oziel da Silva Santos needed a new TV, but with stores closed due to COVID-19 restrictions in the city of Belem, northern Brazil, l 50 year old man didn’t know how to get one. He followed a link on the website of furniture retailer Via Varejo (VVAR3.SA) and called a store manager.

At the other end of the line was Railton Sampaio, manager of the city’s largest Via Varejo. Sampaio helped him buy the TV online, sending the link for payment through the commonly used messaging app WhatsApp.

Santos is among millions of Brazilians making their first online purchase following the pandemic, a vital new market for the nation’s largest retailers. Stores are adjusting their strategies and pursuing mergers and acquisitions (M&A) to ease the transition to internet shopping for inexperienced customers.

In four months, Santos made five more online purchases with the help of Via Varejo salespeople, earning commissions for the store’s agents.

Sampaio’s sales team is an example of a growing digital strategy among Brazil’s largest retailers to increase revenue and attract new customers online after closures closed most physical stores at the start of the pandemic .

When Brazil’s largest cities imposed all store closures in March 2020, Via Varejo sales fell by 70%. Almost immediately, the retailer mobilized its 20,000 sellers to start selling through social platforms Facebook and WhatsApp. “The pandemic has accelerated our digital transformation and in a few months we have done what had been planned for a year,” said Roberto Fulcherberguer, CEO of Via Varejo.

Each store opened a Facebook account, and sellers first marketed offers to friends and family. The “Call Me On Zap” campaign, the Brazilian nickname for the popular WhatsApp messaging app, provided online discussion forums with store managers.


Even though physical stores have reopened in recent months due to the nationwide rollout of the vaccine, Via Varejo and its competitors such as Magazine Luiza SA (MGLU3.SA) and Lojas Americanas SA (LAME3.SA) continue to push for sales in line. At Via Varejo, 56% of revenue comes from online sales, up from 30% before the pandemic.

“Sellers are now eager to sell online. I get a lot of my commissions online, ”said Karina Ferreira Dias, sales assistant at a Via Varejo department store in the metropolitan area of ​​Sao Paulo. Unlike other businesses, Via Varejo did not downsize even when most of its stores were closed.

Luiza magazine has a similar strategy. “During the pandemic, sellers were able to sell through an app. They receive commissions on everything they sell, whether online, third-party products in the marketplace or in person,” said Eduardo Galanternick, his vice -President.

The biggest companies, Magazine Luiza, Via Varejo and clothing retailer Lojas Renner raised more than $ 3 billion in combined shares and invested the proceeds mostly in mergers and acquisitions.

The merger and acquisition strategy of Luiza magazine and Via Varejo was to strengthen their digital presence to face growing competition from pan-regional competitors such as Mercadolibre Inc (MELI.O), one of America’s most valued companies. Latin, Inc (AMZN.O) and even AliExpress. They’ve built big markets with tens of thousands of third-party sellers each.

Last month, Via Varejo acquired fintech Celer, with the aim of increasing the financial products it offers through its digital banking and credit app BanQi. He has acquired six companies since last year and created a venture capital fund that will invest 200 million reais over the next five years in tech startups.

Luiza magazine bought 12 companies last year, including nine tech startups. So far this year, the company has acquired 10 companies, including delivery companies, fintechs and e-commerce companies specializing in beauty products, food and video games.

Most of the deals have bolstered “omnichannel” service to consumers, allowing mixes of online and offline services that Brazilian retailers hope will help them compete with the big internet companies. Luiza magazine, for example, opened 23 new physical stores in Rio de Janeiro last month and plans to reach 50 by the end of the year.

Some retailers, lacking both cash flow during the pandemic and digital strategy, have filed for bankruptcy protection, such as bookstore chains Saraiva Livreiros (SLED3.SA) and appliance retailer Maquina de Vendas. They now have a low chance of getting out, financial analysts say.

“The pandemic has sharply separated the winners and losers from Brazilian retail and what they have done during this time will define their future,” said Ricardo Lacerda, CEO of investment bank BR Partners, who advised some of Brazil’s largest retail transactions.

($ 1 = 5.2128 reais)

Reporting by Tatiana Bautzer, additional reporting by Jimin Kang; Editing by Aurora Ellis

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