Brazil: Online sales outperform shopping malls in pandemic

RIO DE JANEIRO, BRAZIL – Earlier than expected and with a boost from the pandemic, e-commerce sales have outperformed those of shopping malls in Brazil. According to a study by Canuma Capital management company, last year online sales reached R$260 (US$47) billion, an increase of R$160 billion over 2019, before the pandemic.

On the other end, malls grossed approximately R$190 billion in 2019 and are expected to have closed 2021 at R$175 billion, considering the same stores, the study found.

However, according to the manager, the data do not show a loss of relevance trend of malls in Brazilian retail – there are about 600 units in operation in the country. But they highlight the challenge of further enhancing sales digitalization, a process that is currently underway.

Glauco Humai, chairman of ABRASCE, the association representing malls in Brazil, said he is neutral about the advance of e-commerce, but believes it is impossible to determine how much of online sales came from the structure of malls – whether a sale was made through WhatsApp or the retailer’s own digital platform.

Other than that, physical stores also act as a showcase for products and are therefore part of the sales process, he says. “It is increasingly difficult to separate what is online and offline sales,” he says. The executive points out that the focus of malls, which came before the pandemic, includes the convergence of sales channels.

“Everyone is heading towards multichannel,” he says. Evidence of this is the trend of digital native retailers opening physical points of sale – many of which in shopping malls. According to Humai, the purchase itself has now become a commodity, something that has prompted malls to adjust to be service centers and enablers for the customer’s purchase. “And in the pandemic, the value of the physical point, for customer contact with the brand and product, has become even more clear.”

REINVENTION

For Canuma Capital’s study, data from publicly traded groups were used, including e-commerce companies, information about shopping malls owned by real estate funds, data from associations and the Brazilian Institute of Geography and Statistics (IBGE), explains Canuma partner and Brookfield Property Group former director Marcelo Vainstein.

Currently, Canuma, which invests globally, does not have investments in shopping malls in Brazil in its portfolio, only in the United States.

“Malls will have to reinvent themselves to have the same revenue per square meter,” Vainstein says. However, he points out that the penetration of e-commerce is not homogeneous in all regions of Brazil and, therefore, depending on the area, many malls suffer less from this competitive effect.

He points out that the impact on the country’s malls was uneven, and those with pre-pandemic issues suffered more, as well as those located in places heavily dependent on offices. On the other hand, outlets exceeded all expectations and malls that sell imported products to the high-income population performed better, because Brazilian tourists were unable to travel and bought locally.

On the other hand, with the resumption of tourism, with the population vaccinated, the local luxury market tends to lose sales volume, Vainstein stresses.

SHARE

The study shows that malls lost approximately R$35 billion to e-commerce. In addition, shopping centers also lost another R$15 billion directly in the service area, with a lower flow in movie theaters and the food area, for instance.

But despite having taken a share of the sales previously made in malls, the largest e-commerce gain came from street commerce, also according to the study.

With respect to the share in restricted retail, which does not include sales of vehicles and construction materials, e-commerce had a total share of 6.8% in 2019, and this jumped to 12.7% last year.

CHALLENGES

For retail industry expert and partner at Varese Retail Alberto Serrentino, the fact that e-commerce has exceeded mall sales is not a cause for great concern for the industry. He says that malls are on track to achieving the same pre-pandemic result.

The sales slump over the past few years was a direct consequence of the period of tougher restrictions, he recalls. In addition, e-commerce was growing at a higher rate even before the pandemic, he says.

“When people feel safer, they come back to the mall. And that’s what we witnessed in the fourth quarter of 2021,” Serrentino says. He believes malls in Brazil are more than just a place to shop, as they have become a large entertainment venue, including gastronomy – and it is precisely this segment that has yet to return to its pre-pandemic level.

However, this does not mean that malls will not have to address specific challenges, the expert says. One of these will continue to be the digitalization process, which has begun due to the imposition of social restrictions. “The main challenge is how malls will manage to embrace the new consumer experience, by being a major entertainment hub. This will involve a digital transformation that simplifies customers’ lives,” he points out.

This transformation will involve connecting customers to a particular store in a mall, so that they can know if a product is available before going there.

RESUMPTION

The figures are beginning to reflect an upturn. One of the largest groups of shopping malls in Brazil, with 19 ventures, Multiplan, with Morumbi and Vila Olímpia in its portfolio, pointed out in its operating data for the last quarter of 2021 that the business is heated. In the last three months of the year, the company reported record figures in its history.

Growth reached 8.1% compared to the same period the year before. The last quarter of 2021 was the first of the year with a full operation in regular hours.

The rent indicator in the same stores (open for over 12 months) grew by 41.4%. Sales at stores increased 10.3% compared to the fourth quarter of 2019.