Looking beyond China?
THERE IS A LOT OF TALK about retail
expansion into Asian markets, particularly
China, but there is one BRIC (Brazil, Russia,
India, and China) country that is just around
the corner from the U.S.
Brazil, one of the world’s fastest-growing
economies, is only one time zone from New York
and a seven-hour flight from Miami. For retailers who are expanding abroad, Brazil offers some
significant benefits over China. China has the
sheer, massive size and population, but I believe
Brazil still has better brand protection than
China (I don’t see people opening fake Apple
stores there.) and an occidental culture much
closer to the U. S. than any other BRIC country.
necks in Latin America, so hiring good, experienced people is not easy—and the qualified
ones come at a high premium.
And in terms of fixtures, Brazil has very protective importation laws, making it very expensive to bring fixtures manufactured elsewhere
into the country (That’s been my experience
in Russia as well.) It is very important to have
someone who understands the idiosyncrasies
of every country when it comes to bringing in
fixtures and how you qualify them for taxes. For
example, in Brazil, if you bring in machinery
that will generate jobs, you will not pay as much
in taxes, but for point-of-sale that might generate jobs as well, you do pay. I have seen companies successfully defend that some of their
investment in P-O-P will generate jobs, therefore qualifying for lower importation taxes, so
working with someone who is really seasoned at
importation laws is critical to success.
If you understand each country’s requirements, you can sometimes strategically design
pieces to meet them. For example, Russia allows
the import of fixture components at a lower
tax bracket assuming local labor will be used to
assemble them. So in one of my previous jobs,
we designed the pieces and parts to be easy to
assemble—they came in with different parts
groups ready assembled but needing enough
assembly to qualify for the lower bracket.
The same retailer worked with a company that handled all
implementation in whatever country we were expanding into.
The implementation company would follow the global guidelines,
do the drawings, and handle the program management. They
had a presence globally, and wherever they weren’t, they would
either find a partner or create a presence there as a company.
For instance, in Brazil where it wasn’t realistic to import into
the country from anywhere else, they purchased a P-O-P company and started manufacturing fixtures locally under the same
With the FIFA World Cup coming to Brazil in 2012, and the
Olympics coming to Rio two years later, the possibilities for retail
growth are immense.
Director of Brand Experience
“Brazil, one of
only one time
zone from New
York and a seven-hour flight from
OF RAPID CULTURAL CHANGE
Brazil has been able to tame the country’s wild
inflation of the ‘80s, has very healthy reserves,
a large middle class, and a lower class that has
been steadily rising above poverty.
In terms of retail expansion into Brazil,
I believe it’s more a matter of understanding
the people than understanding the political
situation, as it might be in China. It’s critical
to understand how brands behave in a country
where people are rapidly changing social classes.
Brands are very important for individuals to show that they have
progressed in life. Take cell phones, for instance. What is seen in
the U. S. as a functional piece of hardware, in Brazil, is also a status
symbol. Rather than putting cell phones away in restaurants, people place them on the table to show they have a more prestigious
brand or model.
I can see the shifts even in the U.S. I keep getting requests
from our flagship store in New York to translate our signs into
Portuguese. We have long had upper-class clients from Brazil coming to our stores in the U.S. to buy high-end electronics. Now we
have more middle- and lower-class Brazilians coming as well—and
they don’t necessarily speak English.
BUT IT REQUIRES EXPERT LOCAL KNOWLEDGE
One of the challenges in expanding into just about any country is
understanding local regulations and requirements. As in China,
in Brazil you might need, not necessarily a local partner, but local
employees who are seasoned in the way of doing business in the
country. Processes are very complex, including taxation, unions,
and labor laws. Education is one of the biggest economic bottle-
Luiz Andrade is a member of the executive committee of A.R.E.’s Retail
Council and Director of Brand Experience for Sony Stores. He was born and
raised in Rio de Janeiro, Brazil. Learn more on this topic during the A.R.E.-sponsored “Brazil Goes Retail: Unique Consumers, Unique Challenges” in
the Store Design & Planning track during GlobalShop, Feb. 29-March 2,
2012, at the Sands Expo & Convention Center in Las Vegas.