Article by BrazilianMarket and IBI-Tech

Magalu has more than 1,100 physical stores in Brazil and more than 20 million monthly active customers in the app. Whit sales of US$2.3B and net income of US$ 41.5 million, Magalu Stock (BVMF: MGLU3) has raised by 12.000% in the last 5 years. These results are directly related to the digital transformation process.

One of the companies that attracted the most attention in Brazil due to its growth in recent years is Magalu. During the pandemic, Magalu’s e-commerce grew by 148% and represented 66% of total sales in the 3rd quarter of 2020.

The decision to transform Magalu into a technology company was a brave one. The company grew at 10% a year in 2017, a very healthy rate when Fred Trajano, the company’s CEO, decided to reshape his company in an aggressive cultural change, embracing and prioritizing e-commerce.

The scenario in Brazil was extremely competitive with other retailers as: Americanas.com, Submarino, Shoptime, Casas Bahia and Ponto Frio. Besides the Argentine giant e-commerce platform Mercado Livre and the entrance of the American colossus Amazon.

Digital corporate culture

Luiza Labs: a technology and innovation laboratory, with digital solutions for customers.

Digital inclusion

Taking advantage of the exponential growth that the smartphone market had in Brazil at the time, the company created online content and provided internet connection services.

Digitalization of physical stores

The company developed a new sales application and a tool for optimizing store inventory. Each store now offers credit verification, free Wi-Fi and online shopping pickup in the physical environment.

Digital sales platform

Anticipating strong competition from Amazon, Magalu decided to bet on the creation of a strong marketplace for third-party sellers. As early as 2017, the company had 750 third-party sellers with 1.5 million products.

Multichannel strategy

In addition to the showroom stores, the company also encouraged Omnichannel through smartphone free shipping strategies, strengthening online shopping on mobile. It became one of the most downloaded and used apps in Brazil, especially during the pandemic.

Magalu targets Amazon competition by a series of acquisitions

Magalu acquired two media platforms: Canal Geek – a technology content producer and InLoco Media, an advertising company. These acquisitions try gets to learn from the experience of global competitors. Magalu is the first Brazilian retailer to advertise durable goods.

Another acquisition, Hubsales platform, which bridges the gap between industries and the final consumer, the so-called Factory to Consumers (F2C), is a common model in Asia, which increases industry margins by eliminating intermediaries.

And the last acquisition, published in July, was Juni Marketing Digital, a startup that optimizes the conversion rate of sales for e-commerce.

Magalu, what’s next?

The last 10 years have been amazing for Magalu. Over the next few years, Magalu will create an ecosystem by plugging different companies into its distribution mechanism.

With a few billion in cash for new acquisitions, cash will not be a problem to establish Magalu as the biggest player in Brazilian e-commerce.

What’s for Israeli Companies?

Brazil is among the five largest countries in the world, with more than 210 million people whit their own consumer culture. Among the largest countries, Brazil is the one that most resembles the US in it’s lifestyle. So, for Israeli brands that are already established in the US, going to Brazil is a good step.

Many Israeli startups and even unicorns are acting in the retail ecosystem and can provide great technological solutions. Israeli companies should understand the Brazilian market singularities before entering this market to achieve success.