Embed Size (px)
Citation preview
E-COMMERCEfrom threat to opportunity
ABOUT CUSHMAN & WAKEFIELDCushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occu-piers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
SUMMARY
The Contemporary retail
Main E-commerce players in Brazil
The rise of online sales
The transformation of physical stores in mini distribution centers
The E-commerce at Shopping Malls
4
4
10
5
10
4 E-COMMERCE From threat to opportunity
THE CONTEMPORARY RETAIL
Technological advance affects every economic sector and one of the most influenced segments by the online sales modernization is retail. With the growing wave of companies investing in E-commerce, physical retailers have already started to feel both positive and negative results this change brought about. Shopping centers it made easy and quick, the wide range of options and the convenience offered to consumers leads online shopping to perform better and more significantly.
As we will show next, several companies use E-commerce to develop the results through partnerships established with large companies from the segment or by developing their own E-commerce platforms.
THE RISE OF ONLINE SALES
Brazilian retailers are undergoing a changing phase, and, over the past few years, online sales have presented the best results in relation to that of overall sales. According to the EBIT data shown in the Webshoppers report, E-commerce sales grew between 2011 and 2018, presenting an average annual increase by 16.11%*. Despite Brazil’s crisis scenario in 2015 and 2016, E-commerce sales went up by 15.36% and 7.51%, respectively. In turn, overall retail sales did not record good numbers between 2013 and 2016. PMC (Brazilian Monthly Survey of Trade) data reveal a slowdown in sales volume in 2013 and 2014, and downturn in 2015 and 2016 by -4.35% and -6.25%, respectively. However, with the resumption of the economy in 2017, the Brazilian trade pointed out recovery in its main index (PMC - Core), but a stable growth in 2018. Therefore, it is worth to highlight that the forecast of 2019 does not predict an expressive growth in the retail market, only the continuity of stead growth that have seen in the last two years.
* CAGR was the method used to measure the average annual increase. 2011 was used as base year.
6.67
8.41
4.272.23
-4.35
-6.25
2.09
2.30 2.31
18.722.5
28.8
35.8
41.344.4
47.7
53.2
61.2
2011 2012 2013 2014 2015 2016 2017 2018 2019(Forecast)
70
60
50
40
30
20
10
0
10
8
6
4
2
0
-2
-4
-6
-8
E-COMMERCE SALES REVENUE (BILLIONS OF BRL) VS CORE MONTHLY SURVEY OF TRADE (%)
Core Monthly Survey of Trade (%) E-commerce sales revenue (Billions of R$)Source: EBIT value according to the 39th edition of Webshoppers report, LCA
Core Mothly Survey of Trade (%) Revenues
5CUSHMAN & WAKEFIELD
MAIN E-COMMERCE PLAYERS IN BRAZIL – PUBLIC COMPANIES
Some examples of public company retail businesses with successful E-commerce sales include Magazine Luiza, Via Varejo, Grupo Pão de Açúcar (GPA), Carrefour and B2W Digital. The most commonly used metric for measuring online sales performance is GMV (Gross Merchandising Volume). The calculation method is used differently across the companies, but all the companies analyzed include the results of their own product sales added to marketplace sales.
Magazine Luiza top management informed in the Q1 19 report that their customer portfolio grew by 34% when compared to the first quarter from the previous year. At the end of the first quarter, the company reached 33 million downloads, and the average number of monthly active users increased by 130% against the same period from the previous year. Lastly, Magazine also informed that their marketplace sales grew by 244% in relation to the first quarter compared to previous year.
The company strategy includes multichannel activity, meaning that the idea is to widen shopping options for the consumer, and that is why the top management emphasizes that the company’s goal is to combine a “Digital platform with physical stores and human warmth.”.
Via Varejo recorded an increase by 11% in their 2018 online management gross sales, while presenting a positive variation by just 5% in management gross sales from their physical stores. Following this result, the company has been developing a strategy that is oriented toward increasing the number of sellers in their marketplace platform. Right now, it is already possible to notice the results from this plan, since the category’s marketplace sales growth corresponded to 63% while online sales of their own products dropped by -7% in the first quarter of 2019, when comparing both values to that from the same period in the previous year. Regarding to this upside down result, the total GMV presented a low increase of 1.7%. In view of this fact, it is possible to notice that Via Varejo’s own product sales results still weighs heavily on the increase in GMV. Such idea can also be observed when we analyze the marketplace sales rate in relation to the GMV, represented by 21% in the first quarter of 2019, meaning that marketplace has yet to include most of the sales.
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
16.1%
2.4%
17.4%
25.8%
-12.5%
33.7% 32.3%
60.9% 60.1%
9.9%
2014 2015 2016 2017 2018
MAGAZINE LUIZA
Total Sales Growth from Physical Stores
Total E-commerce Sales Growth
So
urce: Mag
azine Luiza Investor R
elations
Source: Via Varejo Investor Relations and Cushman & Wakefield
2018 GROSS SALES REVENUE - VIA VAREJO
11% Management Gross Sales -
Online (millions of BRL)
5% Management Gross Sales - Physical Store (millions of BRL)
(YoY)
6 E-COMMERCE From threat to opportunity
GMV - Q1 19 TOTAL E-COMMERCE SALES GROWTH (YoY)
84% Carrefour
50% Magazine Luiza
15.3% B2W Digital
1.7% Via Varejo
Source: Public companies
0%
Within the same quarter, GPA doubled their sales in the wine category, in the company’s Pão de Açúcar Adega category. As a way to complement online sales, the group have strengthened their Omnichannel strategy. The company has informed that the operations of James Delivery (the company’s delivery partner) include today 20 stores and the idea is to expand them to at least 25 cities until 2020. GPA customers also have the option of shopping on the Internet and picking up their goods at one of the company’s unit with the Express Click & Collect service.
Carrefour operates via the “Meu Carrefour” app, in which the consumers are able to have access to the company’s products. The idea is also related to the Omnichannel concept, since it offers several shopping options to the customer. The company has signed a partnership with Rappi, so that customers can choose to have the goods delivery to their homes. Furthermore, consumers can also pick up the goods by car, a service that has already been available at 17 stores in the State of São Paulo. Another interesting option to have access to the products is the Click & Collect service, which started to be tested at four hypermarkets and represented 9% of the nonfood, direct sales (1P)* in the first quarter of 2019. Regarding to the marketplace platform, in the first quarter of 2019, Carrefour presented a growth by 332% (YoY) in sales, which, in turn, represented 23% of the total GMV.
B2W is an electronic commerce company that connects people, businesses, products and services via their digital platform. The company provides large Brazilian brand products, through websites such as Americanas.com and Submarino, available and offers technological, logistics, customer and payment services..
B2W also presented good results in the first quarter of 2019, with a total GMV amounting to just over 3.579 billion brazilian reals, which represented an increase by 15.3% against the same period from the previous year. The company’s marketplace sales grew by 52.2% (YoY%) in the first quarter of 2019, accounting for approximately 61% of the total GMV. B2W currently has 31 thousand sellers. In addition to that, the company’s product assortment of 4.9 million items in the first quarter of 2018 went up and reached 8.8 million items by the end of first quarter of 2019.
*1P corresponds to Carrefour´s own products
Notes: The calculation method B2W uses consists of summing up sales of their own goods, marketplace sales and other revenues (excluding Marketplace sales commission), after returns and including taxes. Carrefour refers to the total amount of online sales (own sales + marketplace sales), added by freight revenue and excluding marketplace sales commission, but includes sales taxes. Magazine Luiza includes sales commission and marketplace product value when determining E-commerce growth. In turn, Via Varejo’s online sales consists of own product sales and marketplace commission ONLY. Thus, the chart only gives an idea of the growth of those companies’ E-commerce sales, since the calculation method used by Via Varejo and Magazine Luiza differs from the others.
7CUSHMAN & WAKEFIELD
Q1 19 MARKETPLACE SALES GROWTH (YoY)
244%
52.2%
63%
332%
Via Varejo
Magazine Luiza
Carrefour
B2W Digital
Source: Public companies
Source: Public companies* The indicator used for defining E-commerce total growth (Own Products + Marketplace) by Via Varejo, B2W Digital and Carrefour is GMV (Gross Merchandising Volume). Total E-commerce Sales Growth is how Magazine Luiza calls this same indicator.
MARKETPLACE (%GMV)*70%
60%
50%
40%
30%
20%
10%
0%Magazine Luiza Carrefour B2W DigitalVia Varejo
61%
23%21%
18%
46%
10%13%
8%
Q1 18 Q1 19
8 E-COMMERCE From threat to opportunity
By analyzing the marketplace sales performance of those four companies, it is possible to observe a behavior pattern. In all the cases, marketplace sales have been consistently growing since the third quarter of 2018. Then they show a significant increase in the fourth quarter of 2018, which is the result of year-end sales boosting the entire retail market. And, lastly, they slowdown and decrease in the first quarter of 2019, presenting a strong discrepancy, as a result of the return to usual consumption patterns for the rest of the year.
MARKETPLACE SALES GROWTH - MAGAZINE LUIZA (QoQ%)
80%
60%
40%
20%
70%
50%
30%
10%0%
Q2 18 Q3 18 Q4 18 Q1 19
19%
42%
18%
MAGAZINE LUIZA
Q2 18 Q3 18 Q4 18 Q1 19
40%
20%
10%
0%
30%
-10%
20%
34%
5%
VIA VAREJO
Q2 18 Q3 18 Q4 18 Q1 19
60%
80%
100%
120%
20%
0%
-20%
40% 39%47%
118%
CARREFOUR
Q2 18 Q3 18 Q4 18 Q1 19
60%50%40%30%20%10%0%
-10%-20%-30%
25%
53%
-24%
B2W DIGITAL
Source: Investor relations and Cushman & Wakefield
72%
-4%
5%
-8%
9CUSHMAN & WAKEFIELD
0%
10%
20%
30%
40%
50%
70%
60%
-30%
-20%
-10%
0%
10%
20%
30%
40%
52%
13%47%
3%
61%
-30%
57%
40%
Q2 18 Q3 18 Q4 18 Q1 19
B2W DIGITAL
Regarding to the dependency retailers have on marketplace sales, we notice that the straight line takes an upward slope for all the companies. B2W indicates that they strongly rely on their marketplace sales, since the numbers show that, in the first quarter of 2019, GMV share reached 61%. This is explained by the fact that B2W is an exclusively digital company; in other words, they have no physical stores. In turn, the other companies, despite the growing marketplace sales share, have yet to exhibit the same dependency of B2W. The average GMV share of the three other companies amount to 15%.
The GMV curve (QoQ%) is very similar in almost every case, and only Via Varejo behaves differently. The company recorded a slowdown in the third quarter of 2018, with a not very significant increase in year-end sales in the fourth quarter, and a drop in the first quarter of 2019.
Source Investor Relations and Cushman & Wakefield
GMV X MARKETPLACE (GMV%) - (QoQ%)
Online GMV Marketplace (GMV%)
0%
5%
10%
15%
20%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
13%
10%10%
-3%
18%
6%
33%
16%
Q2 18 Q3 18 Q4 18 Q1 19
MAGAZINE LUIZA
0%
5%
10%
15%
25%
20%
-20%-15%-10%-5%0%5%
10%15%
20%25%30%
14%
2%
8%
12%
21%
-13%
7%
17%
Q2 18 Q3 18 Q4 18 Q1 19
VIA VAREJO
0%
5%
10%
15%
25%
20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
16%
22%13%
5%
23%
-24%
19%
84%
Q2 18 Q3 18 Q4 18 Q1 19
CARREFOUR
10 E-COMMERCE From threat to opportunity
THE TRANSFORMATION OF PHYSICAL STORES IN MINI DISTRIBUTION CENTERS
Faced with these results, some companies are changing their performance strategies and developing new sales channels. The core idea is to get traditional stores working also as mini distribution centers. Thus, it is possible to speed up the logistics process and, as a result of that, reduce delivery time. According to the information from E-commerce Brasil, companies, such as Via Varejo, Magazine Luiza and Carrefour, have been using part of their storage area in some stores as a starting point for E-commerce sales. Magazine Luiza, for instance, select their products via logistics software. The goal is to organize the products’ destination according to the demand; in other words, they can be directed either to E-commerce or physical stores without notice. So, the company put into use their multichannel strategy and adopt the dual functionality idea of the stores in Brazil.
Furthermore, the delivery market has been relevant to Brazil, and players, such as Ifood, Rappi and Loggi, are great facilitators for retailers performing in E-commerce. This type of business is associated with the Last Mile concept, which refers to the last step of goods transportation, leaving a distribution center and getting to the end consumer. This market’s success encouraged the entry of new players, such as Delivery Center company. This startup company’s business model is slightly different from the others, since the company performs at points of sales in shopping malls. Some companies, such as BRMalls, Multiplan and CCP, have already acquired a share of Delivery Center, thus confirming that this is in fact a great bet on the future of the retail sector. BRMalls have a share of Delivery Center, a partnership that started out with malls in Rio de Janeiro only, but today, includes some shopping malls in the city of São Paulo as well. CCP* will provide some exclusive amenities in their very well located corporate buildings, by developing exclusive fast-delivery hubs.
At first, the rising of E-commerce was interpreted as a threat to shopping malls, but, today, they have has seen it as an opportunity. Bearing in mind that e-commerce presents a wider reach than physical stores, the trend is that online sales volume boosts the productivity indicators of shopping malls in Brazil. Sales leverage variable rental prices while boosting the Same Store Sales (SSS) and Same Store Rent (SSR) indicators.
Faced with the possibility of this favorable scenario, some malls decided to join this new digital wave. JHSF, owner and manager of Shopping Cidade Jardim, launched their own platform to sell their retailers products online in exchange for a fee (previously established) according to the service provided. Fees also vary according to the retailers demand, meaning that a higher fee is charged for photography and product packaging services. However, when the idea is to just promote the products on the platform, a lower fee is charged. In both cases, the mall is responsible for the delivery service. As we mentioned earlier, variable rental prices tend to go up with online sales, but the income obtained via sales on the CJFashion platform has yet to reach significant numbers. According to JHSF, despite the growing online sales, most of the population still prefers to use physical retailers. Besides, CJExpress was launched at the same time as CJFashion, it allows products that are not displayed on the online platform (CJ Fashion) to be purchased remotely, performing as a “Personal Shopper.” If the order is placed before 02:00 pm, it is delivered on the same day.
Just like JHSF, the former Sonae Sierra, now Aliansce Sonae launched an E-commerce platform for their greatest GLA asset, Shopping Parque Dom Pedro. In addition to easy shopping, the platform also offers a portfolio with several different products. Along with plans to expand E-commerce sales across all the malls in the portfolio, Aliansce Sonae intends to bring physical and online retail sales together. When it comes to delivery services, the customer will be able to choose between receiving the goods coming from a distribution center at home or picking them up at the mall itself. Another approach used is to customize the service provided according to each customer’s shopping and search background and hold promotions and reward programs.
THE E-COMMERCE AT SHOPPING MALLS
* Cyrela CommerCial ProPerties s.a..
11CUSHMAN & WAKEFIELD
Additionally, BRMalls announced a partnerhip signed with the giant Mercado Livre aiming at providing users with an online shopping experience. The products from mall stores will be sold on the platform, and the prototype is to be launched at Shopping Villa Lobos. In turn, Multiplan recently started a new mobile app, which allows users to obtain information of some malls included in their portfolio. Some of the app’s features include purchasing movie tickets, real-time deals on discounted products and even scheduling medical appointments at clinics located at some malls. Also, it will soon be possible to pay for parking via the platform.
Iguatemi group has recently announced their partnership with IFood, one of the largest food delivery platforms in Brazil, aiming at increasing food service revenue. According to Iguatemi, the partnership makes the delivery process more convenient and faster. This allows the shopping malls to present an exclusive area for dispatching delivery orders placed at restaurants. Furthermore, Iguatemi is soon to launch their very own E-commerce operation to sell mall products, named Iguatemi 365.
The exponential growth of digital retail sales is undeniable, and, so, there are some expectations toward how physical retail stores will react to this development. Morgan Stanley’s retail report forecasts a negative scenario for the Brazilian physical
retailers, since, as the company sees it, the increase in online purchases tends to hurt shopping mall sales. The company presented a market study that shows the strong increase in number of E-commerce app downloads, while parking income has gone stagnated. Still according to this study, they presented a chart that relates the variables, Annual People Flow Rate per sqm and Monthly Rent Price per sqm, where R² corresponded to 0.6184, which allowed us to conclude that there is evidence that the decrease in people flow at malls will result in lower rental revenue. Furthermore, the study shows that the E-commerce penetration curve in Brazil from 2013 to 2018 was very similar to that in the US from 2007 to 2012, which would lead us to understand that Brazil is expecting a strong increase in E-commerce sales as it occurred in the US.
DELIVERY APPS - ACCUMULATED NUMBER OF DOWNLOADS (MILLIONS)
Source: Morgan Stanley
Source: Morgan Stanley
40Mi
20Mi
50Mi
60Mi
70Mi
30Mi
10Mi
02014 2015 2016 2017 2018 2019
iFood
Uber Eats
RappiOthers
MONTHLY PARKING INCOME (BASE 100)120
110
115
105
100Dec/15 Jun/16 Dec/16 Jun/17 Dec/17 Jun/18 Dec/18
Multiplan IguatemiInflation
12 E-COMMERCE From threat to opportunity
ANNUAL PEOPLE FLOW RATE PER SQM VS. MONTHLY RENT PRICE PER SQM *(**)
260
200
140
80
20
100 200 300 400 500
People Flow Rate per sqm (thousands)
Mo
nthl
y R
ent
per
sq
m (
BR
$)
Source: Morgan Stanley*Multiplan was the baseline company used for the analysis **The subtitles correspond to shopping mall rating, in which Prime is the highest rating.
Middle-income Low-incomeHigh-incomePrime
R2 = 0.6184
E-COMMERCE PENETRATION - BRAZIL VS USA
Source: Morgan Stanley
3.5%
3.0%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
2007 (US)2013 (BR)
2008 (US)2014 (BR)
2009 (US)2015 (BR)
2010 (US)2016 (BR)
2011 (US)2017 (BR)
2012 (US)2018 (BR)
6.97%
6.23%
5.49%
4.91%4.58%
4.23%
4.98%
5.64%6.15%
4.30%
3.75%
6.81%
BrazilUSA
13CUSHMAN & WAKEFIELD
convenience and safety to consumers. Thus, going to the mall is part of the Brazilian lifestyle and that is why Gustavo concludes stating that: “Malls will survive and win the game.”
Even with the growing development of E-commerce, we believe that customers are multi-channel; in other words, they enjoy having different shopping options to choose from. The measures taken by the mall companies regarding the launch of their platforms show their proneness to adjust to omnichannel. The increase in sales, either made online or at physical stores, directly affect variable rental prices and, as a result of that, mall sales. Thus, over time, the trend is to have digital and physical retail stores not as competitors but as complementary to one another. For these and other reasons lead us to believe that, even with E-commerce showing strong development, shopping malls will continue to exist, since, as mentioned earlier, they are part of the Brazilian consumer’s lifestyle not just for shopping purposes, but for family and social leisure activities as well. Thus, shopping malls will need to reinvent themselves, so that they offer an increasingly unique and complete experience in order to get consumers to choose to visit them regularly.
Clearly, the data on some public shopping mall companies show that in fact parking income has been stagnated, particularly when compared with the IPCA (Consumer Price Index), thus confirming the bank’s theory. In turn, the increase of people flow at malls shows how resilient the sector is. In 2015 and 2016, Brazil lived through its worst crisis in history, which led to a drop in flow of people at malls. Bearing in mind the stagnation of parking income and the increase of people flow rate, we can come to the conclusion that visitors have selected other transportation options that are offered by technology companies, such as Uber, 99 and Cabify.
According to Gustavo Queiroz, open innovation and digital transformation manager at BRMalls, customers are omnichannel, meaning that they tend to choose from different shopping channels. That is why they believe that online and offline environments walk hand in hand and that one boosts the other. Concomitantly, Queiroz also believes that location helps Brazilian malls by making delivery logistics easier and providing customers better services. The innovation manager further added that malls are part of the Brazilian culture, since they are not just retail centers but also a place for entertainment and leisure activities, in addition to offering more Source: Abrasce e Cushman & Wakefield
PARKING INCOME (BASE 100) *
PEOPLE FLOW RATE (MONTHLY AVERAGE)
115
500Mi
490Mi
480Mi
470Mi
460Mi
450Mi
440Mi
430Mi
420Mi
110
105
100
952015
2015
2016
2016
2017 2018
2017 2018
CPIParking Income
Source: Public companies, LCA and Cushman & Wakefield**The companies studied were Aliansce, BRMalls, General Shopping, Iguatemi and Multiplan
-1.3%
5.6%
5.8%
Team responsible for this publication:
Market Research & Business IntelligenceJadson Mendes AndradeBruno SuguimotoMateus Paiva Zanolo
Valuation & AdvisoryRogerio CerretiMaurício Itagyba
Retail ServicesManuel Puig
Marketing & CommunicationsNatália PozzaniThiago Licre
[email protected]: 11 5501 8251
