As multinational apparel retailers contemplate entering Brazil's mass market, they must come to grips with a consumer landscape that differs considerably from what they find in most developed and many emerging markets. For starters, Brazil's consumers are extremely fond of shopping for clothes: almost 80 percent look forward to it, a figure much higher than those for China and Russia, though about the same as the one for India .In addition, more than half of Brazil's shoppers use most of the clothing they buy for going out with friends and family; the proportion.

Furthermore, Brazil's mass-market apparel shoppers seem particularly conscious of fashion; only in Brazil did it rank among the top three attributes at preferred stores. Fashion trends there are strongly shaped by local celebrities (in particular, prominent characters from popular television soap operas), and only local retailers (with a few noteworthy exceptions) consistently offer the mass-market segment these fashions. Today many of these local retailers and the local brands they sell are highly regarded by Brazilian shoppers: stick to, "I trust local brands," compared with a bit less than half of those surveyed in China, India, and Russia. Similarly, only 11 percent of Brazilians agree that "foreign brands are higher quality than local brands"-a proportion much smaller than it is in the other countries we studied, although shoppers there also exhibit some degree of resistance to foreign brands. Some of the multinationals that have had more success in the Brazilian market, such as the European apparel retailer C&A, have established local identities, for example, by running campaigns featuring Brazilian supermodels.

Because of the absence of comprehensive credit profiles, general-purpose credit cards are rare in Brazil, particularly among mass-market consumers. Still, the proclivity of Brazilians to buy clothes on credit means that retailers face a competitive disadvantage if they restrict their customers to cash payments. All major local and multinational apparel retailers therefore offer cards with low initial spending limits that increase as consumers prove their creditworthiness. These private-label cards-offered through retailer-owned finance operations or joint ventures with banks-now finance around 70 percent of total sales for Brazil's larger apparel retailers and sometimes generate profits comparable to those that retailers earn from apparel purchases.

Multinationals eyeing opportunities in Brazil's mass market for apparel will thus need to develop new skills, since they would be competing against local retailers that often are better credit underwriters for mass-market customers than are large retail banks. (Local retailers, for instance, have higher penetration and lower loss rates.) Multinationals will also have to manage their promotions differently. In developed markets, promotional campaigns, for example, tend to be seasonal and product specific, but apparel retailers in Brazil use attractive credit offerings, such as installment payments, to entice customers.

To take advantage of Brazils unique market characteristics, the multinationals will have to concentrate on hiring strong local management teams that excel both at merchandising and at helping to craft competitive credit offerings. Domestic retailers, for their part, should capitalize on their skill advantages by expanding beyond the major cities, competing in new formats, and taking market share from the informal retailers-thus capturing the large growth opportunities before their multinational competitors can.

Source: AEPC Weekly