Brazilian retail is about to achieve its best performance in over ten years. According to IBGE, so far, only June showed an actual decline in results. Furthermore, a survey by the National Confederation of Commerce of Goods, Services, and Tourism (CNC) is projecting a 30% growth in sales in 2024, which hasn't happened since 2013. According to Scanntech's projections, only the food retail sector is expected to generate R$1.27 trillion in revenue this year. These factors are being driven by the increase in wage mass and the availability of jobs to consumers.
“The 2024 scenario as a whole was positive, with commemorative dates such as Mother's Day and Consumer Day boosting retail. We also saw 2024 as a positive outlook from the point of view of the resumption of credit. There was a good circulation of capital in the economy, especially due to the low unemployment rates. It is a cascade effect in which credit was also a protagonist in this boosting scenario”, comments Glauco Soares Filho, co-founder of RPE – Retail Payment Ecosystem.
In October of last year, several sectors recorded an increase in sales. Regarding 2023, the total growth has been 6.5% so far. Compared to September, sales of pharmaceutical and perfumery items increased (16.1%), as did furniture and appliances (9.9%); textiles, clothing, and footwear (7.9%); supermarkets, hypermarkets, and food products (5.6%); and personal and household items (4.7%), among others.
At Christmas, the results were also positive. According to ICVA, sales between December 19 and 25, 2024, increased by 3.4% compared to the same period the previous year, with the sectors showing the best performance being supermarkets (6% growth), drugstores and pharmacies (5.8%), and optical and jewelry stores (5.7%). According to Visa Consulting & Analytics, since November 1st, there has been a 12.2% increase in year-end sales compared to 2023, considering all payment methods, including other financial services beyond those provided by Visa.
Will a Selic rate above 14% harm retail?
Despite the positive outlook, economic volatility has directly influenced retail and consumers' purchasing power. With the increase in the Selic rate, now set at 12.25% per year, but with projections to reach 14.75% in 2025, according to the Central Bank's Focus Bulletin, a warning is raised regarding the rising cost of credit lines and a possible reduction in consumption by the population. With the increase in debts and interest rates, which follow the Selic rate, access to higher-value goods such as appliances, electronics, vehicles, furniture, among others, becomes limited and there is less money circulating in the market. In some way, this also affects retailers, who end up with a higher level of debt. "This scenario directly impacts credit granting, making it more expensive and consequently scarcer. Because of this, the retailer needs to be more assertive to sell," points out Glauco Soares Filho.
As an alternative to stimulate consumption, retailers need to invest in their own customer loyalty formulas, such as granting credit and providing their own store card, known as Private Label. Although Pix is the population's favorite payment method, with 29 billion transactions carried out in the first half of 2024 alone, according to the Brazilian Association of Credit Card and Service Companies (ABECS), proprietary retail cards are becoming popular.
According to the 'Fiserv Insights: Brazilians and the use of credit cards today and tomorrow' survey, 62% of the population already have at least one retail store credit card. And, once in possession of one, 67% of people end up spending more on it. Specifically among individuals from classes D and E, this number reaches 81%. This is because 28% of people from classes D and E consider the credit card as part of their income, and 28% see the main benefit of this payment method as the possibility of installment payments for purchases. Along with that, individuals from classes D and E have more than one card to have a higher available limit. In other words, they seek greater access to income.
“The big driver of all this is credit, but retailers have also diversified their customer acquisition and sought to retain them through appropriate CRM programs, cashback policies, loyalty and other incentives, so that consumers return and do not just make a purchase in the store, but create recurrence, especially in the durable consumer goods sector. In the food sector, this also happens, but the format and discount percentage tend to be more conservative”, explains Glauco.
What's next?
By 2025, trends indicate an increasing integration of retail with technology. E-commerce, whose revenue grew by 18.7% in the first half of 2024, reaching R$160.3 billion, driven by the growth of the food sector (18.4%), will remain strong, along with the integration of financial services. In this way, it will become increasingly possible to associate purchases with consumers' credit needs, such as loans, financing, and other services, in a personalized manner according to their needs and budget.
Brazilian consumption and retail are currently pressured by the rise of the dollar, inflation, and the increase in the SELIC rate, which is predictable and has been signaled by the COPOM. Still, retailers anticipated this movement in a more structured way in 2024, innovating in technology and combined offerings. These factors, along with the positive scenario of lower unemployment and increased wage mass that we are seeing now, should bring stability to retail this year. After all, retail is responsible for supporting the Brazilian economy, representing an important part of GDP, comments Lucas Dornellas, Chief Revenue Officer at RPE – Retail Payment Ecosystem.According to data from the Brazilian Society of Retail and Consumption (SBVC), the expanded retail reached R$2.75 trillion, representing 25.23% of the Gross Domestic Product (GDP). The restricted retail was R$2.23 trillion and accounted for 20.45% of the country's GDP.
For Pedro Albuquerque, co-founder and director of new business at RPE, the main challenge for retail in 2025 will be “controlling fixed costs, reducing their leverage and having debts not tied to interest rates. This will give retailers more opportunities to launch new products, open new stores and ensure more structured growth. With an effective share of GDP, Brazilian retail continues to be an essential driver of the economy. Investing in technological strategies and loyalty programs will be key to facing the challenges of 2025 and maintaining sustainable growth in the sector,” concludes the expert.
