Brazil faces retail deglobalization, intense digital competition
Brazil seems to be heading towards "de-globalization" in the physical retail trade, with sudden announcements of store closures and the departure of international operations in Brazil. In contrast, online retail has followed the opposite path, following the intensified competition from foreign digital platforms since 2020, including plans for new international groups to enter the country.In physical store operations, the country has seen more business closures than new brands in recent years, especially in the food trade. The prospect confirmed on Thursday that DIA is looking for solutions for its local operation should add the Spanish grocery store chain to the list of foreign companies that have given up on staying in Brazil.Since late 2023, Lazard, an asset management firm, has been on the lookout for buyers for DIA, as previously reported by Valor. However, according to two sources, the negotiation process is moving at a slow pace. Despite that, DIA is committed to its plan to exit the Brazilian market within the year. Currently, DIA operates 590 stores in Brazil, having closed 18 last year. One source familiar with the situation pointed out that the negotiation challenges stem primarily from the franchise model. Approximately 30% of DIA’s stores are franchises, and there’s a notable lack of expertise in managing this business model effectively in Brazil, this person said.On Thursday, commenting on strategic decisions for the portfolio, the subject of a slide presentation to the market, DIA’s CEO, Martín Tolcachir, said that there is a process of "repositioning the core" of the group to close ongoing operations. Brazil was mentioned in the presentation, as was Portugal. When contacted, the company declined to comment."Our operations in Brazil suffered from a deterioration in financial results, affected by the highly competitive market context, which led to promotional initiatives," the company stated elsewhere in its material.DIA’s same store sales in the country fell by 12% in 2023, and the loss doubled. The chain has negative cash flow and has been affected by the competition with cash-and-carry stores, known in Brazil as "atacarejo."Simultaneously with this movement, the country is witnessing an unprecedented acceleration in the entry of large global e-commerce platforms, especially Asian online marketplaces. Since 2019, Singapore’s Shopee and China’s Shein have entered the country—AliExpress and Wish already operated here—and this...
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