“Our main lesson is: the only way to reconcile people’s health and safety with an economic balance is through digital transformation.” (Leila Nakashima, Magazine Luiza)
The importance of digital platforms is long recognized and investigated by practitioners and researchers in retail. With the COVID-19 crisis, a diversity of challenges are imposed on retailers on a world scale. We interviewed Magazine Luiza, one of the biggest retailers in Brazil, to understand how they have been working to overcome the crisis and provide potential lessons to retailers around the world.
For this interview, we talked to Leila Nakashima, Head of Strategy and Management at Luizalabs, the technology and innovation center within Magazine Luiza. The center has more than a thousand software engineers and specialists. Leila is an electrical engineer and obtained her degree at the Polytechnic School at Universidade de São Paulo (USP). She also has a Master’s in Business (MBA) from Stanford University.
Leila, could you give us an introduction to Magazine Luiza?
Magazine Luiza is a digital platform, but with physical touchpoints and human warmth. A Brazilian company, which develops technology and has to retail in its soul. We have more than a thousand stores all over Brazil, 35,000 employees, and 15 distribution centers. Our marketplace has more than 26,000 sellers, who are small retailers discovering the benefits and opportunities enabled by digitalization.
Retailers worldwide have also faced challenges, given the pandemic, to maintain their strategy, operations, and business running smoothly. What are the impacts of the pandemic to Magazine Luiza? Could you possibly talk about your experience in dealing with such challenges in a continental country like Brazil?
Since 2016, Magalu has worked on a successful digital transformation. We are not anymore only a chain of physical stores with E-commerce operations. We have become a digital platform that operates its physical touchpoints as a competitive asset of our ecosystem. Thanks to this strategy, the company has been able to react to the crisis. For instance, although 60% of the physical stores were closed in May, the annual growth revenue was 45%.
Has Magazine Luiza supported small and medium-sized retailers, or partners, during the crisis?
Magalu has released a platform for small and medium physical retailers, naming iPDV. The platform enables any physical retailer to integrate its assortment into our marketplace and sell its products online. Given that, we are supporting retailers to transition to the digital landscape, and to keep their revenue to survive during the crisis.
Will the customer experience and behavior be different in physical and online stores? What is the vision for the future of post-coronavirus retail?
The COVID-19 crisis has accelerated the trend of migrating towards the online. Customers are increasingly exploring the available multi-channels and their benefits for shopping.
It was already possible to observe a trend towards the transition from traditional to digital and omnichannel retail. Are you already implementing or considering that as a potential path for the post-pandemic?
Magalu is a reference when discussing omnichannel in the Brazilian retail landscape. For instance, before the crisis, more than 40% of the online orders were picked up in physical stores. We know it is a convenient option for our customers, which can bring us gains over distribution costs.
Several industries consider a data-oriented culture as a requirement for optimizing their operations and interacting with customers. Does Magazine Luiza consider this to be a potential solution for retailers now and soon?
Definitely. Magalu has thousands of sellers, millions of stock-keeping units (SKU), as well as millions of customers and more than a thousand small physical stores. The only way to have this network working efficiently is to focus on the needs of our customers. That is achieved through projects involving data science and machine learning. Examples of projects we have been working on are:
- Recommendation algorithms to offer products that make sense to customers needs, given their demands have changed a lot with the crisis
- Analysis of data and trends to define which physical stores should we open or keep closed, to protect the healthiness of our collaborators and customers
We observed some insights and initiatives from this interview and how big retailers can support small and medium enterprises.
- The online world’s migration is becoming the new norm for retail customers, and companies should be ready for and assess their digital readiness
- Digital transformation is the key for keeping business and operations running smoothly during and post-pandemic
- The pandemic does not mean loss of revenue if retailers are digitally prepared for it
- The adoption of platforms which enable retailers to integrate their assortment into well-established marketplaces
- Click and collect as a must, and the establishment of resources enabling omnichannel operations, and enhancement of convenience for shopping experiences
- Data-driven and AI culture to support the understanding of customers needs and behavioral changes
This article was written by the ESR Douglas Cirqueira. We would like to thank Leila Nakashima and Magazine Luiza for their time and valuable insights to this interview.