Tourism numbers predictably soared during Brazil’s recent hosting of the FIFA World Cup, but its impact on other sectors of the economy was decidedly negative. Industrial production fell steeply in many sectors, as did consumer consumption in a country that is heavily service-oriented. None of it was helped by some host cities declaring municipal holidays on days when matches were played in local stadiums or legions of workers playing hooky to watch the Brazilian national team’s games.
According to Thiago Britto, Managing Director of Brazilian B2B operator Inforshop, retail sales fell by a whopping 35% in the month of June. Inforshop itself fared somewhat better, but revenues during the World Cup month were still down 9.7% compared to the same period a year ago.
But the World Cup – as well as other ‘distracting’ events like Mardi Gras or the forthcoming elections – is merely a blip for this profit-oriented (rather than just top line) player in a year that is seeing the OP reseller venture down new avenues and consolidate its existing strengths.
Inforshop has come a long way since 1986 when it was founded by José Mário Britto (Thiago’s father) as a retail franchise with the slogan ‘O shopping da informática’ (explaining the name of the company). The business model changed over time, with it now being an operator that is 100% focused on the B2B sector, split into four business units. These are corporate, SMB, government and resellers, the latter accounting for just 10% of overall revenue.
With current revenues of approximately BRL191 million ($84 million), this number is steadily – though not as dramatically as hoped a couple of years ago – going up. But as is the case for so many companies in so many markets, the financial crisis of 2008 has irrevocably changed the outlook for this somewhat struggling BRIC nation.
Says Thiago Britto who took over from his father as Managing Director (José Mário is now Chairman) at the beginning of this year: “For many years, Brazil benefited from international growth and commodity exports. Since 2008, things have changed and the challenge nowadays is to boost economic activity – the prediction for 2014 is already lower than 1% – and both control and reduce inflation (5.91% in 2013) and interest rates (11%). An obvious way out of this trap is to reduce government overheads and increase investments, but that’s often easier said than done when political interests are involved.”
Inforshop’s key factor for success, Britto adds, has been its ability to adapt as the market evolved. “We have been in the office supplies contract business since 2002, servicing an average of 3,000 customers per month. Through our partnership with Lyreco that began in 2012 and our part in an international alliance of 15 distributors, we’ve been able to provide global solutions to multinational firms. These types of partnership are a great example of think global, act local. We rely on each other to be part of the international landscape and at the same time each individual player is more efficient and more specialised in its own market.”
In terms of product, Inforshop’s main categories comprise cut-size paper, IT consumables and stationery. Paper being so important is interesting and due to the fact that the country’s paper consumption is still relatively immature compared to the US or parts of Europe where paper usage is considerably higher but now on a downward trend, whereas in Brazil there’s still plenty of room for growth in this category.
That said, Britto is fully aware that the global declining trend for paper and paper-products will eventually reach Brazil as well. Indeed, through its Lexmark Solutions Center, the company is already offering ways to customers of printing more consciously and realising savings through apps and embedded solutions.
Furthermore, a growing focus on personalised print, the whole gamut of facilities management – a negligible proportion of its 8,000 SKUs at present – and also a planned foray into private label are other product extensions that should counteract the anticipated declines in some categories and significantly boost revenues overall.
Product slightly aside, though undoubtedly related, Britto and his team are currently working on two major initiatives and that is the creation of two new business units: E-commerce and Services. He says: “What we’re doing is preparing the company for the future. Our Services and E-commerce units are both focused on the SMB market and have a lot of synergies between them. The reason for the SMB focus as regards e-commerce specifically is because most contract customers prefer to input orders through their own platforms and systems, so the options are more limited for us. But e-commerce in Brazil is growing by 30-40% a year and we need to maximise the potential in this area. Social media uptake is also growing and we’re hoping to create opportunities here as well, in conjunction with our open e-commerce platform.”
He adds: “The new Services unit is a differentiation alternative to the traditional box-moving model and an attempt to add more value. The portfolio is going to be initially more concentrated on IT services, including MPS, hardware rental, tech support and maintenance.”
With e-commerce developments comparatively recent still, Inforshop has nonetheless ploughed significant funds into other technology areas, but these have so far largely focused on the logistics side of things. Within its main distribution centre, strategically located in the São Paulo countryside – the area generates the country’s second highest GDP, ahead of the entire state of Rio de Janeiro – investments in logistics are paramount to a smooth and sophisticated operation.
Britto explains: “We internally developed an app to confirm deliveries in real time and/or start a claim quicker. RFID is also deployed in our distribution centres through handheld wireless devices connected to the ERP system, and is used for checking in goods, picking and checking out orders.”
With many OP firms fighting for organic growth through new strategies, products and services, being financially stable and nimble is paramount. Inforshop is in an enviable position in this regard as Britto points out. “We are financially very solid, with low levels of debt and the ability to invest using our own resources. This is key in a country where interest rates are 11%.”
“It’s all about reinvesting in the company,” he concludes, “and investments in my opinion should be focused on people and logistics automation. In the short-term future, we will pay close attention to our new business units and constantly review our existing business model and our mix of products.”