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Magazine Luiza

Brazilian retail

Magazine Luiza, or Magalu, is one of the largest Brazilian retailers. The company was founded in 1957 in Franca by Brazilian billionaire Luiza Trajano and family.

In 1992, it launched its first “virtual” stores, which at the time were physical retail outlets equipped with multimedia ordering kiosks. There are 162 stores in Brazil today with such kiosks still in use. In 2000, Frederico Trajano, a third-generation Luiza and the company’s current CEO, joined the company to direct the launch of its ecommerce division with “a simple philosophy to do an omnichannel strategy,” involving ecommerce orders that could be shipped directly to consumers or picked up at physical outlets.

Currently the company has more than 1001 stores and 9 distribution centres, selling 10 thousand items in their stores, and at the end of 2018, its online marketplace hosted more than 3,300 vendors offering a combined total of 4.3 million products. The company reported annual sales of $220 million from its online marketplace for 2018.

Luiza Trajano, founder of Magazine Luiza, was recently interviewed by BBC.

With inflation hitting a whopping 3,000%, and new currencies being introduced and then quickly ditched, it was not easy to be a retailer in the Brazil of the early 1990s. That was the tough economic backdrop faced by Luiza Trajano, then 40, when she took up the top job at her family’s chain of shops selling home electronics and household appliances in 1991.

Magazine Luiza had a small chain in the southern state of Sao Paulo. But Luiza had ambitious plans to expand nationwide. And she had a cunning plan. With inflation that high, and the Brazilian government introducing and then abandoning no fewer than four different currencies between 1989 and 1994, it would have been risky to start opening more large stores stocking the entire range of products.

So Luiza decided to open a chain of micro shops that didn’t stock anything. Starting in 1992, customers would instead sit down at a computer terminal, and browse a computerised catalogue of all the items on sale. They would then order what they wanted, and Magazine Luiza would deliver it to their homes from a network of nationwide distribution depots.

It was a precursor to online sales, from a time before Brazil got the internet – access to the net only became available to consumers in Brazil in 1997. In addition to enabling Magazine Luiza to quickly and cheaply expand, the small “electronic shops” also meant that the company didn’t have to keep printing out new physical price labels in response to inflation or a new currency. It just had to update the prices on its computer system.

Looking back, Luiza, who is now 68, says: “It was a big revolution, we introduced a new way of virtual sales. It prepared us for the internet before anyone else.” She says that she also made sure that the company put a lot of effort into explaining the expansion plans to staff, to ensure that they were happy and motivated, and therefore offering good customer service. “We did intense work with our team, explaining our targets and how we need everyone. We were very transparent with how they played an important role in this new movement.”

Within three years Magazine Luiza had a few hundred of its shops across Brazil, with some large cities having as many as 58 outlets. Today the company has more than 1,000 stores across Brazil and 30,000 employees. Meanwhile, its website accounts for 48% of sales and it has total annual revenues of 19.7bn real ($4.9bn; £3.7bn). The success of the business has made Luiza one of the richest people in Brazil. Her net worth is $3.5bn (£2.7bn), according to Forbes magazine.

The first Magazine Luiza shop was opened in 1957 by Luiza’s aunt and uncle, in her home city of Franca, 400km (250 miles) north of the city of Sao Paulo, The word “magazine” was chosen as a variation of the French word for shop, “magasin”, while “Luiza” was also her aunt’s first name. Luiza started helping her aunt and uncle at the shop from the age of 12, working in the afternoon and early evening after she had finished school. “I was a saleswoman, and it was still a very small shop [at the time],” she says. “I loved the experience, and it was a success.”

When Luiza went to university to study law, she still made time to work at the shop. And after graduating she joined the family business full-time. Over the next two decades she filled a number of increasingly senior roles, before coming chief executive in 1991, as her uncle and aunt stepped back from the day-to-day running of the business.

Another innovation Luiza introduced was opening the stores very early in the morning during sales periods. This might have long been common practice in the UK and North America, but in 1990s Brazil it was a novel development. “We opened the shops at 5am, something that we had never seen before in Brazil.” she says. “Other retail shops started to do the same.”

Today the company is one of the largest retailers in Brazil. With almost half of sales now coming online, the small non-stock shops have been replaced over the years with larger ones that do have some or all products there to take away. The focus on staff happiness remains though, and Magazine Luiza consistently tops the list of the best Brazilian retail companies to work for.

“We have been in first place since 2006,” she says. “It is one of my greatest joys after all these years.” While she has no plans to retire, in 2016 Luiza passed the chief executive role over to her son Frederico, while she switched to chairwoman.

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