Talking about business in Brazil is about dealing with continental challenges, from the technological Southeast to the rural Midwest. In Northern Brazil, the least populous region in Latin America’s largest economy, the word combination “e-commerce and Amazon” has a slightly different meaning than usual, and Bemol is the one responsible for it. The 78-year-old retail chain has made e-commerce happen in the most remote villages of the world’s largest rainforest.
Through highways, ferries, and boats, Bemol reaches more than 50 municipalities in the so-called Western Amazon, which includes areas in the states of Amazonas, Roraima, Rondônia, and Acre. In the second quarter of 2020, when e-commerce became a primary solution for retailers during the isolation measures implemented to stop the spread of the COVID-19 pandemic, Bemol saw the so-called caboclo e-commerce (in reference to the riverside population, mainly formed by people with indigenous ancestrality) sell ten times more than in the same period of 2019.
80% of Bemol’s business is in the Amazonas, and until a few years ago it was concentrated in Manaus, the capital that concentrates half of the state’s population. In early 2019, 97% of sales in Amazonas were made through brick-and-mortar stores, with unrepresentative e-commerce. “Our business is also very credit-based. Around 80% of our sales are made through our installment plan service, without any financial institution”, explains Marcelo Forma, CFO of the company, in an interview with LABS.
On March 21, all chain stores were closed due to a state decree. Manaus was the first capital in Brazil to be severely affected by the pandemic, with a lack of ICU beds and even space in cemeteries to bury the disease’s victims. The impact on businesses, in general, was tremendous. The first problem to be solved was how to sell.
Only 3% of Bemol’s sales were made through e-commerce. The second issue was how to be paid, since the payment of the crediário, a popular type of installment plan in Brazil, was made in person by the customers in the chain’s stores.
Until that day, Bemol’s business grew around 20% every month, compared to 2019. With 10 days of stores closed, sales fell 15%. In April, Bemol went through its worst period, with a 36% reduction in sales.
Paddling against the bad tide of COVID-19
“We created a crisis committee and defined three major strategies. The first was to take care of our employees’ health and customers with a well-structured health protocol. The second strategy was to decide that we would not fire anyone and use all the government tools available for us. Even so, if it were not enough, we would ensure (the employment of) our entire sales force. The third strategy was to take care of the company’s financial health,” says Forma. Combined with the loans that the retailer managed to get and negotiations with suppliers to postpone payment terms, the three strategies worked.
With the sharp drop in physical sales, the company bet on e-commerce, improving the user experience on its website, investing in the promotion of the portal, diversifying its offers, and reducing delivery times. “We started to understand needs that our customers had that went beyond our traditional product mix and we were able to incorporate food products because we saw that there was a great need for the population in the region. Nobody used to deliver basic food items through e-commerce,” he said.
In the first month of the offer, 2,000 basic food items were sold through Bemol’s crediário, which feeds the company’s retail verticals. “Our factory products and medicines from the Bemol’s pharmacy were also being sold through our e-commerce.”
In the 70 days of March, April, and May when Bemol stores were closed, e-commerce accounted for half of the company’s sales. The other 50% was made through telesales and social selling, mainly through WhatsApp.
The retailer also gave its customers one month grace period for the payment of their installments, in addition to creating two drive-thrus and providing couriers to physically collect these payments at customers’ homes. “The 36% drop in sales in April turned to a slighter fall of 9% May. In June, as stores opened, sales rose 50%,” says Forma.
Bemol’s pilot project for the so-called “caboclo e-commerce”
The city of Autazes (124.274 miles from Manaus), with 30,000 inhabitants, was the pilot for Bemol’s “caboclo e-commerce” in April 2019. To get there, from Manaus, it is necessary to take two ferries (and spend an hour in each one) and, later, drive on a highway for an hour and a half. In the city’s main square, Bemol installed free Internet to enable customers to buy products with prices from Manaus (generally 30% lower than that of the products sold in riverside cities). Also, Bemol offered free freight, with delivery within three days, and allowed its customers to pay in installments without interest.
Fred Galvão, Bemol’s e-commerce coordinator, said that the idea of ”caboclo e-commerce” emerged to strengthen its share in the region’s market against external competitors, such as Amazon and Magalu (one of the largest retailers in Brazil).
In Amazonas, river transportation is the leader. Many municipalities only move to the capital through rivers. “Numbers that we projected to achieve within a year with ‘caboclo e-commerce’, we achieved in the first month,” he says.
In the river villages, Bemol installed kiosks with a technical team where customers can search for the products they bought online, access the internet, and make a Bemol card. “The riverside population is mostly unbanked. We finance over 90% of our sales. Not only do we sell, but we also encourage this sale.”
In smaller municipalities, the retailer works with partner companies to do the so-called last-mile delivery. “Here in the Amazonas, we have a particularity. River transport does not work apart from passenger transport. It is increasingly rare to find vessels that strictly carry cargo. This flow is unilateral, I take many things inland but little returns to the capital,” says Forma.
However, in the pandemic, boaters had to carry only goods, as people’s transport was blocked to contain contagion by COVID-19. And Bemol products became an option for those who needed to maintain their income by transporting goods from the capital to the municipalities.
Bemol wants to go from installments to a complete financial ecosystem
According to Forma, access to credit through financial institutions is more complex in riverside communities, with few banks. Also, shopkeepers usually have no cash change. For this reason, the retailer is now betting on the creation of a free digital account to bank the riverside residents and plans to expand the range of financial services with the so-called “caboclo e-commerce 2.0.”
“Now in January we are opening a smaller store in Autazes, where the second floor will also be a deposit to accelerate the speed of delivery times and also the base for us to offer the financial services that will be launched now at the beginning of the year,” says Forma.
Bemol’s digital account will include services such as installment plans and personal loans, which are already in trials, as well as basic services, such as transfers. Soon, the idea is that all the stores in the Amazonas state’s interior would become small branches of the Bemol’s bank account.
“We are already on a journey of intense digital transformation. We saw that what brought us here, perhaps, would not be enough to lead us to the future. The pillar of digital transformation is a priority”, says the CFO, who adds that the transformation is, above all, cultural: “it is no use just using technology, we have to change the company’s mindset.”