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Magazine Luiza: Get to know Brazil’s most valuable retailer

Also known as "Magalu,” the company has made is gradually becoming a super app

To answer “what is Magazine Luiza” is no simple feat. In a nutshell, Magazine Luiza is an electronics and appliance retailer. Not an ordinary retailer, but the most valuable one in Brazil. “Magalu,” as it’s also known, sells home-furnishing and basic home needs throughout its 1,000 physical stores that are present in 21 out of 26 states in Brazil. It is also a booming e-commerce and marketplace, and, in the last two years, is gradually becoming much more than that: a tech company born from retail, but that plans to be a super-app, offering all kinds of products and services.

In 2019 alone, the company registered BRL 921,8 million (around $174 million) in revenue, with 45% of this total coming from online sales, an impressive jump compared to the 36% share reached in 2018. In 2020, boosted by the COVID-19 pandemic, Magazine Luiza‘s online sales soared. From January to September last year–the last data available–, Magazine Luiza registered BRL 12.4 billion in sales, an 81% growth compared to the same period of 2019. E-commerce grew 148%, reaching R$8.2 billion and 66% of total sales.

In its 63 years of operation, the Magazine Luiza went from a single gift shop to a multi-purpose business. Magalu‘s debut in the Brazilian stock exchange was in 2011. From 2016, when this shift really began with Frederico Trajano, great-nephew of the company’s founding couple, taking over, to 2020, Magalu’s stock price increased 700 times (today the company is worth more than BRL 157 billion, or almost $30 billion).

READ ALSO: Driven by e-commerce boom, Magazine Luiza net revenue increases 70% year-over-year

A brief history of Magazine Luiza

Founded in the late 1950s in the city of Franca, in the state of Sao Paulo, Magazine Luiza started as a gift shop owned by the couple Luiza Trajano Donato and Pelegrino José Donato. She was a clerk, and he was a traveling salesman. The shop was called A Cristaleira, but Luiza decided to launch a contest for local customers to find a new name for the family business. Magazine, a variation of the French word for store (magasin), and Luiza, her first name, made the perfect combination. In 1974, Magazine Luiza opened Franca’s first-ever department store.

The history of Magazine Luiza is intertwined with Luiza Helena Trajano’s personal story, current president of the company’s board of directors. At the age of 12, she started working at the family’s business after school hours. In 1972, she graduated from law school but never practiced law a day in her life. After working in different store departments, increasingly taking on responsibility, she finally took the leadership role at Magazine Luiza in 1991. She is the niece of the store’s original owner and founder, also named Luiza.

READ ALSO: On Brazil’s Black Friday 2020, e-commerce was the main battlefield, and Magazine Luiza the relative winner

Magazine Luiza, a digital pioneer and Brazilian Amazon (or Alibaba?) wannabe

The internet didn’t become available to the Brazilian consumers until 1997, but in 1992, Magazine Luiza made the bold move of opening a chain of micro shops that didn’t stock anything. Instead, customers would sit at computer terminals and browse a catalog that contained all items on sale. This way, they could order any items they wanted, and Magazine Luiza would deliver them straight to their homes. It was an embryo to online sales. At that time, that meant that the company didn’t have to constantly print out new price tags to keep up with the soaring inflation – with rates going up to 3,000% a year – or the constant currency changes (Brazil had four different currencies between 1989 and 1994). Updating prices on the computer was much simpler and cheaper. The “electronic shops” innovative system allowed a quick and cost-effective expansion.

READ ALSO: Brazilian retailer Magazine Luiza acquires Canaltech, an online publisher

Fast forward to 2014, and Magazine Luiza kept true to its digital pioneering. To remain competitive, the company introduced Luizalabs. The concept was to gather an innovation team to address the shift from brick-and-mortar to digital during the rise of e-commerce: empowering a group of 100 developers that eventually went on to acquire its own building so they could experiment with technology without running into bureaucratic obstacles. They went on to work directly on Magazine Luiza’s core e-commerce business. The team now has over 450 employees.

Luizalabs is not the first project to carry Luiza’s name. Luizacred is a joint venture formed in 2001 with the bank Itaú Unibanco; it’s the financial arm of Magalu, offering loans and credit cards to the retailer’s customers. Its total revenue in 2019 was BRL 20,6 billion. Luizaseg, an insurance company, was created in 2005 in partnership with Cardif, a company that’s part of the BNP Paribas group. The latest project is a digital bank account. The app is integrated with Banco do Brasil and allows payments of purchases, facility bills, transfers between banks – all banking functionalities. It is called Magalupay.

Magalu, as the company came to be known in 2018, is a well-known brand. The nickname, born from a marketing strategy, sounds almost like a term of endearment. It is meant to be used on all channels, while the formal Magazine Luiza is to be used on brick-and-mortar businesses. The company is well-liked by customers, investors, and employees alike (the latter are always encouraged to become shareholders). In that same year, Magazine Luiza won a Best Place To Work prize for the 20th time. It was the first retailer in the world ever to win one.

READ ALSO: Magazine Luiza: why this big retailer is the sweetheart of investors in Brazil

Magalu’s Acquisitions in 2020:

In June of 2019, Magalu won the dispute to buy Netshoes, the largest sports e-commerce in Brazil. Their clients can now pick up online orders from 20 different Magazine Luiza stores. After that impressive move, 2020 was a big year of acquisitions too. See a list of the main ones:

Estante Virtual: Magazine Luiza expanded its presence in the book market – just like Amazon did a while ago – and bought, in January last year, Estante Virtual, a well-known marketplace for booksellers in Brazil.

Stoq Tecnologia: The company’s main product is point-of-sale systems, which allow payments wherever the customer is, thus reducing queues and eliminating friction during the purchase process. The company’s acquisition by Magazine Luiza was announced in August last year.

Canaltech and Inloco: Two acquisitions in a single stroke took place in August 2020. The technology content website Canaltech and Inloco online media platform. Canaltech alone has an audience of 24 million single visitors and a vast social media following. The idea is to monetize this audience and offer the marketplace sellers a place to advertise. “By combining content generation and audience (Canaltech) with the tools to sell advertising (InLoco Media), Magalu will be able to sell ads to thousands of suppliers and marketplace sellers, enabling them to promote their brands and products directly via MagaluAds. MagaluAds will enable the company to better monetize its digital audience of around 80 million unique visitors per month,” wrote the company in its Q3’s 2020 earnings report.

AiQFome: Announced in September, AiQFome’s acquisition allows Magalu’s customers to order food without leaving the retailer’s app. The company is present in 350 cities, has more than 2 million registered users and 17,000 partner restaurants.

Hubsales: Magalu’s acquisition of Hubsales in October last year was an important step towards its marketplace expansion beyond retail. Hubsales has developed digital platforms for factories across different sectors to start selling products directly to the final consumer.

GFL and SincLog: A logistic company, GFL serves more than 600 municipalities, and 85% of its deliveries happen on the next day. Also bought by Magalu in October 2020, GFL was integrated into Logbee, acquired in 2018 by Magazine Luiza. Together with GFL, Magalu announced the purchase of SincLog, the technology platform GFL, and 30 other cargo carriers use for management, document issuance, control of freight tables, and driver remuneration. 

Hub Prepaid – it is a payment institution regulated by the Brazilian Central Bank. Its acquisition was announced by Magazine Luiza in December 2020. In addition to offering a digital account and prepaid card directly to its 4 million customers, Hub is one of the largest Banking as a Service (BaaS) platforms in Brazil and a leader in prepaid card processing. Hub registered BRL 6.6 billion in Total Payment Volume (TPV) the last 12 months. The fintech will integrated into MagaluPay. With this, the company’s customers will have one of the most comprehensive offerings of financial products and services in the market, free of charge and fully integrated with the Magalu SuperApp.

All of this happened in 2020, a year marked by economic crisis worldwide. But as Luiza Helena Trajano once said, ‘Magazine Luiza always grew during crisis. When there is no crisis, I get worried’. Indeed, the businesswoman, billionaire, and self-proclaimed feminist has seen the country go through its worst economic turmoil in the early 1990s and managed to make the business thrive by furnishing homes and helping families pay their bills.