Economic Turmoils Change Consumer Behavior but Brazilians Keep Buying Online

Change in the Brazilian consumer’s behavior represents a great opportunity for e-commerce companies that want to explore the largest market in Latin America.

Periods of economic instability cause changes in consumer’s behavior in several aspects. After experiencing years of growth and stability, a considerable part of Brazilians had to rethink their priorities.

Does this mean that Brazilians stopped buying? Actually, no. Brazilians changed their consumption habits, but Brazil still is the number one country in online shopping in Latin America.

Unlike other sectors, e-commerce was not adversely affected during this period. The segment grew every year of the economic crisis in Brazil, which started in late 2014 and ended in 2016. In 2017, e-commerce grew 7.5% and, last year, online sales increased by 12%. The data is from the Webshoppers report.

The trade forecasts are even more optimistic in 2019. With the economic upturn and the possibility of approval of the pension reform, indexes and research studies are already indicating that Brazilians are more willing to go shopping. Brazil became a great possibility for e-commerce companies that wish to explore the Brazilian market. The key point is to know how to align the company’s strategies with the local consumer profile.

Economic stability

After the biggest and longest economic crisis of its history, between 2014 and 2016, Brazil resumed its path towards stability. The election of Jair Bolsonaro, who chose a political and economic team aligned with the market, had investors optimistic with the Brazilian economy again.

The possibility of approving the pension reform, an important measure to ensure the tax balance in the coming years, contributes to this positive outlook. The measure is in the works in the Brazilian Congress and, in the best case scenario, is expected to be approved in mid-2019.

For the economist and professor of Economics at FAE Business School, Gilmar Mendes Lourenço, the reform approval is no easy task for the government, but the fact that it’s in the works is already a good sign for the market.

“It is important to approve the Reform because it sends a positive signal that the government is concerned about the fiscal status. The simple fact that there is the possibility of a medium and long-term solution to this tax situation is a positive aspect for resuming the growth,” he stresses.

On the other hand, the dollar rate, which had a considerable variation in 2018, due to the turbulent period of the presidential elections, achieved more stability in 2019. As LABS displayed in this text, the increased dollar rate last year followed the pattern reported in all election periods in Brazil. In the face of uncertainty in politics, it is natural that the dollar rate presents an unusual variation.

The 2019 scenario has little resemblance with that of 2018. For Gilmar, the dollar rate should remain stable throughout this year, stimulating consumption among Brazilians. “Unlike what many people were betting, believing that after the elections the dollar rate could go to BRL 4.50, it remained stable. This balances the price of production factors for the Brazilian economy, and favors investment decisions by those looking at Brazil from outside,” he analyzes.

If in 2018, which faced a truckers’ strike in May and had the dollar rate around BRL 4.20 during the elections, Brazilians bought 12% more on the internet, the trend is that 2019 presents an even more positive result for the sector.

Consumption will not only be more stable, but also it will react [in 2019]. Brazil will have an increase in consumption. Brazilian families are less indebted. Especially in 2017 and 2018, Brazilians ‘tightened their belts,’ even as a necessity.

Gilmar Mendes Lourenço, economist

Currently, with more economic stability and more organized financially, Brazilians tend to buy more. “Today, the situation of indebtedness and default rates of consumers is much better than it was in 2017 and 2018. If the economy continues on this pace of stability and with unemployment decreasing, the trend is that the consumer will gradually go back to shopping. Thus, this will be a better year for consumption than 2017 and 2018 were, without a doubt,” the economist argues.

This progress has been noticed in indexes and surveys conducted with Brazilian consumers. A survey conducted by the National Confederation for Trading Goods, Services and Tourism (CNC), which represents tourism entrepreneurs in Brazil, identified that Brazilian families intended to spend 2.7% more in February against January. When compared with the same period in 2018, the consumption intention is 13.1% higher. Recent data already confirmed the forecast for an improvement in consumption in Brazil this year.

Gilmar acknowledges, however, that the Brazilian consumption profile changed in the crisis period. It is expected that a more rational and less impulsive behavior is maintained in the coming years. “Brazilian consumers were very cautious in 2017 and 2018, prioritized paying debts even to fix their credit so they could buy,” he indicates.

To e-commerce companies wishing to explore the promising Brazilian market, the strategy is to align products and services with the new Brazilian consumer profile.

The right strategy

Brazil is the largest market in Latin America. In permanent rise, e-commerce in Brazil reported a remarkable growth even in years of economic recession. Today, Brazil is the number one in purchases over the internet in Latin America. According to the Latin America E-commerce report, six out of ten purchases are made online in Brazil. In 2018 alone, 123 million orders were made on the internet.

If the increase of e-commerce in Brazil in 2019 is considered certain, on the other hand, the trend is for Brazilian consumers to shop online more cautiously. This behavior, as we have seen, is a reflection of periods of economic instability of previous years.

A survey conducted by the National Confederation of Shop Owners (CNDL), representing Brazilian trade entrepreneurs, and by the Credit Protection Service (SPC Brazil), gathering data on Brazilians defaulters, identified that 80% of Brazilians changed their consumption habits after the economic crisis.

The study revealed that the number of Brazilians researching before buying rose from 54% in 2017 to 59% in 2018. The variation in the consumer profile, however, didn’t affect the e-commerce sector in Brazil, which, as we have seen, grew 12% last year.

Additionally, other research studies show that a large portion of the Brazilian consumers continue buying without much hesitation. A survey conducted by Kantar IBOPE Media identified two profiles of Brazilians who buy online: excited and aware. The first group includes more impulsive consumers, who purchase products and services in the heat of emotion. They spend on average BRL 1,083 every three months – equivalent to USD 285.

On the other hand, aware consumers are weighing and researching more until they decide to buy. They are more rational and analyze the cost-benefit ratio before making a decision. Purchases by this type of consumer are on average of BRL 646 every three months, or USD 170.

This transformation in the consumption pattern, however, is less a cause for concern and more an opportunity for e-commerce companies that wish to explore the Brazilian market. Offering lower prices than those charged in Brazil, for example, can be a great strategy to win cautious consumers, since products with greater cost-benefit ratio will certainly be the first option at the time of purchase.

Considering that the dollar rate should follow a path of stability in 2019, which stimulates even greater online consumption, the Brazilian market stands out as a great opportunity for e-commerce companies that want to expand a business to Latin America.

Even more cautious, Brazilians are still buying – a lot. Aligning the sale strategies and prices with the new Brazilian consumer profile can be a definitive step for the success of an e-commerce in Brazil.

This content is exclusive for subscribers.