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Digital Transformation at Brazilian Retailer Magazine: Presented By: Group A5

Digital transformation at Brazilian retailer Magazine Luiza: 1. Magazine Luiza transformed its culture, operations, and customer experience through five pillars: developing a digital culture, digital inclusion, digitizing physical stores, expanding its digital sales platform, and implementing an omnichannel strategy. 2. The financial markets responded positively to Magazine Luiza's digital transformation, driving its stock price up over 3300% between 2015-2017 due to expectations of integrating e-commerce and physical stores. 3. Magazine Luiza has a revenue to market cap ratio comparable to other major online and offline retailers in Brazil such as Mercado Livre, Carrefour, and Via Varejo.

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519 views7 pages

Digital Transformation at Brazilian Retailer Magazine: Presented By: Group A5

Digital transformation at Brazilian retailer Magazine Luiza: 1. Magazine Luiza transformed its culture, operations, and customer experience through five pillars: developing a digital culture, digital inclusion, digitizing physical stores, expanding its digital sales platform, and implementing an omnichannel strategy. 2. The financial markets responded positively to Magazine Luiza's digital transformation, driving its stock price up over 3300% between 2015-2017 due to expectations of integrating e-commerce and physical stores. 3. Magazine Luiza has a revenue to market cap ratio comparable to other major online and offline retailers in Brazil such as Mercado Livre, Carrefour, and Via Varejo.

Uploaded by

GaneshRathod
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Digital transformation at Brazilian retailer

magazine

Presented by : Group A5
Ganesh Rathod 037
Mehroze Soni 028
Sumit Singh 045
Mohit Gupta 030
1.List and explain the 5 pillars of Magalu’s
journey towards full digitalization?

• Corporate digital culture: Applied internal marketing technique to


change culture of the organization and prepare the employees to
complete their task using digital tools.

• Digital Inclusion: To make customers literate about the digital


shopping. It includes virtual assistance, chat bots and artificial
intelligence that enhances the customer experience and help them
understand various digital offerings.

• Digitalization of physical store: Upgradation of physical stores and


use of modern technologies to enhance the customer experience to
help in store optimization such as inventory management.
• Digital sales platform: Digital sales platform is launched keeping in mind the
competition provided by amazon. They increased their third party seller which
can provide them 1.5 million SKU’s.

• Omnichannel strategy: Magazine Luiza launched the showrooming concept in


which customers can enter the store, have a feel of the product and then buy
them online. They also launched their dedicated mobile app. Also, to increase
its usage, they provide discounts like free delivery above certain bill amount
when customers make a purchase through the app.
2.How did financial market respond to magalu’s
business transformation? Why did they do so?
• Financial markets responded positively to digital transformation of Magalu
business model, this can also be seen by their stock price growth from 2015 to
2017. It saw a huge growth of over 3300%
• The main reason for the same that the market believed that the company can
integrate ecommerce and physical store operations
• The P/E Ratio for Luiza grew from 12.4 to 27.2% between Dec 2013 to mid 2017
• The rise in ecommerce sales and high growth trajectory got the stock at all time
high. It grew from 16% to 30% during the same time period
• Net Margin was also increasing and became positive in 2016
• When they announced positive results in the online sales in EBIDTA, investor
bought up all the stocks
3.Please make a list of top 5 online and offline players and present their
revenue to market cap ratios. How does this compare to magalu
Online Traffic Offline Market share

Mercado livre 260.93 millions Carrefour 50.28%

Americans 134.58 millions GPA 44.63%

OLX 99.78 millions Via varejo 25.69%

Amazon brazil 54.93 millions Walmart 25.15%

Magazine luiza 50.15 millions Lojas americanas 17.04%


From your understanding of different pricing strategies
discussed in the course,could yourecommend one/mix of
different pricing strategies for this retailer?

• HI-LOW STRATEGY; Following a constant low price might lead to low profits and following a
differential pricing as per competitor benchmarking would lead to more profits
• It would also lead to more traffic generation on the website as well as the offline stores to find
out low prices
• Subscription Model: Setting up a subscription model for exclusive discounts which would
help us to generate more bill per sale and earn revenue
• Consider Competition Pricing by using benchmark analysis
• Stimulate Sales; Using Price Lining Strategy would also help to convert more sales: Setting the
prices at predetermined prices like 129.99
How is the retailer managing the channel conflict
of prices between online and offline channels?

• The customers were very sensitive to Internet pricing and 90% of the
customers proffered showrooming before buying products online. They used a
data aligned algorithm to offer prices depending upon elasticity, competitors
pricing and availability
• There was an average difference of 10-20% of the prices between online and
offline stores due to higher operational costs such as real estate, payroll etc
but Luiza believed that a difference of 5% is acceptable
• The employees of Luiza were authorized to match the Internet prices for
certain items through an analytics app depending upon a few factors
• The shoppers were usually denied for Internet pricing for the Smartphone
category and 5% variation for TVs and matching for Irons

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