Contrasting to Brazil\u2019s ranking fifth in country size and population, the country is featured 55th<\/sup> in worldwide logistics infrastructure according to the World Bank [2], with a disappointing performance even vis-\u00e0-vis countries in the same region or income group:<\/p>\n Opportunity<\/strong><\/p>\n Starting in 2014, Magazine Luiza rolled out their digital initiative to the entire company from supply chain to the creation of a marketplace to help penetration in remote regions harder to access with physical stores: in this new era, the company shifted its positioning from traditional brick-and-mortar retailer to a full digital business with physical points of sale [4]. The consequences since then have been impressive sales and profitability growth, driving the company\u2019s stock to massively outperform competitors as well as the market index in Brazil.<\/p>\n Additionally, the company has been investing in the digitization of its supply chain to boost bottom-line results, with initiatives such as (i) automation of customer service through chat-bots and in-store app payments (reducing need for checkout cashiers), (ii) mobile assembly and inventory management to better plan capacity of workforce, (iii) deployment of RFID technology to improve traceability of inventory and (iv) implementation of Kaizen methodology in their fulfillment centers to improve processes and reduce costs [7].<\/p>\n Future Challenges<\/strong><\/p>\n With an improving outlook for long-term investments, including mounting pressure for simplification of tax system [9], the retail market in Brazil has captured the attention of international competitors, namely Amazon announcing the long-awaited expansion of Amazon\u2019s local operations to start selling electronics (and thus directly competing with Magazine Luiza) [10].<\/p>\n In order to remain competitive against Amazon\u2019s deep pockets and strong data-driven approach, Magazine Luiza will need to take its digital initiative practice several steps further \u2013 with price pressure coming from competitors, the key differentiating factors will be (i) customer loyalty to gain scale and (ii) cost efficiency.<\/p>\n To the first concern, although Magazine Luiza substantially improved its e-commerce platform, it still has a long way to go in predictive analytics and leveraging on customer behavior data \u2013 Amazon has state-of-the-art technology, including CRM tactics such as subscription discounts and replenishment emails (Amazon can predict with decent confidence when you are running out of your consumable products) whereas only in 2013 did Magazine Luiza\u00a0 migrate towards spreading data-driven tools across the company with the adoption of Tableau [11].<\/p>\n Regarding cost efficiency, the jury is still out on whether Magazine Luiza will be able to improve its inventory management and distribution. The company held an average of 76.6 inventory days in 2016 [12] and unless it moves towards just-in-time integration of the supply chain, the company might face a substantial deterioration in financial performance. How can Magazine Luiza with its heavy physical presence be fast enough to react to fast competitors like Amazon?<\/p>\n Word Count<\/strong><\/p>\n 797<\/p>\n References<\/strong><\/p>\n [1] EY (2017), \u201cEY Growth Barometer | Brazil. Can shifting sands be a solid foundation for growth?<\/em>\u201d. Available at: http:\/\/www.ey.com\/Publication\/vwLUAssets\/ey-growth-barometer-brazil\/$FILE\/ey-growth-barometer-brazil.pdf<\/a> (Accessed 5 November 2017).<\/p>\n [2] The World Bank (2016), \u201cInternational LPI Global Ranking<\/em>\u201d. Available at: https:\/\/lpi.worldbank.org\/international\/global<\/a> (Accessed 5 November 2017).<\/p>\n [3] Woods et al. (2017), \u201cSix Strategies for Beating Brazil\u2019s Supply Chain Complexities<\/em>\u201d, BCG. Available at: https:\/\/www.bcg.com\/publications\/2017\/consumer-products-six-strategies-beating-brazil-supply-chain-complexities.aspx<\/a> (Accessed 5 November 2017)<\/p>\n [4] Rethans, J. (2016), \u201cHow Magazine Luiza Mastered Digital Transformation and Became one of Brazil\u2019s Top-Performing Companies<\/em>\u201d, Huffington Post. Available at: https:\/\/www.huffingtonpost.com\/entry\/how-magazine-luiza-mastered-digital-transformation_us_5840686ee4b0cf3f645587de<\/a> (Accessed: 5 November 2017)<\/p>\n [5] Bloomberg Markets (2017). Available at https:\/\/www.bloomberg.com\/quote\/MGLU3:BZ\u00a0<\/a>(Accessed: 5 November 2017).<\/p>\n [6] Magazine Luiza 2015 Management Report (2016). Available at http:\/\/ri.magazineluiza.com.br\/show.aspx?idMateria=mZoQeKZUHLnTW8oeLFXC4Q==&linguagem=en#<\/a> (Accessed: 5 November 2017).<\/p>\n [7] Magazine Luiza 2016 Annual Sustainability Report (2017). Available at http:\/\/ri.magazineluiza.com.br\/show.aspx?idMateria=mZoQeKZUHLnTW8oeLFXC4Q==&linguagem=en#<\/a> (Accessed: 5 November 2017).<\/p>\n [8] Moura F. and Sambo P. (2017), \u201cHawking TVs on Tinder Helps Fuel 2000% Rally in Brazil Stock<\/em>\u201d. Bloomberg Businessweek. Available at<\/p>\n https:\/\/www.bloomberg.com\/news\/articles\/2017-08-14\/hocking-tvs-on-tinder-helps-fuel-2000-rally-for-brazil-retailer<\/a> (Accessed: 5 November 2017).<\/p>\n [9] Marcello, M. (2016), \u201cBrazil\u2019s president to pursue tax reform in 2017\u201d<\/em>, Reuters. Available at: https:\/\/www.reuters.com\/article\/us-brazil-economy-temer\/brazils-president-to-pursue-tax-reform-in-2017-idUSKBN14I1ED<\/a> (Accessed: 5 November 2017).<\/p>\n [10] Sciaudone, C. (2017), \u201cAmazon Is Coming to the Amazon, Shaking Brazil Retailer Stocks<\/em>\u201d. Bloomberg Technology. Available at https:\/\/www.bloomberg.com\/news\/articles\/2017-10-13\/amazon-is-coming-to-the-amazon-shaking-brazil-retailer-stocks<\/a> (Accessed: 5 November 2017).<\/p>\n [11] Tableau [2015], \u201cMagazine Luiza gains fast access to sales data<\/em>\u201d. Available at https:\/\/www.tableau.com\/solutions\/customer\/magazine-luiza-gains-fast-access-sales-data<\/a> (Accessed: 5 November 2017).<\/p>\n![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/TOMFigure1.png\")
<\/a><\/a><\/a>