Household and electrical goods retailer Magazine Luiza, by contrast, seems to be weathering the recession pretty well, even though its target audience is low-income households, many of whom have been hit hardest by the country’s recession.
In its most recent financial quarter (3Q2016), Magazine Luiza’s sales were up almost 11% year-on-year to R$2.7 billion ($830.5 million). E-commerce sales, meanwhile, were up 24.3% year-on-year and now account for almost one-quarter (24.7%) of total revenue.
Given that Magazine Luiza’s digital transformation journey didn’t really begin in earnest until 2011, that’s pretty impressive progress. Back then, success was by no means guaranteed, since access to both the Internet and consumer credit was still an issue for many customers. But the company didn’t embark on its journey in a half-hearted way. Instead, the goal has been a bold re-definition of Magazine Luiza, from a retail company using technology, to a technology company focused on omni-channel retail, according to CTO Andre Fatala.
At the heart of the action, he says, is Luizalabs, the company’s R&D unit, which today employs more than 100 software engineers responsible for leading innovation projects both for its e-commerce channel and its 786 physical stores across 16 Brazilian states. That team has also been responsible for helping to shift the mindset of the wider IT department, says Fatala:
Six years ago, we had a very traditional IT architecture and a mindset that needed to change. Today, the IT team says, ‘OK, we’re here to create things using our IT knowledge, so we need to understand the strategy of the company and deliver things that help the company achieve its goals.”
This change of mindset was our biggest challenge, but by creating the R&D team and using it to attract new technology skills to the company from younger people - more digital natives - we were able to start talking to IT, helping it to evolve, to improve the methodologies it had relied on in the past and now we have a more defined approach to working together.
Integrating the old and the new
But there was also a connectivity challenge to tackle if Magazine Luiza was to fulfil its ambition to offer customers the same experience across its digital and physical channels, says Fatala. In other words, to become a true ‘omni-channel’ retailer, it was vital to get older, back-end systems interacting seamlessly with newer mobile and web apps. Here, Magazine Luiza uses Apigee for API [application programming interface] management, Fatala explains:
We first started using Apigee to integrate the back office and our front ends. Now, it’s used for governance of all the APIs we have in the company. It speeds up the development of applications that we want to deliver not just to customers but also to employees working in our our stores. And it also provides us with analytics, where we have reports that are generated by APIs, helping us to decide what’s the next feature we must develop or what improvements we need to make in the back office in order to deliver new features.
Using Apigee has created a more digital culture for Magazine Luiza. We’ve been able to organise the whole of IT differently because of our focus on APIs. Instead of having the typical arrangement of a project [development] team and an IT maintenance team, everyone now works in smaller teams of five or six people and each of these groups takes care of a different part of an application on the platform - so we have a team that takes care of online check-out; a team that takes care of check-out in physical stores, a team that’s responsible for order management across the company, and so on. It makes us more aligned with and supportive of company strategy.
Today, Magazine Luiza has around 100 APIs under management using Apigee, says Fatala, and those APIs receive some 1.1 billion requests per month, on average. But in addition to encouraging closer, more efficient collaboration between development and IT operations staff at the company, this system is also helping Magazine Luiza to branch out in new directions.
A case in point is the company’s new Marketplace platform, which was just launched this summer and has already tripled the number of SKUs [stock keeping units] that the company is able to offer Brazilian online shoppers. Basically, the Marketplace platform enables smaller companies, including many outside of Brazil, to connect to Magazine Luiza using APIs and to sell through its site. APIs are the glue, then, that have allowed the company to become a storefront for other brands and products, similar to the model seen at Amazon and European fashion retailer Zalando.
The bureaucracy here in Brazil can be crazy and the tax system is hard to deal with for smaller suppliers - but we see that API technology is the answer to helping those companies sell to Brazilian consumers using the Magazine Luiza brand, which is good for them, good for us and good for customer choice.