Brazil's interior cities hold promise

4 June 2014
BOSTON: Brands targeting the Brazilian market need to urgently look beyond the major metropolitan cities to the country's interior which is expected to account for $130bn in added spending by 2020 according to a leading consultancy.

Boston Consulting Group (BCG) noted that millions of households in interior cities were "vaulting from poverty into the ranks of the middle class and the affluent" and had more disposable income than their counterparts in major cities. Such consumers would become the primary drivers of growth for the rest of this decade at least.

But the interior market, said BCG, "is vastly underserved in a number of product categories", partly because of problems around infrastructure and distribution and partly because businesses were failing to meet their purchasing habits.

These two issues were intertwined, as interior-city consumers preferred to physically inspect a product before buying but, as BCG noted, even market leaders frequently did not have a bricks-and-mortar presence.

And while these consumers were enthusiastic online window shoppers they were less likely to buy online than those in major cities: three quarters cited a lack of reliable delivery and the difficulties associated with returning a product for a refund as their biggest reasons for not shopping online.

BCG examined five product categories including apparel, where it found sales were held back by the low number of shopping malls since the multibrand stores typically found in malls were important for these consumers.

Nearly all of middle-class and affluent interior households surveyed said they had purchased apparel in such a store in the preceding three months, compared with around 40% in major cities.

They were also less concerned about buying branded clothing – just half of middle-class and affluent interior households said this was important, compared to a response rate of 70% to 80% when asked about mobile-phone services, food and beverages, cars, personal-care items, and consumer durables.

The upside of this, suggested BCG, was that there is "considerable opportunity for apparel companies to establish their brands as market leaders in the interior".

BCG said businesses should also consider innovative business models, such as small-scale and flexible retail formats and concepts, to address the preferences and needs of interior city consumers.

Data sourced from BCG; additional content by Warc staff
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