Brazilian retailers diversify amid slower consumer demand
Belmiro Gomes
Silvia Zamboni/Valor
Large retailers are seeking new businesses outside their traditional operations to generate additional revenue or attract different consumer groups, increasing shopping frequency and profitability. Retailers such as Assaí, Magazine Luiza and Casas Bahia have announced moves in this direction, entering areas where they had not previously competed.
The trend is gaining momentum as retailers expect 2027 to bring weaker demand growth than 2026. Some executives see an opportunity to capture revenue from competitors in adjacent markets while avoiding major investments.
Data from the Brazilian Institute of Geography and Statistics (IBGE) show that the country’s retail sector is losing momentum this year. An exclusive survey for Valor by market research firm NielsenIQ (NIQ) found that food retail sales volume grew only 1% between the first week of January and the first week of September compared with the same period a year earlier.
Retailers likely to keep tax-inclusive prices on shelves
Casas Bahia, GPA try to hammer out wiping out cross-debt
IBGE data show that retail sales volume across all segments grew 2.4% from January to March. By the January-to-July period, growth had slowed to 1.8%. Sales are down in three of the 12 segments: textiles, apparel and footwear; building materials; and furniture.
Eugenio Foganholo, a partner at Mixxer Desenvolvimento Empresarial and an adviser to retail chains, said the renewed push for diversification is aimed not only at gaining market share in new categories but also at increasing retailers’ overall gross margins.
“These are brands that already have a relationship of trust with consumers and are moving into areas where they believe they can generate new revenue for the ecosystem they already operate,” Foganholo said.
Beyond the macro
Analysts see signs that retailers are facing challenges that go beyond a cooling market and macroeconomic variables such as high interest rates and tight credit.
The current environment also reflects the highly concentrated expansion of online commerce, which is intensifying competition across the sector. At the same time, the transition from the current period of lower interest rates to a recovery in consumer spending is taking longer. This more challenging environment is pushing retail chains to adopt new initiatives with greater strategic weight.
“Brazilian retail is heading toward one of the most uncertain macroeconomic and political environments of recent years, making it tempting to classify the sector, once again, mainly through macroeconomic variables [...] [The issue is that] the traditional framework based on GDP, interest rates and credit remains highly relevant, but may no longer tell the whole story,” Luiz Guanais, an analyst at BTG Pactual, said in a report published this week.
Assaí bets on pharmacies
As it looks for ways to respond, cash-and-carry chain Assaí, Brazil’s second-largest food retailer, entered the pharmacy business in July and plans to begin operating EV charging stations later this year. The company expects the new operation to gain scale after 2027.
Assaí will sell electricity to customers with electric vehicles from its parking lots and build its own charging infrastructure. The investment is not expected to be substantial while creating an additional revenue stream for the company. Belmiro Gomes, the group’s CEO, has emphasized the strategy of expanding into adjacent businesses to capture additional revenue without significant investment, he said in a recent interview with Valor.
Drugstores question Brazil’s regulator over Mercado Libre expansion
“We have large parking lots, and most of our electricity comes from the free market, not the regulated market. Our energy cost is approximately half the residential tariff paid by consumers. The goal is to give customers the opportunity to charge a hybrid or electric vehicle at a lower cost than they would pay to charge it at home,” Gomes told analysts in August.
Technical feasibility studies indicate that most of Assaí’s roughly 300 stores have excess power capacity, allowing customers to charge their vehicles while shopping. About 20 million vehicles visit Assaí stores each month.
At the same time, the retailer is opening pharmacies inside its stores, another initiative aimed at developing new businesses. Assaí has not provided a revenue forecast.
The company opened seven pharmacies during two months of investment.
“The idea is to have 25 pharmacies operating by the end of 2026, and at this stage we foresee 250 potential locations over the medium and long term. Capex to set up a pharmacy should be below or around R$400,000. So we expect total investment in the 250 locations to be only about R$100 million, for a significant sales potential,” Gomes told analysts.
For comparison, R$100 million is equivalent to the current construction cost of about one and a half new cash-and-carry stores.
Magalu expands delivery
Other initiatives are emerging in electronics retail, including an expansion into logistics.
Retail and technology group Magazine Luiza launched Magalu Delivery this month, a rapid-delivery service for restaurants, supermarkets and pharmacies, among other businesses, promising deliveries within 60 minutes. The service debuted in about 400 cities.
The company is signing up motorcycle couriers and merchants as partners, putting it in direct competition with major players such as Brazil’s iFood and Chinese platforms 99Food and Keeta, which have been investing billions of dollars in their services.
One strategy is to offer more competitive commissions than the sector average: 14.99% for deliveries handled by the merchant and 19.99% when delivery is handled by Magalu.
“The economic rationale is that we have a lean operation, with lower costs than the large platforms,” said Igor Remigio, CEO of aiqfome, which is integrated with Magalu Delivery.
The operation is directly connected to the group’s broader services ecosystem. In practice, this is the company’s strategy: the delivery launch strengthens Magalu’s model of integrating multiple services — including financial services, logistics and advertising — that generate revenue beyond product sales.
Consultants say the group has less financial firepower than the major foreign platforms and should therefore focus on selected markets where it can be more competitive. aiqfome operates in about 500 cities outside Brazil’s major urban centers and runs a coalition of eight apps, including Plus Delivery, Quero Delivery and Uai Rango. Together, they reach 1,170 cities.
“In this case, Magalu, which was founded in Franca [São Paulo state], complements its ecosystem with the DNA of knowing how to operate in smaller cities, reducing the operational risk,” Foganholo said.
Casas Bahia adds insurance
In June, two months before filing for bankruptcy protection, another electronics and furniture retailer, Casas Bahia, reached an agreement with an insurance company to sell products through its app.
French insurer CNP partnered with Casas Bahia Pay, formerly known as BanQi, to offer payment protection insurance linked to personal loans in a fully digital operation.
The agreement is expected to generate R$220 million in revenue over five years and gives CNP preferential rights to offer savings bonds, insurance and dental plans through the Casas Bahia Pay platform.
In the early 2000s, Brazilian retail chains went through a similar diversification drive in financial services, offering a range of products.
That expansion, however, was supported by major banks, which had the funding needed to accelerate the businesses. Depending on the case, banks also paid to become partners or to gain access to services offered through retail chains.
