Retailer at Home in the Favelas

Saturday, November 15, 2008

The live music is by Exaltasamba and, as it pounds out of stacks of loudspeakers, the singer gets -the several hundred people in front of the store dancing, jumping and waving their arms as if there is no -tomorrow.

It is 9.30 am and the show has been put on for the opening of a new S?o Paulo outlet of Casas Bahia, a Brazilian retailer of furniture and electrical goods.

The store is one of the chain’s 550 in Brazil and its first to open in a favela – one of the sprawling shanty towns that spring up wherever space allows around the country’s cities.

“There are Casas Bahia delivery trucks up and down here every day of the week,” says Carlos de Assis Silva, a labourer. He bought his television, most of his furniture, and even a stone-cutting saw for work from what used to be the nearest Casas Bahia, in the lower middle-class district of Santo Amaro about an hour away by bus.

Casas Bahia thrives on people like Mr Silva. While no cheaper than many shops aimed at richer customers, it is hugely popular with the poor because it allows them to pay in small instalments – and at hefty rates of interest that average 4.5 per cent a month, or about 70 per cent a year. Customers receive a stack of payment slips and must go into a store to make payments. This keeps them coming back and usually keeps them shopping – unless they are among the 10 per cent who default.

Talk of economic crisis raises smiles among the shoppers who pour in when the doors open. Casas Bahia foresees no immediate downturn. It expects sales to rise from R$13bn ($5.6bn, ?4.5bn, ?3.8bn) last year to R$14bn this year. It spent R$2m to open its new store. Another 30 will follow next year, including others in favelas .

Mr Silva lives across the street from the store, so he will now be able to pay his remaining instalments more easily. He is one of about 80,000 people living in Parais?polis, one of Brazil’s biggest favelas. The store’s manager says 3,000 people applied for its 50 jobs, of which 40 – all except management – were filled locally.

That will be important for building good relationships. Most favelas are strict no-go areas for outsiders – often dominated by drug gangs and other criminals.

Parais?polis is not much different. In recent years, it has gained piped water and sewerage in many areas. Houses change hands for between R$15,000 and R$400,000, putting many inhabitants well inside Brazil’s expanding middle class.

One young man in the crowd, who cheerfully admits to being “linked to the Parallel” (the PCC, a criminal organisation that briefly terrorised S?o Paulo with bombs and shootings in 2006), explains how the role of organised crime has changed in recent years.

“In the 1990s, anyone running a business here had to pay bribes,” he says. The favela used to be dominated by an extended family from Brazil’s north-east. They would extort about R$15,000 a year, for example, from anyone running a minibus service in and out of the favela .

Continue reading: “Retailer at home in the favelas

Source: Financial Times (link opens in a new window)