Hawking TVs on tinder helps fuel rally for Brazil stock

Bloomberg

For starters, she’s an avatar.
Even so, within 12 hours of hitting the dating app last June, the pretty-if-somewhat-stiff brunette had garnered more than 150,000 matches. Her admirers, both men and women, were on the hunt not for a hookup so much as a good deal on refrigerators and TVs.
Onlookers from the developed world might be tempted to write off Lu, the brainchild of Brazil retailer Magazine Luiza SA, as a gimmick in this increasingly crowded digital era. But they’d be missing the point. In Brazil, she’s become something of a trailblazer, an unlikely bridge between a leery consumer base and online retailers who have struggled to gain a foothold in Latin America’s largest economy.
“Lu was created to encourage people who aren’t so comfortable with technology. When she was introduced, there was nothing like it out there,” said Pedro Guasti, chief executive officer of Ebit, an e-commerce researcher in Brazil. “In that sense, she’s pretty special.”
The digital saleswoman helped Magazine Luiza boost its online sales by 56 percent in the first six months of 2017 from a year earlier, a pace that dwarfed the 12 percent gain for all e-commerce in Brazil, according to the company and Ebit. That’s one of the reasons investors have turned Magazine Luiza into the world’s best-performing major retail stock, driving up shares more than 2,000 percent since the start of 2016.
“Magazine Luiza will be the Amazon of Brazil,” said Luiz Alves Paes de Barros, the Brazilian tycoon whose Alaska Investimentos Ltda. made the retailer one of its biggest holdings before the rally took off.
To much of the world, e-commerce has already joined the ranks of the microwave and smartphones: omnipresent and hard to live without. But in emerging markets like Brazil, shopping online has yet to really gain acceptance, accounting for just 4.5 percent of retail sales, compared with 14 percent in the U.S. Consumers don’t quite trust big companies or anonymous payment systems. And for good reason. Corruption, robberies and scams—both online and on the street—are just too common.
Dealing with Lu has proven to be less of a leap for many Brazilians, some of whom don’t even have credit cards. Go online and Lu’s ready to chat about what appliances offer the best value or how to share videos between smartphones and TVs.
She’s popped up on newscasts, and takes questions on Facebook. Her Youtube channel has 500,000 followers, and Tinder users who swiped her profile last June got a Magazine Luiza coupon. Bucking the trend toward artificial intelligence, Magazine Luiza keeps a live person behind the avatar, not a so-called chat bot.
“We’re in Brazil—we need that human warmth,” says Frederico Trajano, Magazine Luiza’s 41-year-old CEO, whose mother, Luiza Helena Trajano, is the original Lu.
Trajano turned Magazine Luiza’s website into a market place last year, meaning the company now brokers sales between third-party vendors with consumers. The move helped boost online sales to 28 percent of total revenue in the second quarter from 18 percent two years earlier.
While analysts don’t expect the stock to repeat its stellar rally,
four of the six who rate the
shares still recommend buying Magazine Luiza. At 23 times its estimated earnings, its valuation
is less than half that of MercadoLibre Inc., Latin America’s largest online platform.
In figuring out how to crack Brazil’s tricky e-commerce market, Magazine Luiza may be setting a course for fellow retailers in other emerging nations.