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Ebit - Buscape- #34 webshoppers english 2016

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Ebit - Buscape- #34 webshoppers english 2016

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Ebit - Buscape- #34 webshoppers english 2016

  1. 1. WEBSHOPPERS 201634TH EDITION www.ebit.com.br www.buscapecompany.com
  2. 2. TABLE OF CONTENTS INTRODUCTION • What is WebShoppers • About Ebit • Ebit Certification • Methodology • Tailored Reports EXECUTIVE SUMMARY CHAPTER 1 360º appraisal of the first half of 2016 CHAPTER 2 Online purchasing cycle CHAPTER 3 The economic and political crisis according to FecomercioSP CHAPTER 4 FIPE/Buscapé Index FINAL CONSIDERATIONS • Main clients • Glossary • Communication support • Press information • Team/Contacts 03 24 11 34 13 48 54
  3. 3. INTRODUCTION 3
  4. 4. WHAT IS WEBSHOPPERS Performed by Ebit since 2001, WebShoppers is the highest credibility report on Brazilian e-commerce and it is considered the main reference for professionals in this segment. In this study, we will show the current e-commerce market scenario, estimates for 2016, as well as changes in behavior and preferences of consumers. Insights obtained in this research aim at outlining the online market direction and contributing to understand and develop the sector. Present in the Brazilian market since January 2000, Ebit has been following the evolution of online retail in our country since its begin- ning, and it is a reference in this topic. Using a sophisticated system that collects data directly from the online buyer, Ebit generates detailed information on e-commerce. On its website, Ebit ( www.ebit.com.br) pro- vides relevant information for purchase deci- sion-making processes, and it offers products and services to retailers. Ebit's store certifi- cation helps consumers build trust in online purchases. Through a classification by medals (Diamond, Gold, Silver, and Bronze), which cer- tifies the quality of services provided by retail- ers, consumers find arguments that help them at the moment of decision. For the executive, Ebit works as a source of knowledge on e-commerce in Brazil, contri- buting to the growth of business and of the sector in general. Learn more on Ebit and its main products below. This edition of the WebShoppers report uses information deriving from the research carried out by Ebit with over 21,000 online stores already certified and with its consumer panel, as well as from ad hoc research and external information. ABOUT EBIT WEBSHOPPERS TABLE OF CONTENTS 4 INTRODUCTION | WHAT IS WEBSHOPPERS / ABOUT EBIT
  5. 5. 0976 8765 6543 0987 09 17 Pesquisa E-bit DIAMOND BRONZESILVERGOLD Ebit has partnerships with over 21,000 online stores. Once the con- sumers complete a purchase on one of these stores, they are invited to answer a survey. There are three steps: one im- mediately after the effective purchase and another some days after, to assess delivery, and the third one is about product usability. The process is auto- matic and simple, done over the Inter- net. Through these evaluations, Ebit calculates a score for each store and classifies them by medals (Diamond, Gold, Silver, and Bronze). EBIT CERTIFICATION METHODOLOGY BENEFITS FOR CONSUMERS Since January, 2000, Ebit has already collected over 25 million questionnaires, answered af- ter the online purchase process, and over 300,000 new questionnaires are added to this value on a monthly basis. This compiled information gener- ates monthly Business Intelligence reports that indicate the social demographic profile of the e-consumer, as well as the most sold products, most frequently used means of payment, re-pur- chase indicators, among other pieces of informa- tion. Through another WebShoppers edition, Ebit wishes to continue to contribute to developing In- ternet and e-commerce in Brazil. T he Ebit Store classification builds trust in online purchases and en- sures a higher quality service for all users. Through the medal classifica- tion, which verify the quality of the services provided by the retailers, the consumer finds arguments that help them at the moment of decision. Pesquisa E-bit THE CONSUMER VIEWS THE EBIT BANNER ON THE PURCHASE CONFIRMATION SCREEN, WHICH WILL LEAD THEM TO THE SATISFACTION RESEARCH. ONE DAY AFTER THE DELIVERY DEADLINE, EBIT SENDS A SURVEY VIA EMAIL TO ASSESS THE POST-SALE EXPERIENCE OF THE STORE. ACCORDING TO THESE SURVEYS, THE STORES ARE CLASSIFIED BY MEDALS: BRONZE, SILVER, GOLD, OR DIAMOND, ACCORDING TO PRE-ESTABLISHED CRITERIA. BASED ON ALL INFORMATION COLLECTED FROM CONSUMERS, EBIT GENERATES REPORTS AND INFORMATION ON E-COMMERCE AND DISPLAYS THEM IN THE RETAILER'S AREA. CLIENTS ANALYZETHE ONLINE STORE ATTRIBUTING POINTS BASED ON THEIR PURCHASE EXPERIENCE AND OTHER PIECES OF INFORMATION, SUCH AS SHIPPING, PAYMENT METHOD, AND DELIVERY. A FEW WEEKS AFTER THE PRODUCT IS DELIVERED, EBIT SENDS AN ASSESSEMENT RESEARCH ABOUT OVERALL SATISFACTION WITH THE ITEM. 1. 4. 2. 5. 6. 3. TABLE OF CONTENTS 5 INTRODUCTION | EBITCERTIFICATION / BENEFITS FOR CONSUMERS / METHODOLOGY
  6. 6. BI-YEARLY MONTHLY DAILY 6 1 The questionnaires, answered on a daily basis by consumers, feed Ebit's databa- se, and by cross checking this information, the company has valuable reports which outli- ne consumer profile and also comparatively analyze the services provided by online stores, regarding points such as delivery, product pri- ce, means of payment, NPS®, among others. The reports offered by Ebit to retailers comply with operational, tactical, and strate- gic objectives, and engagement varies accor- ding to business needs. The Categories* defi- ne the areas recommended for each report. TAILORED REPORTS *Categories: commercial, executive, management, business intelligence, logistics, marketing, products, customer service. SPECIAL STUDIES DEVELOPED FOR WEBSHOPPERS REPORTS COMPARATIVE PERFORMANCE OF THE ONLINE STORE COMPARATIVE ANALYSIS OF COMMERCIAL PERFORMANCE Especially developed research for WebShoppers report: E-commerce purchase cycle (WS34), Cross Border (WS33), Mobile Purchase Habit (WS32), and World Cup impact (WS31). Comparative study between the market and its competing market, along an evolution over the last 12 months. With information on e-consumer profile, purchase frequency, purchase and delivery aspects, average ticket, NPS®, among others. Essential follow-up on the financial data of your store, comparing it with definite market and general market. It offers the following data: sales, number of orders, average ticket, general and new e-consumers, sales per categories and subcategories, results per region and state. GENERAL OBJECTIVE OPERATIONAL OBJECTIVE TACTICAL AND STRATEGIC OBJECTIVE Business intelligence Commercial Commercial Logistics Marketing Marketing Products Customer service TABLE OF CONTENTS 6 INTRODUCTION | TAILORED REPORTS
  7. 7. PRODUCTS THAT GENERATED MORE VISITS TO THE STORES PRESENT ON BUSCAPÉ DAILY MONTHLY REAL TIME WEEKLY MONTHLY 1 1 REAL-TIME FOLLOW-UP ON E-COMMERCE SALES DETAILED FOLLOW-UP ON E-COMMERCE SALES TIPS ON MOST SOLD PRODUCTS TOP E-COMMERCE SALES Dashboard to follow and compare your store's sales vs. general market on an hourly basis, with e-commerce sales information, number of orders, average ticket, and share per device (e-commerce x m-commerce). Particularly for seasonal events such as Black Friday, Mother's Day, Valentine's Day etc. Detailed sales database of the online store compared to the general market (without the store). The following information is shown: category, subcategory, order volume, financial volume, shipping value, gender, region, type of device (desktop, mobile), new buyer, income range, reason for purchase, and type of shipping (paid or not). List of the 10 most sold products in the market, in the most important categories of your store (last 7 days). Information on the most sold products in e-commerce with average ticket paid by consumers (including shipping). Information on the products that generated more visits to the stores present on Buscapé, predicting the purchase intention of consumers. TACTICAL OBJECTIVE Commercial Commercial Commercial Commercial Commercial Marketing Marketing Marketing TABLE OF CONTENTS 7 INTRODUCTION | TAILORED REPORTS
  8. 8. REAL TIME DAILY DAILY DAILY WEEKLY REAL-TIME COMMENTS BY CONSUMERS COMMENTS BY CONSUMERS EVOLUTION OF THE MAIN MANAGEMENT INDICATORS - DAILY Comments made by consumers in the Ebit Certification Research, at the moment of purchasing and after-sales, who answered “unlikely”, “highly unlikely”, or “maybe” when asked about purchasing again. Comments made by consumers in the research shall be daily sent in Excel format, containing several pieces of information such as complaints, compliments, or suggestions, probability of purchasing again on that store and order number. Dashboard to follow the evolution of your store’s service quality vs. general market on a daily basis, attributed by your consumers in the Ebit certification research: delivery performance, delay, NPS®, consumer profile, and comments on your store. Customer service Customer service Management Management Management Customer service Customer service Marketing Marketing NPS® - NET PROMOTER SCORE® Information on customer satisfaction and loyalty using NPS® methodology, compared to the market and to direct competitors. EVOLUTION OF THE MAIN MANAGEMENT INDICATORS - WEEKLY Information to follow clients’ scores in the Ebit certification research on a weekly basis and their variation compared to the previous week, analyzing purchasing aspects (price, payment, ease to buy, etc). TABLE OF CONTENTS 8 INTRODUCTION | TAILORED REPORTS
  9. 9. DAILY MONTHLY 1 MONTHLY 1 QUARTERLY 3 OVERVIEW FOR ONLINE STORE MANAGEMENT COMPETITIVE SHIPPING ANALYSIS ANALYSIS OF THE USE OF MEANS OF PAYMENT IN E-COMMERCE PURCHASING BEHAVIOR OF CONSUMERS Essential information on the store's performance. It contains scores attributed in the research at the moment of purchase and post-sales, orders delivered within and out of the deadline, daily, 30 and 90-day NPS®, client appraisal on purchase aspects (price, delivery, customer service etc); client profile, comments by consumers, among others. Full report focused on shipping, which shows its impact on sales and other variables, compared to the market. Distribution of shipping value by price ranges, average promised deadline in business days for each shipping range, average ticket by installments etc. Analyses of means of payments in online purchases. Financial volume by means of payment, by flags, by issuing bank, by State, by consumer profile (gender, age, income, education), by device (e-commerce x m-commerce), and by category. Information on customers’ purchasing process, with its evolution over the last 12 months. Shopping motivators, omnichannel behavior, installments, means of payment etc. STRATEGIC OBJECTIVE Management Customer serviceMarketing Marketing Commercial Commercial Marketing Marketing TABLE OF CONTENTS 9 INTRODUCTION | TAILORED REPORTS
  10. 10. MONTHLY MONTHLY 1 1 TAILORED REPORTS Is any data or information which you need and not listed here? We can tailor it for you. Contact comercial@ebit.com.br and let's talk about it! EXECUTIVE PRESENTATION BY EBIT SPECIALISTS Executive presentation by Ebit e-commerce specialists with a detailed analysis of the online store's comparative performance report x competing market, together with market insights in the period and specific recommendations. RELATIONSHIP WITH THE FINANCIAL MARKET • Presence of Ebit e-commerce specialists at meetings, lectures, and events held by your company • Invite your clients, partners, and investors to pre-launching events of WebShoppers reports at Ebit • Monthly access to the most important financial and metric e-commerce information • Anticipated access to forecast of growth estimates (2 years) – December. Commercial Executives Marketing TABLE OF CONTENTS 10 INTRODUCTION | TAILORED REPORTS
  11. 11. Tthe current economic and political moment in Bra- zil has posed several obsta- cles to the growth trajectory observed over the last years, with clear impacts on the pro- ductive activity and on em- ployment levels throughout national territory. After the adoption of a comprehensive tax policy between 2009 and 2014, Brazilian public deficit EXECUTIVE SUMMARY ges in the Government. The last two months of the first half of 2016 signaled a react- ion regarding sales recovery, which caused e-commerce market to reach a nominal growth of 5.2% in the period, with R$ 19.6 billion in sales. The main e-commerce high- lights of the first half of the year are outlined on the next page. increased substantially, espe- cially in 2015, thus generating several obstacles and a lack of optimism by retail consumers in the country. Following this unfavorable scenario, Brazilian e-commer- ce did not show any growth in the first months of the year, when it started to show some reaction after a few chan- TABLE OF CONTENTS 11 INTRODUCTION | EXECUTIVE SUMMARY
  12. 12. MAJOR HIGHLIGHTS OF BRAZILIAN E-COMMERCE IN THE FIRST HALF OF 2016 Driven by the increased prices registered by FIPE/Buscapé Index, the average ticket spent by Brazilian consumers in e-commerce was R$ 403.46 which represents a nominal growth of 7% compared to the first half of 2015. 23.1 million online consumers performed at least one purchase in the first half of 2016, a volume 31% higher than in 2015, boosted by migration of sales from physical retail to the online channel. ORDERS AVERAGE TICKET ACTIVE CONSUMERS With increased unemployment and weaker purchases by class C, after a slowdown in sales at the beginning of the year, we registered a drop of 2% in the order volume, compared to the previous year. The actual e-commerce sales in the State of São Paulo reached R$ 3.6 billion in the first quarter of 2016, which represents a 7.4% drop compared to the R$ 3.9 billion recorded in the same period in 2015. Sales via mobile devices showed a strong growth over the year, reaching a share of 23% of sales in June/2016. E-COMMERCE IN SÃO PAULO MOBILE DEVICES ONLINE PURCHASING CYCLE Purchases of products over the Internet can be better planned, as the consumers can compare products and prices before closing an order on this channel. According to the special Ebit research, people took, on average, 16 days to perform a purchase, for instance, of a mobile phone/smartphone. TABLE OF CONTENTS 12 INTRODUCTION | EXECUTIVE SUMMARY
  13. 13. CHAPTER 1 13 360º APPRAISAL OF THE FIRST HALF OF 2016
  14. 14. 360º APPRAISAL OF THE FIRST HALF OF 2016 I n addition to the challenges of the macro- economic moment of the country, online re- tail was affected in the first half of 2016 by increased product prices, as registered by the FIPE/Buscapé Index (chapter IV), changes in the ICMS billing model, and also by the downfall if AMIDST A TROUBLED POLITICAL AND ECONOMIC MOMENT IN BRAZIL, E-COMMERCE IN THE FIRST HALF OF THE YEAR WAS MARKED BY THE FACT THAT MANY COMPANIES IN THE SECTOR HAD TO RETHINK THEIR STRATEGIES AND REVIEW THEIR EXPENSES IN SEARCH FOR SURVIVAL AND GROWTH the “Good Law”, which ensured a zero PIS/Cofins aliquot for computing and telecom products (In summary increasing taxes). In this scenario, the solution for companies in the sector was to improve online consumer TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 14
  15. 15. experience both for access via desktop and via mobile devices, which accounted for a total of 18.8% of the transactions in the period. In addition, online retail operations aim at improving their operational experience in or- der to attract the highest possible volume of consumers in the offline channel. In the first half of 2016, we registered an increase in the number of active e-consumers in Brazil. This shows that, in general, consumers have been in search of advantages in the sector, which the traditional retail cannot offer. POPULARIZATION OF SMARTPHONES IN BRAZIL, ALONG WITH THE NEED TO IMPROVE CONVERSION TO VISITS VIA MOBILE DEVICE HAS FORCED COMPANIES TO OFFER A BETTER USER EXPERIENCE ON RESPONSIVE WEBSITES AND APPS, THUS DIRECTLY REFLECTING THE GROWTH IN SHARE OF M-COMMERCE SALES. states Pedro Guasti, CEO of Ebit IN BRAZIL, 23.1 MILLION CONSUMERS PERFORMED AT LEAST ONE ONLINE SALE IN THE FIRST HALF OF 2016, THUS ACCOUNTING FOR A 31% INCREASE COMPARED TO 2015 of transactions were performed via mobile devices of transactions were performed via computers/laptops DEVICES USED TO PERFORM ONLINE PURCHASES WERE: 81.2%18.8% EVOLUTION OF ACTIVE E-CONSUMERS SOURCE: EBIT INFORMATION – NUMBER OF ACTIVE CONSUMERS, 1ST HALF OF 2016 10 15 5 20 25 CONSUMERS (MILLION) VAR. 31% 20131ST HALF OF 2014 2015 2016 14.1 18.9 17.6 23.1 SOURCE: EBIT INFORMATION TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 15
  16. 16. CONSUMER PROFILE IN THE 1ST HALF OF 2016 SOURCE: EBIT INFORMATION REGION WOMAN 1S/2016 1S/ 2015 1S/ 2016 1S/2015 MEN 49.99%50.01% 48.13%51.87% TO 24 YEARS OLD BETWEEN 25 AND 34 YEARS OLD ABOVE 50 YEARS OLD AVERAGE AGE (YEARS OLD) BETWEEN 35 AND 49 YEARS OLD 8% 8% 22% 23% 37% 37% 33% 32% 43.1 42.8 FAMILY AVERAGE INCOME THE AVERAGE INCOME OF ONLINE CONSUMERS INCREASED BY 11%, BOOSTED BY A WEAKER CLASS C IN E-COMMERCE PURCHASES THE AVERAGE AGE OF THE BRAZILIAN CONSUMER IS STILL 43 YEARS OLD. DUE TO THE INTRODUCTION OF NEW, YOUNGER CONSUMERS LESS THAN R$ 3,000 BETWEEN R$ 3,001 AND R$ 5,000 ABOVE R$ 8.001 I’D RATHER NOT ANSWER BETWEEN R$ 5.001 AND R$ 8.000 SOUTHEAST SOUTH NORTHEAST MID-WEST NORTH FAMILY INCOME SOUTHERN AND MID-WESTERN REGIONS HAVE GAINED A LARGER SHARE IN E-COMMERCE SALES IN THE FIRST HALF OF 2016, THE SHARE OF WOMEN WAS HIGHER IN E-COMMERCE THERE WERE 828,655 MORE WOMEN THAN MEN GENDER 1S/2015 1S/2016 AGE GROUP 64.5% 13.7% 12.9% 6.1% 2.8% 63.8% 14.5% 12.5% 6.6% 2.6% 1S/2015 R$ 4.658 40,35% 21,99% 15,30% 15,09% 7,27% 1S/2016 R$ 5.174 34,70% 21,97% 16,51% 19,24% 7,58% TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 16
  17. 17. unemployment and additional discounts for payments in one installment. In the first semes- ter of 2016, 42% of online purchases were per- formed with free shipping. E-COMMERCE IS MATURING AND FREE SHIPPING NO LONGER NEEDS TO BE USED AS THE ONLY STRATEGY TO STIMULATE PURCHASES. FROM NOW ON, FREIGHT SHALL BE DYNAMICALLY OFFERED TO CONSUMERS ACCORDING TO THEIR NEED OR URGENCY. Online stores are still reducing their free shipping policy and e-consumers started to choose cash payment or payment in up to three installments, due to high interest rates, risk of highlights André Ricardo Dias, COO of Ebit SHARE OF INCOME RANGES IN E-COMMERCE (ORDER VOLUME) SOURCE: EBIT INFORMATION TOP 10 GENERAL MARKET 30% 50% 20% 10% 40% 43 33 19 43 27 26 43 40 40 44 40 42 1Q/15 3Q/152Q/15 4Q/15 2Q/161Q/16 SOURCE: EBIT INFORMATION UP TO R$ 3 THOUSAND FROM R$ 3 THOUSAND TO R$ 8 THOUSAND OVER R$ 8 THOUSAND 1S/2013 1S/20162S/20151S/20152S/20141S/20142S/2013 FREE SHIPPING 10% 30% 50% 20% 40% 60% SINCE JULY/2014 E-COMMERCE HAS DECREASED THE PERCENTAGE OF FREE SHIPPING, MOSTLY BIG RETAILERS. 50.3 48.5 43.5 49.0 46.1 41.1 41.6 38.5 40.238.6 39.4 40.9 37.537.7 12.0 12.4 13.0 14.5 16.3 17.9 20.8 TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 17
  18. 18. SOURCE: EBIT INFORMATION With the worsening crisis, the first half of 2016 registered a slight change in the pay- ment forms on online purchase: in the same period of 2015, 39.6% of consumers preferred cash payment. On the other hand, in the first six months of 2016, 42% have decided to pay their purchases in only one installment, also benefiting from discounts offered by stores. HIGHLIGHTS As SELIC rate and inflation remain high, stores have chosen to offer shorter installment deadlines with interests. Higher incentive to pay in cash (with bank slip) or in up to three installments. Websites have limited payments to a maximum of ten installments. SOURCE: EBIT INFORMATION INSTALLMENTS: IN 2016, ONLINE CONSUMERS HAVE CHOSEN TO PURCHASE LESS WITH INSTALLMENTS. AVERAGE INSTALLMENTS (NUMBER OF INSTALLMENTS) MAIN PAYMENT METHOD CASH 2-3 INSTALLMENTS 4-12 INSTALLMENTS OR MORE 2.5 installments 2.4 installments 39.6% 42.0% 24.6% 25.1% 35.8% 33.0% 1S/2015 1S/2016 1S/ 2015 1S/ 2016 SOURCE: EBIT INFORMATION TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 18
  19. 19. FINANCIAL DATA: ORDERS, SALES, AND AVERAGE TICKET E-commerce sales in Bra- zil in 2016 kept rising and started to grow again. According to the datacol- EVEN WITH THE SLOWER GROWTH IN THIS SEMESTER, E-COMMERCE ADVANCES AT MUCH HIGHER RATES THAN OTHER SECTORS OF THE ECONOMY. THIS RHYTHM WON'T STOP BECAUSE MORE AND MORE BRAZILIANS WILL UNDERSTAND THAT PERFORMING A MORE CONSCIOUS PURCHASE IS POSSIBLE OVER THE INTERNET, AS WELL AS SAVING WITH AN EASIER PRICE COMPARISON. explains Sandoval Martins, CEO of Buscapé Company lected, e-commerce sales were R$ 19.6 billion in the first half of the year. This number represents a nomi- nal growth of 5.2% com- pared to the same period in 2015, when a total of R$ 18.6 billion were sold. ONLINE SALES (CONSUMER GOODS) IN BILLION OF BRAZILIAN REAIS SOURCE: EBIT INFORMATION FINANCIAL VARIATION 10 30% 20 70% 60% 40% 80% 5 20% 10% 15 50% 25 90% 100% R$BILLION 1S/11 1S/141S/13 1S/161S/12 1S/15 27.5% 8.4 12.7 18.6 10.2 16.1 19.6 31.1% 16.0% 13.5% 25.9% 5.2% TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 19
  20. 20. The main factors driving growthinBraziliane-commer- ce sales were the increased average ticket, boosted by the increased prices of products sold in the sec- tor, as registered by the FIPE/Buscapé Index; high- er share of classes AB; and continued sales of higher value product categories, such as Household Appli- ances and Telephony/Mo- bile phones. We registered a 7% in- crease in the average ticket of online consumers in the first half of 2016. THE MAIN FACTORS DRIVING GROWTH IN E-COMMERCE SALES WERE INCREASED AVERAGE TICKET, HIGHER SHARE OF CLASSES AB, AND CONTINUED SALES OF PRODUCT CATEGORIES WITH HIGHER VALUE EVOLUTION OF THE AVERAGE TICKET OVER THE 1ST SIX MONTHS NUMBER OF ORDERS IN E-COMMERCE SOURCE: EBIT INFORMATION SOURCE: EBIT INFORMATION AVERAGE TICKET TRANSACTIONAL VARIATION -20% -10% 20% 30% 10% 20% -10% 0% 30% 40% 0% 10% 450 60 350 40 250 20 150 50 400 50 300 30 200 10 100 40% 50% 50% 60% 70% R$MILLION VARIATION 353.4 309.5 376.6 334.1 333.4 403.5 25.0 35.5 49.4 29.6 48.2 48.5 40.4% 1S/11 1S/141S/13 1S/161S/12 1S/15 18.4% -5% -7% 7% 13% 7% -7% 20.1% 35.5% 2.5% -1.8% 1S/11 1S/141S/13 1S/161S/12 1S/15 TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 20
  21. 21. HIGHLIGHTS MOST SOLD CATEGORIES: IN VOLUME OF ORDERS MOST SOLD CATEGORIES: IN SALES SOURCE: EBIT INFORMATION – 1ST HALF OF 2016 BOOKS / SUBSCRIPTIONS / BOOKLETS FASHION & ACCESSORIES HOUSE & DECOR HOUSEHOLD APPLIANCES FASHION & ACCESSORIES BOOKS / SUBSCRIPTIONS / BOOKLETS ELECTRONIC DEVICES ELECTRONIC DEVICES HOUSEHOLD APPLIANCES HEALTH / COSMETICS & PERFUMERY COMPUTING TELEPHONY / MOBILE PHONES HEALTH / COSMETICS & PERFUMERY SPORTS & LEISURE SPORTS & LEISURE COMPUTING TELEPHONY / MOBILE PHONES AUTOMOTIVE ACCESSORIES TOYS & GAMES HOUSE & DECOR 14% 5% 9% 24% 12% 4% 5% 12% 13% 5% 6% 20% 12% 3% 4% 10% 9% 3% 2% 7% SOURCE: EBIT INFORMATION – 1ST HALF OF 2016 Despite the 4% fall in volume of orders, the category Household Appliances kept its leadership position in e-commerce sales. In the second position is Telephony/Mobile phones with a 19% increase compared to 2015, mainly strengthened by the increase in average price spent by consumers, since there was a 16% drop in volume of orders compared to the first half of 2015. The category Automotive Accessories reached 3% of share in Brazilian e-commerce sales, with a 75% increase compared to the previous year. SOURCE: EBIT INFORMATION TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 21
  22. 22. DELIVERY AND SATISFACTION: NPS® AND DELIVERY DEADLINE One of the major highlights of e-commerce in 2015 was certainly related to the quali- ty of services provided by online retailers. Ebit registered a drop in volume of delayed deliveries, reaching a percentage of only 7.7%. However, we identified that the average deadline advertised by the stores increased in the first half of 2016, compared to the same period last year, to ensure delivery within the promised deadline. Net Promoter Score® (NPS®), trademark of Bain & Company, is an indicator that measures client satisfaction and loyalty. Since 2013, when Ebit started to perform this measurement, the best result was in July 2015, with 66.3%, showing stability over the subsequent months. However, from Decem- ber on, there was a considerable drop in NPS®, to 59.7% with increased delayed deliveries in e-commerce due to the large volume of sales of Black Friday. From January 2016 onwards, the indica- tor showed improvement, although it still remained 1.9 percentage point lower than what was registered in July 2015 when clos- ing the period comprising the last 12 months (in June 2016). 10% 70% 5% 60% NET PROMOTER SCORE® - NPS® (%) DELAYED DELIVERY (%) SOURCE: EBIT INFORMATION SOURCE: EBIT INFORMATION SOURCE: EBIT INFORMATION JAN16 JAN16 JUL15 JUL15 APR16 APR16 OCT15 OCT15 FEB16 FEB16 AUG15 AUG15 MAY16 MAY16 NOV15 NOV15 MAR16 MAR16 SEPT15 SEPT15 JUN16 JUN16 DEC15 DEC15 1S/2015 1S/2016 % DELAYED DELIVERY AVERAGE DEADLINE ADVERTISED 65.0 5.8 65.4 5.7 59.7 7.3 61.2 7.8 66.3 5.9 65.6 5.7 65.9 6.0 59.7 8.5 61.6 8.1 64.0 7.3 64.4 7.8 64.5 8.0 8.6% 7.7% 9.5DAYS 9.2DAYS TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 22
  23. 23. PROJECTION FOR 2016 After a nominal growth of 5.2% in the first half of 2016, Ebit projects that growth in e-commerce sa- les will remain at 8% in 2016, reaching a total of 44.6 billion in sales. Although sales in the first half of 2016 have shown a 2% drop in volume of orders, Ebit estimates that, as the optimism of consumers has improved due to changes in Brazilian politics, as well as a second half strength- ened by Black Friday and Christmas, the sector shall have a slight recovery. Thus, by the end of the year, the total volume of orders might reach 106.5 million, a num- ber close to the one shown throughout 2015. Without increase in sa- les, growth in billing shall be supported by the in- crease in average ticket, which shall reach an average value of R$ 418 this year. AVERAGE TICKET ESTIMATE IN 2016 ORDER VOLUME ESTIMATE IN 2016 SALES GROWTH ESTIMATE IN 2016 SOURCE: EBIT INFORMATION SOURCE: EBIT INFORMATION SOURCE: EBIT INFORMATION 450 350 250 150 50 50 40 30 20 10 30% 120%120 120% 10% 80%80 80% 20% 100%100 100% -10% 40%40 40% 60%60 60% 20%20 20% R$R$BILLIONVOLUME 0% BRAZILIANREAIS AVERAGE TICKET ORDERS FINANCIAL VARIATION VARIATION VARIATION 2011 20142013 20162012 2015 0% 2011 20142013 20162012 2015 2011 20142013 20162012 2015 0% 18.7 53.7 349 338 327 347 388 418 66.7 88.3 103.4 106.5 106.5 22.5 28.8 35.8 41.3 44.6 26% 34% -6% -3% -3% 6% 12% 8% 17% 25% 3% 32% 0% 20% 28% 24% 15% 8% 2016 TABLE OF CONTENTSCHAPTER 1 | 360º APPRAISAL OF THE FIRST HALF OF 2016 23
  24. 24. ONLINE PURCHASING CYCLE CHAPTER 2 24
  25. 25. I t has become increasingly important for e-commer- ce companies to un- derstand consumers and their purchasing habits, in order to create more effective sales and client loyalty strategies. When performing a purchase over the Internet or even in tradi- tional retail, people usually go through a natural pur- chasing cycle before acquir- ing a product or a service. THE IMPORTANCE OF THE CATEGORYTELEPHONY/MOBILE PHONES IN E-COMMERCE The purchasing cycle starts when the consumer identifies that they need something or have a problem that requires acquir- ing a new product or service. Some consumers are more impetuous while others like to think carefully about the real need to acquire some merchandise. From this mo- ment on, the consumer who is currently more aware and wellinformed starts to search for the desired product or service, and might be influenced by a huge amount of ads and publicity with the most diverse formats until they make their decision. After surveying the op- tions, consumers then start to analyze several features such as quality, durabili- ty, brand, and above all, product price – this is one of the main purchase-decision IDENTIFY A DESIRE, NEED, OR PROBLEM 1 SEARCH FOR THE PRODUCT 2 APPRAISAL5 ASSESS ALTERNATIVES 3 PURCHASE THE PRODUCT 4 1 2 34 5 PEOPLE'S NATURAL PURCHASING CYCLE TABLE OF CONTENTSCHAPTER 2 | ONLINE PURCHASING CYCLE 25
  26. 26. factors. After making their decision, having weighed up all benefits as well as negative points, con- sumers decide to buy the product with the best cost-benefit ratio. In this scenario, the question posed by many companies in the sector is: "What is the process and time to purchase a product in different categories by e-commerce websites?" We know that the cate- gory Telephony and Mobile phones has been gaining rel- evance with online practices over the last years, with in- creasing share in the nation- al e-commerce market. In 2013, this category occupied the sixth position in volume of orders, with a 6% share of sales; in 2014, it rose to the fourth position with 8% of share in online purchases. In 2015, the category rose again, reaching the third position in the ranking of most sold cate- gories in the Brazilian e-com- merce, with a total of 11% of sales in volume of orders. Having increasingly be- come an object of desire and a need for Brazilians, who used to having smartphones for personal and professional use several times a day, this category reached the sec- ond position in e-commerce sales in Brazil, with an aver- age price of R$ 867 in the first half of 2016. In the first six months of 2016 alone, Ebit estimates that approxima- tely 3.98 million smart- phones were sold in the Brazilian e-commerce. This high sales volume makes Brazil a large market for manufacturers and Telecom operators, whose mission is to broaden the installed 3G and 4G base over the next years. By crossing check- ing information obtained by PNAD survey with data from Teleco/Anatel, Ebit estimates there are approximately 100 million users who have some type of mobile phone with Internet connection. An article in portal Ex- ame.com in 2015 estimat- ed that Brazilians like to ex- change mobile phones, on average, every year and one month, thus generating a po- tential market/year of 100 million new devices in Brazil. The increasing use of smartphones and mobile phones has been largely de- bated and displayed in the last Ebit Webshoppers re- ports. The share of online purchases via mobile devices, whichwaspracticallynon-exis- tentinJune2011(0.3%),hasrisen to 23% in five years, a 6,300% growth over the period. THE INTERNET HAS SIGNIFICANTLY CHANGED THE WAY HOW PEOPE ACQUIRE A PRODUCT OR SERVICE AS THE RULE IS NO LONGER HOW TO FIND YOUR CLIENTS BUT HOW TO BE FOUND BY THEM IN A NON- INVASIVE MANNER AND WITH CREDIBILITY. says André Ricardo Dias, COO of Ebit TABLE OF CONTENTSCHAPTER 2 | ONLINE PURCHASING CYCLE 26
  27. 27. ANALYSIS OF THE PURCHASING CYCLE IN THE CATEGORY MOBILE PHONE/SMARTPHONE To better understand smartphone commercialization opportunities for onli- ne stores, manufacturers, and other markets, Ebit carried out an online survey between June 03 and July 11 2016 using its e-consumer panel, collecting a sample of 7,809 e-consu- mers throughout national territory. In this survey, we asked interviewees which products they had purchased recently over the Internet (last three months). It was possible to choose up to three out of the 19 previously de- fined product subcategories, which were: Mobi- le phone/Smartphone, Air Conditioner, TV sets, Women's Fashion/Accessories, Men's Fashion/ Accessories, Sports & Leisure, Perfume, Refrige- rator/Freezer, Washing Machine, Stove, Games, Car Tires, Printer, Laptop, Wine, Coffee Machine, Water Purifier, Microwaves, and Beer. The survey pointed out that Mobi- le phone/Smartphone was the most cho- sen option, with 26% of consumer pre- ference, followed by Women's Fashion/ Accessories (19%), Men's Fashion/Accessories (15%), Perfume (12%), and Sports & Leisure (11%). If we compare the current share mobile devices have in purchases of other, more ma- ture markets, we might un- derstand that although we have 23% in Brazil, we still have much to grow. On the last Black Friday in the United States, in November 2015, IBM estimated that 36% of the total e-commerce sales were per- formedovermobiledevicesand 57% of circulation in the stores came from these devices. E-COMMERCE SHARE (ORDERS %)* SOURCE: EBIT INFORMATION 20% 25% 15% 5% 10% JUN/13JUN/11 JUN/12 JUN/14 JUN/16JUN/15 0.3% 7% 1.3% 10.1% 3.6% 23% 0% TABLE OF CONTENTSCHAPTER 2 | ONLINE PURCHASING CYCLE 27
  28. 28. ONLINE CONSUMER PROFILE: MOBILE PHONE/SMARTPHONE T he survey pointed out that most consumers in this category are men (68%), due to the interest and technological affinity usually shown by this public. Overall, considering all e-commerce sales there is a technical tie between men and women. PURCHASING CYCLE SURVEY: MOST BOUGHT PRODUCTS ONLINE RECENTLY (%)* SOURCE: EBIT INFORMATION BASE: 7,809 PERIOD: JUNE 03 TO JULY 11/2016 What is your gender? SOURCE: EBIT INFORMATION BASE: 2,025 PERIOD: JUNE 03 TO JULY 11/2016 PURCHASING CYCLE RESEARCH: PURCHASING BEHAVIOR OF MOBILE PHONES/SMARTPHONES: GENDER* PERFUME CAR TIRES REFRIGERATOR / FREEZER PRINTER WOMEN'S FASHION / ACCESSORIES TV SETS LAPTOP AIR CONDITIONER STOVE WATER PURIFIER MOBILE PHONE / SMARTPHONE SPORTS & LEISURE WINE WASHING MACHINE COFFEE MACHINE MEN'S FASHION / ACCESSORIES GAMES BEER MICROWAVE NONE OF THE LISTED PRODUCTS 0% 5% 15% 25% 35%10% 20% 30% MAN WOMAN 32%68% 26 6 4 15 5 3 11 4 3 2 19 5 3 12 5 3 7 4 2 31 TABLE OF CONTENTSCHAPTER 2 | ONLINE PURCHASING CYCLE 28
  29. 29. Regarding age, buyers in this category are, on av- erage, 44 years old, and the range between 35 and 49 is the most representative, with 40% of the answers. This average is above the mean age of online consumers point- ed out by Ebit in the first half of 2016, which was 43 years old. Another piece of inform- ation highlighted by the survey is the balance in education level among people who said they bought this category. While 52% of consumers have completed a graduation or post-gradu- ation course, 47% said they didn't start or complete any graduation course. On the other hand, regarding purchasing power, the average family income stated in the survey, R$ 5,322, is nearly 10% higher than the average income of the Brazilian on- line consumer in the first half of 2016, which was R$ 5,174. PEOPLE WHO ARE, ON AVERAGE, 44 YEARS OLD ARE THE LARGEST BUYERS OF MOBILE PHONES AND SMARTPHONES SOURCE: EBIT INFORMATION BASE: 2,025 PERIOD: JUNE 03 TO JULY 11/2016 SOURCE: EBIT INFORMATION BASE: 2,025 PERIOD: JUNE 03 TO JULY 11/2016 SOURCE: EBIT INFORMATION BASE: 2,025 PERIOD: JUNE 03 TO JULY 11/2016 BETWEEN 18 AND 24 YEARS OLD PRIMARY SCHOOL ELEMENTARY SCHOOL HIGH SCHOOL INCOMPLETE GRADUATION COMPLETE GRADUATION COURSE POST- GRADUATION LESS THAN R$ 1,000 BETWEEN R$ 3,001 AND R$ 5,000 OVER R$ 12,000 BETWEEN R$ 1,000 AND R$ 3,000 BETWEEN R$ 8,001 AND R$ 12,000 BETWEEN R$ 5,001 AND R$ 8,000 I'D RATHER NOT SAY BETWEEN 55 AND 64 YEARS OLD OVER 64 YEARS OLD BETWEEN 35 AND 49 YEARS OLD BETWEEN 25 AND 34 YEARS OLD BETWEEN 50 AND 54 YEARS OLD How old are you? What is your level of education? What is your household's monthly family income? 40% 17%21% 14% 5%4% 0% 21%31%26% 19%3% 3% 28% 8%26% 12%18% 6% PURCHASING CYCLE SURVEY: PURCHASING BEHAVIOR OF MOBILE PHONES/SMARTPHONES: INCOME* PURCHASING CYCLE SURVEY: PURCHASING BEHAVIOR OF MOBILE PHONES/SMARTPHONES: AGE* PURCHASING CYCLE SURVEY: PURCHASING BEHAVIOR OF MOBILE PHONES/SMARTPHONES: EDUCATION* TABLE OF CONTENTSCHAPTER 2 | ONLINE PURCHASING CYCLE 29
  30. 30. PURCHASING BEHAVIOR: MOBILE PHONE/SMARTPHONE The higher the added value of the acquired product, the higher the need for researching and searching for the best cost-benefit ratio, mainly when the product belongs to a category that will be part of the consumer's daily life, which is practi- cally 24 hours connected a day. Only 3% of consumers said they did not research product prices, whereas 53% search- ed for this piece of information only over the Internet, and 37% used both digital media and physical stores for that purpose. The use of mobile devices positively helps with this challenge. One of the leaders in launching apps was Buscapé, with over 8 million downloads, which represents an extreme change in the behavior of consumers, whousuallyusethisresourceovertheweekend at shopping centers and street stores. Through another question, we under- stood the relevance of the main attributes that directly influence the purchase-decision making process. When buying a mobile pho- ne/smartphone, 57% chose price as the main decision factor, while 50% chose quality, 23% chose free shipping, and 22% chose product brand as the most important aspect. Therefore, choosing a product might take longer than people think. The survey indica- ted that only 15% of consumers immediately chose the purchased item, while for 42%, it took up to a week to choose the ideal item, and over two weeks for another 42%. BUSCAPÉ’S APP IS PART OF CONSUMER BEHAVIOR HABITS, AS IT MAKES THIS ROUTINE MORE PRACTICAL AND PROVIDES A DIFFERENTIAL EXPERIENCE ANYWHERE CONSUMERS GO BY TURNING THE COMPARISON OF PRICES AND PRODUCTS ON THE BEST E-COMMERCE STORES IN BRAZIL A SIMPLE PROCESS. says Fábio Sakae, Marketing Director of Buscapé TABLE OF CONTENTSCHAPTER 2 | ONLINE PURCHASING CYCLE 30
  31. 31. PURCHASING CYCLE RESEARCH: PURCHASING BEHAVIOR OF MOBILE PHONES/SMARTPHONES: KEY FACTORS THAT INDUCE PURCHASE* PURCHASING CYCLE SURVEY: PURCHASING BEHAVIOR OF MOBILE PHONES/SMARTPHONES: PURCHASING SURVEY AND DECISION TIME* SOURCE: EBIT INFORMATION BASE: 2,025 PERIOD: JUNE 03 TO JULY 11/2016 Before performing this purchase, did you research prices at stores or over the Internet? When you think of buying a new product, what are the main features you consider the most? On average, how long did it take for you to decide to buy the product? 20% 60% 50% 40% 10% 30% I DON'T KNOW / DON'T REMEMBER UP TO 1 WEEK 1 MONTH 2 WEEKS OVER 1 MONTH IMMEDIATELY 40% 50%10% 20% 30%0% 57% 17% 23% 10% 50% 10% 22% 6% 5% 7 3% % 37% %53 0% SOURCE: EBIT INFORMATION BASE: 2,024 PERIOD: JUNE 03 TO JULY 11/2016 PRICE QUALITY IMMEDIATE DELIVERY INNOVATION ADDED VALUE DELIVERY DEADLINE PAYMENT CONDITION BRAND FREE SHIPPING 18 15 13 11 2 I RESEARCHED ON THE INTERNET I DIDN’T RESEARCH I RESEARCHED AT PHYSICAL STORES AND ON THE INTERNET I RESEARCHED AT PHYSICAL STORES 42 ON AVERAGE, IT TOOK 16 DAYS FOR PEOPLE TO DECIDE TO BUY THE MOBILE PHONE/ SMARTPHONE TABLE OF CONTENTSCHAPTER 2 | ONLINE PURCHASING CYCLE 31
  32. 32. PURCHASING FREQUENCY OF MOBILE PHONE/SMARTPHONE The study also point- ed out the purchasing frequency of this product by consumers on online stores in Brazil. We see that 6% purchase this item every six months, which is typical of technological cat- egories, as new products THE GREAT MAJORITY ANSWERED THAT THEY BOUGHT THEIR MOBILE DEVICES ANNUALLY (34%) OR EVERY TWO YEARS (31%) are frequently launched, and also due to “early adopters" and fanatics, who always acquire newly- launched products. The great majority answered that they bought their mo- bile devices annually (34%) or every two years (31%). PURCHASING CYCLE SURVEY: PURCHASE FREQUENCY: MOBILE PHONE/SMARTPHONE* How often do you usually buy it? SOURCE: EBIT INFORMATION BASE: 2,025 PERIOD: JUNE 03 TO JULY 11/2016 EVERY MONTH EVERY 2 YEARS EVERY 3 YEARS EVERY SIX MONTHS EVERY 5 YEARS MORE THAN 6 YEARS EVERY THREE MONTHS EVERY 4 YEARS EVERY YEAR EVERY 6 YEARS FIRST TIME I BOUGHT 20% 40% 10% 30% 0% 3% 31% 1% 6% 3% 6% 4% 10% 1% 34% 2% TABLE OF CONTENTSCHAPTER 2 | ONLINE PURCHASING CYCLE 32
  33. 33. *IN QUESTIONS THAT USE SELECTION BOXES, THE TOTAL NUMBER OF ANSWERS MIGHT BE HIGHER THAN THE NUMBERS OF INTERVIEWEES. THIS MIGHT CAUSE THE TOTAL PERCENTAGES OF THE ANSWER TO EXCEED 100%. RELATIONSHIP BRAND x PRICE IN DECIDING TO PURCHASE A MOBILE PHONE/SMARTPHONE As to the purchasing decision of products in this category, 48% of consumers chose to acquire another brand with lower price, 34% were faithful to their usual choice and 13% cho- se, along with their preferred brand, products with higher value. Regarding brands preferred by online consumers, the survey indicated Sam- sung as the leader, with 41%, followed by Moto- rola, in second with 18%, LG in third with 10%, Apple in 4th with 4th (8%), Asus in 5th (5%) and Microsoft/Nokia in 6th with 5% of the answers. The survey also pointed out which of them have higher loyalty and preference by Brazilian online consumers. The winner in this category is Apple, as 63% of the inter- viewees who bought a product of this brand said they did not research any products from a competing brand. Ebit commercializes this type of thorough study on other 19 product categories and subcategories. Your company can engage this study requesting further information by email: comercial@ebit.com.br SOURCE: EBIT INFORMATION BASE: 2,025 PERIOD: JUNE 03 TO JULY 11/2016 Did you research another brand before purchasing? If so, did you by the more inexpensive or the more expensive brand? PURCHASING CYCLE RESEARCH: PREFERRED BRAND BY E-CONSUMERS* 0% 50% 100%10% 60%20% 70%40% 90%30% 80% I BOUGHT THE MORE INEXPENSIVE BRAND I DIDN'T RESEARCH ANOTHER BRAND I BOUGHT THE MOST EXPENSIVE BRAND DON'T KNOW / I DON'T REMEMBER SAMSUNG MOTOROLA APPLE LG 216 2063 5182355 4113846 6163147 TABLE OF CONTENTSCHAPTER 2 | ONLINE PURCHASING CYCLE 33
  34. 34. THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 34 CHAPTER 3
  35. 35. B razil is probably experiencing the great- est crisis of its history. GDP (Gross Domes- tic Product) shall decrease approximately 3.5% in 2016, after having registered a 3.8% drop last year. It will be the first time since the 1930's that the Brazilian economy registers a retraction for two consecutive years. The per capita income shall drop for the third consecutive year and re- tail sales in São Paulo, which dropped 3% in 2014 and 6% in 2015, shall remain unchanged in 2016 in an optimistic scenario, according to data and projections by the Federation of Goods, Services, and Tourism of the State of São Paulo – Fecomer- cioSP. Consequently, unemployment rate has exceeded 11%. Over 100 thousand formal job vacancies have been eliminated per month in our country. In the trade in goods and services of the State of São Paulo, over 260 thousand job positions have already been extinguished in one year, according to the survey conducted by the federation based on data of the General Regis- try of Employed and Unemployed – CAGED. THE ECONOMIC AND POLITICAL CRISIS, ACCORDING TO FECOMERCIOSP TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 35
  36. 36. DESPITE THE DEPRESSION IN THE ECONOMIC ACTIVITY AND THE CONSEQUENT INCREASE IN UNEMPLOYMENT, INFLATION REMAINS HIGH – ALTHOUGH THE LAST DATA HAVE INDICATED A SLOWDOWN – AND INTERESTS ARE ALSO HIGH Despite the declining economic activi- ty and the consequent increased unemploy- ment, inflation remains high – although the latest data have indicated a slowdown – and interests are also high; banks are not willing to lend; companies are postponing or cutting down investments, while families, who work more and more on a tight budget, are cutting expenses and avoiding to take on debts. The characteristics of the current re- cession, however, are quite different from conventional recessions, which usually oc- cur within economic cycles, resulting, for instance, from periods of euphoria and excessive investments or as a reflection of external shocks. The Brazilian crisis is above all a confidence crisis. Evidence of that is the pessimism of executives and consumers, indicated in confidence indicators calculated by FecomercioSP, which have reached the lowest levels in history throughout 2015 and 2016. It is difficult to pinpoint the exact begin- ning of a crisis, which typically results of a combination of factors; however, the fact is that incorrect interventions performed by the Government from 2012 on have under- mined key sectors such as the energy sec- tor, while subsidies to specific groups have resulted in market concentration and inef- ficiency. Structural problems, such as in- creased Social Security expenses, have been left aside throughout the last decade, some- what overcast by a favorable international scenario for Brazil. However, the international situation has changed. Misguided governmental actions have made investors lose confidence. Despite the decrease in revenue deriving from a weaker economic activity, the Government continued to expand costs, which resulted in deficit in government accounts in 2014 and 2015. The country ended up having its invest- ment grade lowered by the main international risk assessment agencies. While the crisis worsened, the Govern- ment didn't seem confident in the diagnosis shown by the main Brazilian executives and economists, and did not submit proposals or show any ability for political articulation to overcome the problem. Thus, it lost popula- tion and Congress support. TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 36
  37. 37. THE CRISIS AND RETAIL IN SÃO PAULO Retail sales in São Paulo have been falling since 2014 after nearly a decade of continuous growth. This year, the sector suffered a negative impact by increased interests, decreased credit offer, and the increa- sing distrust of consumers due to the uncertainty that started to take over the scenario and to the need for adjustments in economy that began to take shape. The insistence in an economic policy that favored increased consumption, credit, and government expenses re- sulted in a scenario with high inflation, and unbalance in pu- blic and external accounts. Af- ter the election results, the Se- lic rate was high again. Public tariff realignment, particularly for electric energy, hit consu- mers' pockets hard. Unem- ployment, which had already been rising in the industry and in civil construction, rea- ched the sector of commerce and services, the main em- ployer in Brazil. After all, with decreased sales, increased costs, and in face of an increasingly disruptive political scenario, executives nee- ded to improve efficiency, cut costs, and readjust their staff to a lower demand. All factors started to retro-feed each other, in a truly vicious circle. With the crisis and a tighter budget, consumers became more conservative, reducing consumption, and avoiding to take on debts and favoring the acquisition of es- sential goods and services. Thus, the highest sales drops were observed in non-durable and semi-durable goods. The downswing in retail sales was mitigated by the positive performance of the Supermarket, Drugstore, and Perfumery sectors, which re- gistered an increase becau- se of the essential nature of the goods marketed by them, whose price increase is limited less than proportionally to the demand for them. ACTUAL RETAIL SALES IN SÃO PAULO (IN R$ BILLION, ACCORDING TO PRICES IN MAR/16) SOURCE: FECOMERCIOSP, SÃO PAULO STATE TREASURY OFFICE (SEFAZ) 2008 2012 2010 2014 2009 2013 2011 2015 12M até mar/16 525 625 475 575 450 550 650 650 500 600 493.9 503.4 557.2 593.1 595.2 620.2 602.7 564.6 562.3 -2.8% -6.3% -6.0% TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 37
  38. 38. From 2015 on, with the launching of the E-commerce Conjunctural Research (PCCE), FecomercioSP, in partnership with Ebit, start- ed to systematically investigate the behavior of sales performed over the Internet, the so-called e-commerce. This was due to the acknowledg- ment of the increasing and undeniable relevance this segment has been gaining in the Brazilian retail in general and in São Paulo, particularly. The process of monthly monitoring e-commerce required the elaboration of an exclusive methodology, which, in turn, allowed E-COMMERCE IN SÃO PAULO (FECOMERCIOSP/EBIT SURVEY) ENABLED THE KNOWLEDGE OF E-COMMERCE SHARE IN RETAIL SALES, AS WELL AS THE INDICATOR BEHAVIOR OVER TIME for surveying unprecedented information on commerce in São Paulo and for elaborating, for instance, comparisons between the volume negotiated in e-commerce and monthly sales of physical stores in the State of São Paulo, divided in the 16 regions defined by the Regional Tax Offices of the São Paulo State Treasury Office (Sefaz). This enabled knowledge of the e-commerce share in retail sales in each one of these regions, as well as the indicator behavior over time. In addition, in the exclusive context of e-commerce, unprecedented monthly data start- ed to be provided on number of orders, average ticket, and the actual sales variation in this segment. It is thus another important source of information for the monitoring of the situation of commerce in a segment of in- creasing importance in the economy, which can be a valuable instrument for executives to define their strategies and also a guidance element for public policies directed to safety and improvement of transactions performed in the world of e-commerce. TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 38
  39. 39. Actual e-commerce sales in the State of São Pau- lo reached R$ 3.6 billion in the first half of 2016, which represents a 7.4% fall compared to the R$ 3.9 billion registered in the same period of 2015. In the first quarter of 2015, e-commerce sales in São Paulo had registered an increase of only 0.9%, after an expressive growth of 27.5% observed between 2013 and 2014. Similar to re- tail in São Paulo as a whole, e-commerce has also suf- fered with the high inflation, which undermines consumers' purchasing power, high HIGHLIGHTS OF THE 1ST QUARTER OF 2016 fore, e-commerce share in retail sales in SãoPaulo, which was 2.9% in the first quarter of 2013, 3.6% in the first quarter of 2014, and 3.6% in the first quarter of 2015, dropped to 3.3% in the first quarter of this year. In other words, techno- logical advances and chang- es in consumer habits were capable of minimizing the effects of the crisis on this sector, which had been growing at a two-figure rate since 2014. The retraction of e-commerce sales can also be explained by the fact that many of the activities that interests, the lowest cred- it offer for consumption, in- creased unemployment, and consumers' unwillingness to take out loans. While e-commerce in São Paulo registered a 7.4% fall in actual sales in the first quar- ter of this year, retail in the State of São Paulo (which includes physical and online stores) showed a smaller de- crease, of 1.7%. When the sec- tors Vehicle Dealerships, Car Parts & Accessories, and Con- struction Materials are con- sidered, the (restricted) retail result over the period be- comes positive, 0.9%. There- THE ACTUAL E-COMMERCE SALES IN THE STATE OF SÃO PAULO REACHED R$ 3.6 BILLION IN THE FIRST QUARTER OF 2016 ACTUAL E-COMMERCE SALES IN THE STATE OF SÃO PAULO (R$ MILLION¹) ¹ ACCORDING TO PRICES IN MARCH 2016. SOURCE: FECOMERCIOSP, EBIT 1Q13 1Q151Q14 1Q16 4.000 3.000 3.500 2.500 3.020 3.852 3.886 3.599 27.5% 0.9% -7.4% TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 39
  40. 40. have been suffering the most with the crisis, such as Cloth- ing & Shoes and Household Appliances & Electronics, are precisely the ones with high- er share in e-commerce sales. While the total retail sales in São Paulo registered a 1.7% drop in Clothing, Fabric, and Shoe stores in the first quarter compared to the same period of 2015, down- swing was 5.5%; in House- hold Appliances, Electronic and Department stores, the drop reached 8.1%. Re- traction of retail in the first three months of the year was mitigated by the good performance of Drugstores & Perfumeries (+10.6%) and Supermarkets (+9%) whose e-commerce share in sales is still relatively low. Monthly performances for actual sales in São Pau- lo compared to the same months of 2015 were: -11.2% in January, -5.5% in February, and finally, -4.6% in March. Therefore, in the first quar- ter of the year, we observed a 7.4% accumulated retrac- tion compared to the three first months of 2015. Actual fall in e-commerce sales thus continues to accelerate ¹ WITH THE AIM OF CREATING AN INDICATOR SIMILAR TO THE NATIONAL ONE ESTIMATED BY EBIT FOR THE CALCULATION OF SHARE IN RETAIL, THE ACTIVITIES OF VEHICLE DEALERSHIPS, CAR PARTS &ACCESSORIES AND CONSTRUCTION MATERIALS WERE NOT CONSIDERED. SOURCE: FECOMERCIOSP, EBIT ACTUAL AVERAGE TICKET IN E-COMMERCE OF THE STATE OF SÃO PAULO (R$¹) NUMBER OF ORDERS IN E-COMMERCE OF THE STATE OF SÃO PAULO (THOUSANDS) E-COMMERCE SHARE IN RETAIL SALES OF THE STATE OF SÃO PAULO¹ ¹ ACCORDING TO PRICES IN MARCH 2016. SOURCE: FECOMERCIOSP, EBIT SOURCE: FECOMERCIOSP, EBIT 400.00 350.00 375.00 325.00 4% 2% 3% 1% 12,000 10,000 11,000 9,000 1Q13 1Q13 1Q13 1Q15 1Q15 1Q15 1Q14 1Q14 1Q14 1Q16 1Q16 1Q16 361.44 8,357 2.9 344.24 11,190 3.6 378.50 10,267 3.6 377.66 9,529 3.3 -4.8% 33.9% 0.7P.P 10% -8.2% 0.0P.P -0.2% -7.2% -0.3P.P TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 40
  41. 41. THE NUMBER OF ORDERS IN THE STATE WENT FROM 10,267 MILLION, IN THE FIRST QUARTER OF 2015, TO 9,529 MILLION IN THE FIRST QUARTER OF 2016. THIS REPRESENTS A 7.2% DROP after the downswing of 0.6% registered in 2015, which occurred after the expres- sive growth of 18.9% ob- served in 2014. In 12 months up to March, the actual e-commerce sales in São Paulo had accumulated a 2.7% drop compared to the 12 months immediately before. The number of orders in the State went from 10,267 million in the first quarter of 2015 to 9,529 million in the first quarter of 2016. This represents a 7.2% decline, very close to the drop ob- served in sales. With this, the average ticket (billing per order) was practically stationary at R$ 378, regis- tered over the three first months of last year. In the sameperiodof2014,however, the amount was 9.1% lower (R$ 344). This suggests that with the crisis, e-commerce sales have concentrated in higher value items. Moreover, the unfavorable economic situation might have stopped the migration of lower so- cial strata to this purchase channel. With the higher share of richer strata in pur- chases, the average value per order continues high. E-COMMERCE SHARE IN RETAIL SALES IN THE STATE OF SÃO PAULO¹ ¹ WITH THE AIM OF CREATING AN INDICATOR SIMILAR TO THE NATIONAL ONE ESTIMATED BY EBIT FOR THE CALCULATION OF SHARE IN RETAIL, THE ACTIVITIES OF VEHICLE DEALERS, CAR PARTS &ACCESSORIES AND CONSTRUCTION MATERIALS WERE NOT CONSIDERED. SOURCE: FECOMERCIOSP, SEFAZ, EBIT 4.1 4.8 5.2 5% 4% 3% 2% 1% FEB MAR JAN FEB JUN OCT APR AUG DEC MAR JUL NOV MAY SEPT JAN FEB MAR JAN JUN JUL OCT APR AUG DEC NOV MAY SEPT DEC FEB JUN APR AUG MAR JUL NOV OCT MAY SEPT JAN 2013 2014 20162015 2.8% 3.3% 3.5% 0% TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 41
  42. 42. APPRAISAL OF REGIONAL DATA FROM THE STATE OF SÃO PAULO Among the 16 regions appraised by PCCE, considering the accumulated billion in the first quarter of 2016, only two registered a positive variation compared to the same pe- riod in 2015: ABCD (0.4%) and Osasco (1.8%). On the other hand, the highest falls were ob- served in the regions of Presidente Prudente (-30.4%), Bauru (-21.6%), and São José do Rio Preto (19.4%). The average ticket in São Paulo was R$ 377.66 in the first quarter. The regions that registered the highest average tickets were Marília (R$ 472.97), Taubaté (R$ 470.39), and Jundiaí (R$ 428.91). At the other end, the capi- tal has the lowest average ticket, of R$ 339.71. However, the region accounts for over 40% of the total orders and for over 36% of actual e-commerce sales; therefore, the average tick- et is naturally lower than in the other locations. In the State of São Paulo, e-commerce share in retail (excluding the sectors Vehicle Dealerships, Car parts & Accessories, and Fur- niture & Decor) was 3.3% in the first quarter, lower than the 3.6% registered in the same pe- riod of 2015 and the 3.7% of the last quarter of 2015, when the result was influenced by the good sales performance of November in the sector due to Black Friday. In the ABCD region, share reached 4.5% in the first quarter of 2016. In the capital, it reached 4.2%. TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 42
  43. 43. ¹ ACCORDING TO PRICES IN MARCH 2016. SOURCE: FECOMERCIOSP, EBIT SOURCE: FECOMERCIOSP, EBIT REAL E-COMMERCE SALES IN REGIONS OF THE STATE OF SÃO PAULO (R$ MILLION¹): 1Q16 REAL E-COMMERCE SALES IN REGIONS OF THE STATE OF SÃO PAULO (R$¹): 1Q16 X 1Q15 BAURU ARAÇATUBA RIBEIRÃO PRETO GUARULHOS GUARULHOS TAUBATÉ ARAÇATUBA BAURU ARARAQUARA MARÍLIA LITORAL ESTADO DE SÃO PAULO TAUBATÉ SOROCABA CAMPINAS ABCD PRESIDENTE PRUDENTE PRESIDENTE PRUDENTE R$ MILLION MARÍLIA RIBEIRÃO PRETO SÃO JOSÉ DO RIO PRETO SÃO JOSÉ DO RIO PRETO LITORAL SOROCABA ARARAQUARA JUNDIAÍ CAPITAL OSASCO CAMPINAS CAPITAL OSASCO ABCD JUNDIAÍ 250 -25%-30%-35% 750 -15% 1250 -5% 500 -20% 1000 -10% 1500 5% 0 0% 1,312 197 154 79 260 174 94 50 333 185 140 71 257 156 92 44 1.8 0.4 -4.1 -10.4 -17.0 -1.3 -5.8 -13.3 -19.4 -4.5 -11.4 -19.3 -2.7 -7.4 -15.6 -21.6 -30.4 TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 43
  44. 44. ¹ WITH THE AIM OF CREATING AN INDICATOR SIMILAR TO THE NATIONAL ONE, ESTIMATED BY EBIT FOR THE CALCULATION OF SHARE IN RETAIL, THE ACTIVITIES OF VEHICLE DEALERSHIPS, CAR PARTS &ACCESSORIES AND CONSTRUCTION MATERIALS WERE NOT CONSIDERED. SOURCE: FECOMERCIOSP, SEFAZ, EBIT ¹ ACCORDING TO PRICES IN MARCH 2016. SOURCE: FECOMERCIOSP, EBIT AVERAGE TICKET OF E-COMMERCE IN REGIONS OF THE STATE OF SÃO PAULO (R$¹): 1Q16 E-COMMERCE SHARE IN RETAIL SALES OF THE STATE OF SÃO PAULO¹: 1Q16 PRESIDENTE PRUDENTE PRESIDENTE PRUDENTE GUARULHOS BAURU ESTADO DE SÃO PAULO RIBEIRÃO PRETO SÃO JOSÉ DO RIO PRETO CAPITAL SOROCABA GUARULHOS BAURU ARARAQUARA MARÍLIA ARAÇATUBA LITORAL CAMPINAS CAPITAL TAUBATÉ OSASCO SOROCABA RIBEIRÃO PRETO RIBEIRÃO PRETO JUNDIAÍ ESTADO DE SÃO PAULO ARAÇATUBA OSASCO ARARAQUARA LITORAL TAUBATÉ ABCD CAMPINAS JUNDIAÍ R$ BRAZILIAN REAIS MARÍLIA ABCD 1% 10050 3% 200 5% 300 350 400 450 2% 150 4% 250 500 0% 0 472.97 405.87 393.24 377.66 428.91 400.70 386.40 374.81 470.39 404.82 386.45 375.89 413.47 395.78 379.36 365.32 339.71 4.5 3.4 3.0 2.6 3.8 3.2 2.9 2.4 4.2 3.3 2.9 2.6 3.8 3.0 2.7 2.3 2.2 TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 44
  45. 45. After the increase in May, the Consumer Confi- dence Index (ICC) surveyed by FecomercioSP started rising again and reached 98 points in June, an increase of 7.9% compared to May of 2016, and of 8.2% compared to June 2015. This is the first in- crease observed when com- paring between a month and the same month in the previ- ous year since January 2013. In other words, the index of June interrupted a three-con- secutive-year decrease (more precisely 40 months) in this basis of comparison. There- fore, ICC has reached its high- est value since 2015 – the last month when it was above 100 points. As opposed to the previ- ous month, increased confi- dence wasn’t only a reflec- tion of renewed hopes. The Consumer Expectations In- dex (IEC) increased again and reached 128.5 points in June, a value 7.2% higher than May and 26.6% higher than June 2015 – it is the highest growth registered since January 2010; therefore, it has reached the highest level since Febru- ary 2014, when it was 132.2 points. The Index of Current Economic Conditions (ICEA), on its turn, despite its 29.4% REGAINING CONFIDENCE drop compared to June of last year, registered a 10.6% in- crease compared to May and reached 52.4 points. The increase in IEC seems to symbolize some kind of vote of confidence given by con- sumers to the new economic team, which however has an expiry date. Moreover, because of the depth and extension of the crisis and also due to the fact that the political changing process has been troubled, the expiry date of this vote of confi- dence is relatively short. For consumer confidence to keep growing, it is necessary MAYvs JUN 2016 +7.9% JUN 2015 vs 2016 +8.2% TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 45
  46. 46. THE HOUSEHOLD CONSUMPTION INTENTION (ICF), CALCULATED MONTHLY BY FECOMERCIOSP, HAS RENOVATED THE MINIMUM HISTORICAL VALUE AND REACHED 63 POINTS IN JUNE, A 0.9% FALL COMPARED TO MAY that some kind of economic policy is effectively delivered by the Government, such as structural reforms, adjust- ments public accounts with cut in costs – and not with increased taxes –, and the approval of an expenditure ceiling in the public sector and privatizations. The measures an- nounced so far and the speed with which they have been announced seem to have encouraged consumers. However, if this initial momentum is not confirmed by changes and effective approvals, consumers might be discouraged again, thus undermining the expected resumption of consumption. Improved confidence, however, hasn't influenced overallretailsalesintheStateof São Paulo, yet; they registered a fall on Mother's Day (May) and Valentine's Day (June) – the two major commerce dates in the first half of the year. In fact, despite the growth in the expectation indicator, consumers are still struggling with high inflation, high interests, and increased unemployment, which affect their financial situation, and consequently, their perception of current conditions. Therefore, the household consumption intention (ICF), monthly calculated by FecomercioSP, repeated the minimum historical value and reached 63 points in June, 0.9% lower than May and 22.9% lower than June 2015. The assessment of the level of "current consumption", one of the seven items that comprise ICF, remained at 35.2 points, the same value of May, the lowest level in the historical series. Compared to June 2015, this value is 37.4% lower. It also is the item with the lowest score among the seven items researched. The decrease in consumption level has directly reflected in retail sales, which have an accumulated fall of 6% over a year in the State of São Paulo. There are still no indications of a recovery of the sector in the short term: the intention to take on debts is still low – despite the slight increase in June – and the analysis of this moment for durable items, another component of ICF, repeated the historical minimum value in June by reaching 38.2 points, 4.2% lower than May and 32.1% lower than June 2015. It is the item with the second lowest score among the seven items researched. Items "current revenue" and "credit access" also re- peated their minimum values in June. The former reached 69.6 points – a drop of 4.7% compared to May 2016 and of 28.7% compared to June 2015 – while the latter remained at 62.3 points – 3.5% lower than May 2016 and 28.7% lower than June 2015. TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 46
  47. 47. THE END OF THE YEAR MIGHT BE BETTER FOR RETAIL THAN ITS BEGINNING, WITH BETTER SALES IN CHRISTMAS COMPARED TO THIS DATE IN 2015 BETTER PERSPECTIVES Theperceptionofconsumersregarding current jobs has reached 87.6 points, practically the same as May, when it was 87.4 points, but 17.4% lower than June 2015. If the assessment of item "current jobs" was practically stable in the monthly comparison, the indicator of "professional perspective" increased 1.5% and reached 97.6 points. With improved "professional perspective", "consumption perspective" also improved: this item reached 50.4 points, 3.9% higher than May. Data aren't as encouraging, yet, since they generally indicate dissatisfaction of households regarding consumption con- ditions. On the other hand, there was a visible improvement in perspectives, in line with ICC data. For expectations to turn into increased sales, however, consump- tion conditions must improve effectively, with price stability, labor market stability, and reduced interest rates, which will only come with an effective tax adjustment and the announcement of measures to stimulate private investments. However, if the trend towards improving expectations is consolidated, the end of the year might be better for retail than its beginning, with better sales in Christmas compared to this date in 2015. Stillfacingmanyuncertainties,consumers are conservative; however, they tend to gradually return to stores as a less pessimistic scenario unfolds. Consumers who only buy indispensable items today tend to resume their more ambitious plans for consumption when regaining confidence, in face of a less gloomy scenario. It is expected that from the second half of the year on, scenario will become clearer and measures for the rationalization of the public sector and the resumption of investments will reflate economy after the greatest economic crisis in the history of our country. Thence, the stakes on a Christmas that symbolizes this resumption of retail sales. TABLE OF CONTENTSCHAPTER 3 | THE ECONOMIC AND POLITICAL CRISIS, according to FecomercioSP 47
  48. 48. FIPE/BUSCAPÉ INDEX The FIPE/Buscape price index calculation is under the responsibility of the Economic Researches Foundation Institute, represented by Prof. Sergio Crispim CHAPTER 4 48
  49. 49. MONTHLY EVOLUTION OF THE FIPE/BUSCAPÉ INDEX The FIPE/Buscapé Index was created to monitor prices in the Brazilian E-commerce and has been published for 65 months. This period of over five years has been characterized by a 45-month price drop, or 69% of the period, reflecting the dynamism and competitiveness of the sector, and the nature of the products that are predomi- nantly sold in this sector, as shown by the graph below. In this first half of 2016, positive accumulated variation of 2.83% of FIPE/Buscapé Index has been slightly low- er than the 3.73% variation of the first half of 2015 due to the lower foreign exchange pressure over product prices and imported components, which have a high weight in e-commerce. Nevertheless, in four of the six first months of 2016, there was price increase. MONTHLY VARIATIONS IN FIPE/BUSCAPÉ PRICE INDEX (%) SOURCE: FIPE/BUSCAPÉ INDEX -2.0% -3.0% 0.0% 2.0% 5.0% -1.0% 1.0% 4.0% 3.0% DEC FEB JUN APR AUG MAR JUL NOV OCT MAY SEPT JAN FEB MAR JAN JUN JUL OCT APR AUG DEC NOV MAY SEPT FEB JUN OCT APR AUG DEC MAR JUL NOV MAY SEPT JAN FEB JUN APR MAR MAY JAN FEB JUN OCT APR AUG DEC MAR JUL NOV MAY SEPT JAN FEB JUN OCT APR AUG DEC MAR JUL NOV MAY SEPT 2011 2012 2013 2014 20162015 -0.64 -1.19 -0.36 -0.19 -0.28 -0.35 -2.41 -1.22 -0.52 -0.26 -0.41 -0.74 -0.02 -0.37 -1.18 -0.73 -0.42 -1.91 -0.03 -0.25 -0.34 -1.28 -0.79 -0.73 -0.32 -0.44 -0.05 -1.21 -0.01 -0.06 -0.38 -0.35 -1.42 -0.40 -0.67 -0.34 -1.06 -0.64 -0.44 -2.85 -1.42 -0.40 -1.28 -1.85 -2.44 4.73 0.90 1.35 2.39 3.07 0.59 1.75 0.14 0.04 0.24 0.85 0.17 2.85 1.00 2.23 0.28 0.17 0.11 0.40 0.20 TABLE OF CONTENTSCHAPTER 4 | FIPE/BUSCAPÉ INDEX 49
  50. 50. Considering the 54 annual variations (t/t-12) of the FIPE/Buscapé Index series, there was price drop in 38 periods, or 65% of the series, emphasizing that annual variations were positive (inflation) over the last 15 months. The annual variation June 2016/ June 2015, of 8.29%, still characterizes the expressive reversal in the FIPE/Buscapé Index trend over the last 12 months compared to the pattern of annual variation of -3%, as shown in the graph below. WecanobservethatinthebeginningoftheFIPE/ Buscapé Index series, annual variation went from approximately -10% in 2012 to +8.5% in the first half of 2016. In other words, annual variation increased around 21%. This reversal reflects the acceler- ation of overall inflation that, measured by IPCA, went from a pattern of annual variation of 6.5% to 10.5%, and it also reflects the dollar appreciation, which has revelead annual variations to sharply rise throughout 2015 and in the first quarter of 2016, but signals a slow down in the 2nd quarter of 2016: 1st quarterof2015/2014(21.3%),2ndquarterof2015/2014 (37.7%), 3rd quarter of 2015/2014 (54.8%), 4th quart- er of 2015/2014 (50.7%), 1st quarter of 2016/2015 (34.0%), and 2nd quarter of 2016/2015 (14.1%). In this context, it is important to emphasize, that some categories that have significant weight in e-commerce are particularly influenced by the dollar appreciation in a significant and lagged manner: Electronic appliances, Computer, Photo- graphy, and Telephony. EVOLUTION OF ANNUAL VARIATIONS AND JUNE/16 ANNUAL VARIATIONS OF FIPE/BUSCAPÉ INDEX (MONTH Q / MONTH Q-12) SOURCE: FIPE/BUSCAPÉ INDEX -5% -10% 10% FEB JUN APR MAR MAY JAN FEB JUN OCT APR AUG DEC MAR JUL NOV MAY SEPT JAN FEB JUN OCT APR AUG DEC MAR JUL NOV MAY SEPT JAN FEB MAR JAN JUN JUL OCT APR AUG DEC NOV MAY SEPT DEC FEB JUN APR AUG MAR JUL NOV OCT MAY SEPT JAN 5% 0.0% 15% 2012 2013 2014 20162015 0.42 1.37 1.98 0.26 4.17 3.54 1.21 2.03 6.92 9.24 9.01 10.72 10.78 5.89 6.69 8.29 -9.73 -6.42 -1.22 -7.67 -4.24 -1.56 -1.61 -9.85 -5.22 -1.36 -9.64 -2.78 -1.99 -2.48 -3.51 -7.89 -4.87 -1.66 -3.83 -9.25 -9.81 -6.13 -1.48 -9.32 -2.83 -1.89 -3.62 -8.29 -4.94 -1.27 -8.92 -7.02 -4.59 -1.31 -3.25 -7.79 -0.77 -1.78 TABLE OF CONTENTSCHAPTER 4 | FIPE/BUSCAPÉ INDEX 50
  51. 51. In the annual period June 2016/June 2015, nine out of the ten groups researched had price increas- es, and only one drop, with an expressive difference between the groups of products that comprise the index, which ranges from a -7.24% drop in Fashion&Accessoriestoa11.02%increaseinHouse- hold Appliances, as shown in the graph below. Of the 157 surveyed categories, 142 (90%) have an average price increase of 9.70% and only 15 (10%) had an average price drop of -1.18%. The only group with annual price drop in May 2016/May 2015 – Fashion & Accessories (-7.24%) – was quite influenced by “sneakers” (-9.71%). The group with the highest price in- crease was Household Appliances (11.02%) due mainly to the products “high pressure washer” (18.85%), “electric stove” (18.14%), “microwave”, (17.92%), “mini-bar” (15.76%), and “dish washer” (13.62%). This group was followed by Computer- ing (10.28%) – in which “printer cartridge” (20.09%), “no break” (15.06%), “printer” (14.87%), and “laptop” (14.87%), and “laptop” (11.41%) were the highlights – and Electronics (9.63%) – influ- enced by “auto sound system” (15.96%), “DVD player” (11.85%), and “home theater” (11.81%). Among all products that comprise the in- dex, those whose increase outstood in the an- nual period of June 2016/June 2015, in addition to the ones previously mentioned, were: “hood/ exhaust” (17.94%), “calculator” (14.47%), “freezer” (13.47%), “flat iron/straightener” (13.31%), “tent” (12.62%), “bicycle”(11.40%), “pan set” (10.89%), “sunscreen” (10.26%), and “treadmill” (9.95%). The ones with the highest drop were: “football team T-shirt” (-7.36%), “soccer shoes” (-5.61%), “suitcase” (-4.35%), and “drink cooler” (-2.97%). ANNUAL VARIATIONS OF FIPE/BUSCAPÉ INDEX BY PRODUCT CATEGORIES (JUN16/JUN15) SOURCE: FIPE/BUSCAPÉ INDEX 15 CATEGORIES WITH DROP OVERALL TOTAL (157 CATEGORIES) 142 CATEGORIES WITH INCREASE 10%-10% 0%-5% 5% 15% FASHION & ACCESSORIES HOUSEHOLD APPLIANCES TOYS & GAMES ELECTRONIC DEVICES COMPUTER HOUSE & DECOR TELEPHONY COSMETICS & PERFUMERY SPORTS & LEISURE PHOTOGRAPHY 11.02 9.63 7.85 10.28 8.32 6.85 5.99 4.19 0.19 -7.24 -1.18 9.70 8.29 TABLE OF CONTENTSCHAPTER 4 | FIPE/BUSCAPÉ INDEX 51
  52. 52. E-COMMERCE PRICES COMPARED TO OVERALL PRICES Thefollowinggraphshowsthat e-commerce prices have an annual variation -0.51% lower than the average IPCA prices in the period June 2016/June 2015, since e-commerce prices increased 8.29% in the period when IPCA recorded an increase of 8.84%. In the first half of the year, the annual variation of the FIPE/ Buscapé Index was 8.53%, 1% lower than the IPCA variation of 9.63%. Forecasts are that the annual IPCA variation shall decline throughout the year but the annual variation of FIPE/ Buscapé Index will probably The numbers in the series translate a significant competitiveness of product pricesmarketedine-commerce related to the average prices that comprise household budget, partially explaining the growth in the sector over time, which was 15.3% in rated terms in 2015, and 13.3% in actual terms, based on the 1.79% variation of the Fipe/Buscapé Index. This growth is quite relevant considering that GDP dropped -3.8% and it means that e-commerce had a 17.7% growth above the economy in a recessive context. remain lower, as it has been throughout the series. If the monthly average variation of the FIPE/BuscapéIndexofthesecond quarterof2016–whichwas0.23% – is maintained, the expected average annual variation for the second half shall be 5.8%. Throughout 2012 – before the impact of the foreign exchange devaluation over the prices of imported products, which have a great weight in e-commerce – variation of FIPE/Buscapé Index was approximately 13% lower than the variation of average prices in the economy. ANNUAL IPCA VARIATION ANNUAL FIPE-BUSCAPÉ VARIATION DIFFERENCE FIPE-BUSCAPÉ/IPCA ANNUAL VARIATIONS OF FIPE INDEX/BUSCAPÉ, IPCA, AND DIFFERENCE (MONTH Q / MONTH Q-12) SOURCE: FIPE/BUSCAPÉ INDEX 2012 2013 2014 20162015 FEB JUN APR MAR MAY JAN DEC FEB JUN OCT APR AUG MAR JUL NOV MAY SEPT JAN FEB JUN OCT APR AUG DEC MAR JUL NOV MAY SEPT JAN FEB MAR JAN JUN OCT APR AUG DEC NOV MAY SEPT FEB JUN APR AUG MAR JUL NOV MAY SEPT JAN 0.0 -10.0 -5.0 5.0 -15.0 10.0 TABLE OF CONTENTSCHAPTER 4 | FIPE/BUSCAPÉ INDEX 52
  53. 53. The graph above shows a comparison of the Overall IPCA with FIPE/ Buscapé Index regarding prices in e-commerce and a Compound Index of IPCA variations (physical retail) with FIPE/Buscapé Index weights (weight of products in e-commerce) for the product categories that are compatible with FIPE/ Buscapé, although with different product baskets. It is noteworthy that the behavior of the Compound Index of product categories surveyed by IPCA and by FIPE/Buscapé Index is quite aligned and consistent with Buscapé Index, and 49% more than the Compound Index. A significant part of these differences can be explained by the following factors: a) the FIPE/ Buscapé Price Index monitors a product basket different from the one analyzed by the overall price indices, i.e., only those that are marketed more significantly over the Internet; b) the weight of products that comprise the FIPE/Buscapé Index are quite different from their weight in ge- neric indices; c) the distribution channel monitored by the FIPE/ Buscapé Index is exclusively e-commerce, while the other in- dices monitor several other tra- ditional and physical channels. OVERALL IPCA TOTAL FIPE/BUSCAPÉ INDEX COMPOUND INDEX (IBGE PRICE AND FIPE-BUSCAPÉ WEIGHT) the behavior of the FIPE/Bus- capé Index, and it represents approximately 72% of the weight of FIPE/Buscapé Index in e-commerce. Specifically in June/2016, compared to the basis of January/2011 (65 months), the FIPE/Buscapé Index is 11% lower, and the Compound Index with IPCA prices and FIPE/Buscapé weights for compatible products is 2.5% lower. On the other hand, the behavior of these two indices is quite different from the behavior of Overall IPCA, which in the period June 2016/January 2011 rose approximately 45.6%, or 64% more than FIPE/ OVERAL IPCA INDEX, FIPE/BUSCAPÉ, AND COMPOUND FIPE/BUSCAPÉ WITH IPCA PRICES (JAN11=1) SOURCE: FIPE/BUSCAPÉ INDEX 20122011 2013 2014 20162015 FEB JUN APR MAR MAY JAN FEB JUN OCT APR AUG DEC MAR JUL NOV MAY SEPT JAN FEB JUN OCT APR AUG DEC MAR JUL NOV MAY SEPT JAN FEB MAR JAN JUN JUL OCT APR AUG DEC NOV MAY SEPT DEC FEB JUN APR AUG MAR JUL NOV OCT MAY SEPT JAN FEB MAR JAN JUN JUL OCT APR AUG DEC NOV MAY SEPT 0.800 0.900 1.500 1.200 1.100 1.300 1.400 1.000 TABLE OF CONTENTSCHAPTER 4 | FIPE/BUSCAPÉ INDEX 53
  54. 54. 54 FINAL CONSIDERATIONS 54
  55. 55. MAIN CLIENTS 55 TABLE OF CONTENTSFINAL CONSIDERATIONS | MAIN CLIENTS
  56. 56. GLOSSARY ADHOC: research under request with a specific purpose APPS: abbreviation of applications APPLICATIONS: programs developed with a purpose (such as e-commerce, game, services) which might be downloaded by Internet, to be used via mobile devices AVERAGE TICKET: calculated average amount spent by order or purchase BALANCE: sales result over a certain period BLACK FRIDAY: e-commerce date with great discounts, typically on the last Friday of November. This event originated in the United States, and was deployed in the Brazilian e-commerce in 2012 BROWSER: browser to access the Internet CLASS A, B, C & D: classification of social classes by household or individual income (A and B: income from R$3,001/ month on; C e D: income up to R$ 3,000/month) CONSUMERS' DAY BRAZIL: date set in the online retail calendar and created by Buscapé Company with the support of entities and retailers in the sector for one discount day similar to Black Friday. It takes place in March, on a Wednesday near the 15th CROSS BORDER: operation of an e-commerce order to be delivered to another country DESKTOP: desk computer E-COMMERCE: online store, environment of electronic commerce. E-business, e-commerce, online retail, purchase over the Internet E-CONSUMIDOR: consumer who performs purchases over the Internet FIPE/BUSCAPÉ INDEX: systematized calculation of prices in the Brazilian e-commerce HOUSEHOLD INCOME: average earnings of a household, sum of members who work and live in the same residence INTERNET: world computer network LAYOUT: a website visual due to its design, appearance of an Internet page. Online stores: a store established online that performs sales in e-commerce. E-commerce MEDALS: Ebit medals, certification assigned by Ebit to classify stores according to online consumer satisfaction after appraising the service provided (they might be Diamond, Gold, Silver, and Bronze) MOBILE COMMERCE: online commerce performed via mobile devices, such as smartphones or tablets (m-commerce is its abbreviation) MOBILE DEVICES: mobile devices, such as smartphones and tablets NPS®: Net Promoter Score®, trademark of Bain & Company. An indicator that measures client satisfaction and loyalty ONE-TIME E-CONSUMERS: those who have performed at least one purchase over the Internet OMNICHANNEL: concept according to which all channels of a retail brand become available for contact with the consumer, inter-relation off-line and online ONLINE RETAIL: e-commerce, online commerce, purchases performed over the Internet A D O P R S T W E F I L M N B C ORDER: each purchase performed, request for a product to be purchased PLAYERS: market components, retailers (regarding e-commerce) PRICE COMPARATORS: websites whose main feature is to search prices of a product and list the variety found in several stores RATED GROWTH: evolution of sales without deducting inflation, difference in sales increase RESPONSIVE WEBSITES: website adapted for mobile devices, with settings and/or layout designed for the mobile format, adapted to the size of the screen and which make browsing easier. SALES: Total amount raised from sales SEARCH ENGINES: service website for price search and/or comparison, e.g. Buscapé and Bondfaro SHARE: market share SMARTPHONES: mobile telephony device, which enables access to the Internet and other advanced features SOCIAL MEDIA: websites (environments) where people meet (such as Facebook, Twitter, and others) STORE CERTIFICATION: assessment performed by Ebit through a survey with consumers who performed purchases over Internet, in the post-sales, to build confidence in online purchase TABLETS: mobile device that works as a portable computer, with use of functionalities and Web browsing through touch screen TRANSACTIONAL VOLUME: sales proportion TRANSACTIONS: operations, purchases performed WI-FI: wireless access to the Internet H 56 TABLE OF CONTENTSFINAL CONSIDERATIONS | GLOSSARY
  57. 57. The Federation of Commerce of Goods, Services, and Tourism of the State of São Paulo (FecomercioSP) is the main union entity of São Paulo for the commerce and service sectors. Responsible for managing the Social Service of Commerce (Sesc) and the National Service of Commercial Apprenticeship (Senac) in this State, it represents an Economy segment that mobilizes over 1.8 million business activities of all sizes, and it gathers 154 employers' unions, which account for 11% of the GDP in São Paulo – around 4% of the Brazilian GDP –, generating around five million jobs. www.fecomercio.com.br 57 TABLE OF CONTENTS MARKETING SUPPORT PREMIUM PARTNER FINAL CONSIDERATIONS | MARKETING SUPPORT
  58. 58. About the Brazilian Chamber of E-commerce: The mission of camara-e.net, main multi-sector entity in Latin America and Brazilian association with the highest representativeness in Online Economy, is to qualify people and organizations for the safe practice of online businesses. With 15 years since its foundation, its role has been essential to the formulation of public policies in line with modern society's aspirations, and especially to enhance sectorial regulatory milestones that provide legal support to the incentive measures required for the development of our country. Since 1894, the Commercial Association of São Paulo has worked on behalf of entrepreneurs who have activities in the city of São Paulo. From family businesses to large industries, over 30 thousand entrepreneurs have the support of the Association to defend their interests before society and the Government and in providing exclusive services that make the entrepreneur's daily life easier. E-Commerce Brasil is an e-commerce market fostering project in Brazil and it offers over 100 activities throughout the year, among which are: specialized content www.acsp.com.br www.ecommercebrasil.com.br posted on the E-Commerce Brasil portal on a daily basis, print magazines, trainings for professionals in the sector, as well as promoting a series of events throughout the country, with emphasis on the E-Commerce Brasil Forum, major e-commerce event in the world and in Latin America, according to Forrester. www.camara-e.net OTHER PARTNERS 58 TABLE OF CONTENTSFINAL CONSIDERATIONS | MARKETING SUPPORT
  59. 59. The Instituto Brasileiro de Executivos de Varejo & Mercado de Consumo (Brazilian Institute of Retail Executives & Consumer Market) is a non-profitable institution. It was founded in December 2009, in São Paulo, by a group of professionals linked to the retailer sector, with the objective of establishing discussion groups, relationships, and knowledge regarding this market. Founded in 1998 with the core mission of developing the interactive media market in Brazil. From 2006 on, the Interactive Media Association (AMI) became a part of the most important network of associations in the world – the Interactive Advertising Bureau –, changing its designation to IAB Brasil. Since then, this association has been part of an international network of associations, which has representations in over 43 countries, among which are the USA, Australia, Singapore, Spain, France, England, Italy, Chile, and Mexico. IAB Brasil has currently more than 230 associates, among websites, portals, technology companies, Web-developing agencies, which are leaders in their segment in the country. MMA is the main non-profitable association of the mobile ecosystem worldwide, with over 800 partner companies in approximately 50 countries. www.ibevar.org.br iabbrasil.net www.mmaglobal.com Our partners come from all segments of Mobile Marketing, including brands, advertisers, agencies, technology platforms, media companies, operators, among others. MMA's mission is to speed up changes and innovation in marketing through mobile devices, promoting growth in the business with high involvement of consumers. 59 TABLE OF CONTENTSFINAL CONSIDERATIONS | MARKETING SUPPORT
  60. 60. ANDRÉ RICARDO DIAS Ebit COO andre.dias@ebit.com.br +55 11 3848-8700 PEDRO GUASTI Ebit CEO pedro.guasti@ebit.com.br +55 11 3848-8700 TEAM/CONTACTS PRESS OFFICE FIRSTCOM COMUNICAÇÃO www.firstcom.com.br +55 11 3034-4662 LUIS CLAUDIO ALLAN luisclaudio@firstcom.com.br CÍNTIA YAMASHIRO cintia.yamashiro.ext@buscapecompany.com JANAINA CAVALHEIRI janaina@firstcom.com.br ART & LAYOUT RITA MAYUMI www.ritamayumi.com EBIT TEAM KEINE MONTEIRO Business Intelligence JÉSSICA OLIVEIRA Business Intelligence RENANN MENDES Marketing and Operations Coordinator LETÍCIA AVELAR Marketing Analyst VITÓRIA JABUR Marketing Analyst MÁRIO FROES IT Manager IMPLEMENTATION OF EBIT SURVEY Contact convenio@ebit.com.br Know more aqui REPORT AND SURVEY ENGAGEMENT Contact comercial@ebit.com.br CONSIDERAÇÕES FINAIS | INFORMAÇÕES PARA IMPRENSA / CONTATOS Ebit requires to be referred to as a source of information in any academic study, press release, opinion article, editorial, or news article stating data collected in its studies about the Brazilian e-commerce market, especially the Webshoppers report. We reinforce that the data is Ebit´s propriety, and therefore, those who use it must always inform the source, in order to enhance the credibility of the information and avoid that data disclosed by the company is attributed to other source. PRESS INFORMATION EBIT DATA DISCLOSURE 60 TABLE OF CONTENTSFINAL CONSIDERATIONS | PRESS INFORMATION / TEAM/CONTACTS
  61. 61. www.ebit.com.br www.buscapecompany.com

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