The digitalised retail industry - Corporate Vision Magazine

After having the worst quarter in history in 2020, the retail industry is beginning to leave the pandemic behind and expects a more balanced recovery this year. The expectation is for a recovery in household spending, with higher demand for clothing and vehicles and lower demand for hygiene items, food and construction materials.

A study by the Federation of Commerce of Goods, Services and Tourism of the State of São Paulo (FecomercioSP) on the value of the Average Monthly Family Ticket (TMF) with retail products in the state of São Paulo shows that retail sales grew 1.9% year over year in 2020, driven by renovation and construction goods and supermarket items. The sector is expected to see an increase of around 10% this year.

“In the second quarter of last year, retail saw a 11% decline in real terms. In the second half of the year, we had a recovery, but in a disorganized way. This spending was channeled to consumption by households that were more at home and started to invest in small renovations, as well as furniture. In other words, housing needs started to account for a bigger chunk of family spending, whose expenses with services, restaurants and trips were curtailed,” said Altamiro Carvalho, an economist with Fecomercio. “This was due to the pent-up demand from the previous semester and the emergency aid. Without it, we would have closed 2020 down 4% and not up nearly 2%.”

The study shows that the pandemic redirected the focus of the consumption habits of São Paulo consumers, giving greater emphasis to purchases in supermarkets, pharmacies and building materials.

Spending in building material stores accounted for 7.4% of retail spending in 2018, increased to 7.5% in 2019, and rose to 8.7% in 2020, Mr. Carvalho said. Spending on home renovation and construction advanced 16.9% last year. With food and hygiene and cleaning products, they rose 12.1%. Statewide, spending on furniture and household items grew 4.5%.

Among the sectors that were most impacted are clothing and vehicles, which find barriers to expand in e-commerce. When looking at the household ticket, on average each household in the state spent R$276.87 per month on clothing and footwear in 2020, 21.5% less than in 2019. Spending on vehicles fell 19%, which makes it clear how the health crisis has affected consumer confidence for the purchase of durable goods, according to the study.

The trend for 2021 is that the losses from sales of items such as clothing and vehicles will be partially recovered. “In this semester, with the resumption of activities such as restaurants and travel, there should be a reduction in the growth of retail consumption. Until now, [money saved because of] travel restrictions ended up being redirected to retail, but there should be a reduction in retail growth as people are traveling more,” said Mr. Carvalho, estimating that growth of supermarket sales will slow down to around 30% from 38% and clothing sales will rise to 8.5% from 6%.

The economist foresees growth for all areas, due to the still pent-up demand, but in a more decelerated and balanced way. “The forecast is for much more balanced growth, barring any unforeseen health conditions,” he said, citing double-digit growth for the clothing and vehicle sectors and a drop in materials for home renovation.

Source: Valor international

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Brazilian airlines are offering a more upbeat view of the market in the second half of the year as vaccination gains steam across states. After demand varied in tandem with contamination rates and a substantial drop in traffic in April, the scenario is now more favorable amid tourism recovery.

Demand for air transport in the Brazilian market measured in revenue passenger kilometers, or RPK, fell 43.4% in May compared to the same period in 2019, before the pandemic, data from the National Civil Aviation Agency (Anac) show. The numbers signal an improvement after the peak of Covid-19 cases this year, which pushed the sector’s demand down by 61% in April compared to the same month of 2019.

In the international market, amid border closures and tourism travel restrictions, the indicators still show strong contraction. Passenger demand in May was 88% lower than that seen in 2019.

As video conferencing replaces business traveling, airlines are increasingly dependent on demand from tourism, one of the segments most affected by the pandemic. But progress on vaccination in Brazil has begun to bring optimism, the Brazilian Association of Tourism Operators (Braztoa) said.

There is already an expectation of improvement in the tourism business field in the second half of 2021. The average sales of the association’s companies now represent 25% of what it was before the pandemic.

Braztoa sees strong demand from people who have already been vaccinated. In total, 71% of tour operators reported that they were sought by vaccinated tourists, and 29% of the trips sold to this public will take place in July, while 47% are scheduled for the second half of the year.

Furthermore, 82% of the operators believe that the approval of Sinovac’s vaccine Coronavac by the World Health Organization earlier this month will positively impact tourism as early as the second half of 2021. For airlines, more tourists means more customers.

In this scenario, Latam has expanded in Brazil. The company recently announced more flights from Guarulhos, Congonhas (São Paulo) and Santos Dumont (Rio), increasing the average number of daily flights to 310 from 250 in June. Compared to June 2019, before the pandemic, the company recovered 63% of capacity. Compared to May this year, the increase is almost 14 percentage points.

The recovery scenario, compounded by both government and private-sector investments in aviation, has encouraged airlines to take new steps in the North region. Gol announced the purchase of Manaus-based MAP Linhas Aéreas, which still needs to be approved by the antitrust watchdog Cade. The acquisition is a step to expand operations in Congonhas. Azul has also announced that it plans to fly to eight new destinations in the North region this year.

The optimism is greater today than last year, when the recovery started only to be interrupted by new cases of Covid-19. Even with the vaccine, however, entities in the sector such as the Brazilian Association of Airline Companies (Abear) have signaled a calm flight only when the country reaches 70% of the fully vaccinated population (with both doses, when applicable). Currently, a little over 11% of Brazilians are fully inoculated.

Source: Valor international

After more than a year without substantial businesses due to the pandemic, plane maker Embraer received a sizable order for 30 jets E-195-E2 from an undisclosed client and sees other signs of improvement in demand. According to CEO Francisco Gomes Neto, the company remains focused on its strategic plan to recover revenue and profitability in the short and medium term. Embraer reported net revenue of R$4.45 billion in the first quarter, with an increase of 55% in the annual comparison and improvement in all business segments. Net loss was reduced by 62%, to R$489.8 million.

Source: Valor international