High interest rates, expensive credit and marketplaces: the shocks that put pressure on Brazilian retail

Casas Bahia Group files for judicial recovery Casas Bahia, Marabraz, Americanas, GPA and Marisa are among the large Brazilian retail companies hit by financial crises in recent years, with impacts ranging from restructuring and store closures to recovery processes. From furniture and appliances to food and clothing, the cases are different, but they help to reveal a pressure that permeates the sector: money has become more expensive precisely when the way of selling and competing has also changed. ?? Do you have any reporting suggestions? Send it to g1 High interest rates and expensive credit reduce families' space to pay for purchases in installments and, at the same time, make debts and the operation of companies more expensive. Meanwhile, marketplaces, e-commerce and international competition increase price competition and reduce the space for companies to earn on each sale, in addition to requiring investments in technology and logistics. In this scenario, companies that generate little money from their own operations, accumulate inventories, maintain expensive physical structures or have debts that are difficult to pay are more vulnerable. The first shock: expensive credit reaches consumers An important part of this pressure begins in families' pockets. When the basic interest rate is high, the cost of money also tends to rise. The Selic, which serves as a reference for other rates in the economy, is at 14% per year. This contributes to making credit offered to consumers and companies more expensive. ? In practice, interest makes purchases in installments more expensive and can lead the consumer to postpone the purchase of higher value products. The higher the price and the longer the term, the higher the final cost tends to be. This is what makes categories like furniture and appliances especially sensitive to credit. The Central Bank's Banking Economy Report (REB) shows that credit rates in Brazil make it difficult for families to spread a purchase over several months. The impact is greater among lower-income families, who face higher interest rates and, therefore, have less space to finance higher-value goods. And when the consumer postpones a purchase, the effect reaches the retailer. ? The store sells less and, if it needs to offer more advantageous payment terms to maintain sales, it may take longer to receive or have to pay to advance this money. ? Meanwhile, expenses such as salaries, rent, suppliers, taxes and interest continue to run. In other words, the problem is not just the drop in sales. This is when sales stop converting into enough cash to cover day-to-day expenses. According to Bruno Medeiros Durão, a specialist in Banking and Tax Law, the difference is precisely there. “Many companies only look at revenue and forget that there is a huge difference between selling a lot and generating cash.” Retail trade store Natal RN Inter TV Cabugi/Reproduction High interest rates do not affect everyone in the same way Still, retail is not experiencing a uniform crisis. Segments that depend more on credit tend to feel the loss of economic momentum first, while those less dependent on financing may be affected in another way. It is a distinction also observed by Genial Investimentos, which relates the economic slowdown to a “significantly contractionary” interest rate and points to a loss of momentum precisely in the segments most linked to credit. This helps explain why the same economic scenario can have such different effects on companies. A retailer that relies on installment sales, maintains high inventories and has a large store network, for example, may face a particularly difficult combination: consumers buying less, more expensive debts and expenses that continue even when sales fall. ? In this scenario, debt stops being just a financial problem and starts to affect the functioning of the company itself. The second shock: the way of selling and competing changed At the same time as it faces expensive credit, retail is going through another transformation: consumers have more options to compare prices and buy. Marketplaces and digital platforms have increased competition between sellers and expanded access to national and foreign products. To compete in this environment, however, it is not enough to place products in an online store. It is necessary to invest in systems to monitor stocks, technology and structures capable of making deliveries reach the consumer quickly. According to geographer Igor Venceslau, in the article "Digitalization of the Brazilian territory and electronic commerce: informational services in the territorial division of labor", electronic commerce requires precisely this set of information systems, inventory management and logistical structures. In a report, analysts from BTG Pactual also highlight the importance of integrating physical stores and digital channels and strengthening the presence of companies in the online environment. At Casas Bahia, the online channel, in partnership with Mercado Livre, was identified as one of the main “levers” to make the business grow. At the same time, the company announced the closure of 298 units, around 29% of the network, as part of an attempt to reduce costs and resize the operation. Researcher Paulo Nassar, in "Everyday life and collective memory in retail", presents a counterpoint: during Americanas' crisis of confidence caused by accounting fraud, digital sales suffered a much greater drop than those in physical stores. This suggests that physical presence can function as an element of trust and resilience at certain times. The question, therefore, is not simply to have or not to have stores. It means maintaining a structure — physical and digital — compatible with the sales volume and the ability to generate money to sustain the operation. When the crisis requires changes in operations The combination of these factors helps to explain why some companies manage to achieve