The Drive to Retail in Latin America Is Gaining Speed

By Stan Bruckheim

For years, international product suppliers have been frustrated by the perceived lack of retail-generated sales in most Latin American countries. In a region in which the prevailing model has been to grant complete product rights to the local distributor/marketers-from TV to retail and everything in between-retail is finally taking off and is one of the fastest areas of growth for DR products in the region.

In a recent survey of many of the top distributor/marketers in Latin America, retail sales of DRTV products for 2007 are projected to increase an average of 25 percent over last year, and retail now represents 20 percent to 40 percent of overall sales of most companies. Several companies report that retail sales represent as much as 40 percent to 50 percent of their overall sales, a dramatic increase over just two years ago.

WHERE ARE THESE SALES COMING FROM?
Most distributor/marketers are keying in on one of two areas of growth: 1) expanded wholesale efforts directed at existing retailers; and 2) strong growth in the number, size and sophistication of owned-and-operated stores. Whether the focus is on selling to existing retailers or O&O stores is determined by a number of local factors in each country.

For example, in Mexico, DRTV companies like TVOfertas tend to sell into major department stores, AsSeenOnTV kiosks and home/specialty stores.

Alejandra Markiewicz, president of TVOfertas, points out that “High-end fitness products like AbKingPro and Orbitrek Platinum, and housewares like Tablemate and Swivel Sweeper have been among our most successful products in retail. Each lends itself well to both the bigger department stores and smaller specialty stores.”

For Tevecompras-Argentina and Quality Products-Peru, a significant portion of retail sales go into pharmacies and drug stores, while in Venezuela, ProKompra plans to add supermarket chains to its retail channels.

However, in other countries, the biggest growth in retail sales is coming from DRTV marketer/distributors launching their own stores, often in shopping malls throughout their country. Companies like Sprayette-Argentina, Tevecompras-Argentina, Quality Products-Peru and Grupo TV Offer-Central America generate an overwhelming majority of their retail sales through their own stores, thereby retaining a greater share of control and profits, and building awareness and credibility for their television advertising. Paul Zaidman, president of Quality Products, explains that “products like Ervamatin, Elina, Nic Out, Reduce Fat Fast and Cell Tone have sold very successfully in both local drug stores and in our 18 Quality Product AsSeenOnTV stores throughout Peru.”

For a company like Polishop-Brazil, its investment in a series of upscale O&O stores with a high-end, high-tech look is thought to add value to their direct response TV advertising, and vice versa. Director Carlos Neto says, “When a customer goes into a Polishop store, sees our video-display wall and gets superior customer service, then he sees our TV advertising at home the next day, it changes his perspective of the infomercial. We feel our retail is critical to our TV, and vice versa.”

Luis Salaverria of GrupoTVOffer agrees. “Our 35 stores in Central America have helped us reach less impulsive, more skeptical customers who would have never bought a DRTV product without handling it personally…the store becomes the perfect synergistic complement to our TV advertising,” he says.

And then there is a third category of company, like Tventas-Ecuador and Falabella-Chile, both born out of the retailing business, yet which treat DRTV as an important, stand-alone business center. For both companies, “selling” to retail is within the corporate family, and neither tends to sell to other retailers.

Saadin Solah, CEO of TVentas points out, “With a strong presence in DR television and live shopping, Tventas is in front of the Ecuadorian consumer a tremendous amount of time each day. We judge our live and taped advertising based on the sales each generates, but we know both have a positive synergistic effect on retail sales in our 36 stores.”

Loreto Bezamat, product manager of Falabella, adds, “Having a large retailer in the industry benefits the industry as a whole by professionalizing the business, validating the business model and ultimately driving volume.”

THE PREVAILING RETAIL APPROACH
Selling DRTV products to retailers seems to be done fairly consistently throughout the region, despite the lack of true multi-national retailers that support the DRTV products. Some general rules of thumb:

• While products that are profitable on TV can work well in retail, products that do not work on TV don’t work in retail only. As Gideon Kornbluth of ProKompra-Venezuela states, “Losers are losers everywhere.”
• Retailers are only interested in DRTV products that continue to have TV support from the DRTV company.
• Promotional materials, ranging from POP displays to videos on flat-screen monitors, are very important. The successful supplier provides these to their local distributors.
• Supplier support and timeliness of delivery of inventory is especially important in retail. Some retailers actually charge a penalty cost to the DRTV company for being late with product.
• DRTV companies generally charge an average of 60 to 70 percent of the product’s on-screen retail price to the retailer, or as it is said in the region, the retailer gets a 30 to 40 percent “discount” off the TV retail price, depending on the country.
• The retailer generally must agree to match the on-screen price of the distributor/marketer, so the consumer pays the same at retail, excluding shipping and handling costs.
• The offer configuration at retail is generally identical to that on TV. Retailers do not change the configuration to differentiate the retail offer…but that will come.
• Most DRTV marketers do not offer sale-and-return to the retailers, but they do grant a minimum of 30-day terms.
• Big discount stores like Wal-Mart and Costco, which have successfully entered many Latin markets, tend to be a tough fit for DRTV products, as they require a discount structure that doesn’t lend itself well to the DRTV model.

Stan Bruckheim is co-director and president of PanLatinoTV in Laguna Hills, Calif. He can be reached via e-mail at [email protected].