Magazine Luiza: Building a Retail Model of “Courting the Poor” a. Identify the retail model Magazine Luiza employed to grow to the third largest nonfood retailer in Brazil.

The key of retail model of Magazine Luiza was its genuinely customer centered and employee centered culture.

Looking at the retail market of Brazil in 2004, it was a large and diverse markets, with 84% of its 47 million households were located in urban areas, and regional development and income distribution were very even. In addition, high inflation, interest rates, and cost of capital, which impacted the costs of inventory, marketing, and distribution – made alternative channels such as catalog-based retailing practically nonexistent, and facilitated the growth of small family-run operations and medium-sized chains that developed local expertise.

Because of the macro level environment, Magazine Luiza tried to build its retail model that was truly customer centered and matched with the industrial phase of Brazil. Focusing on low-income segments, the major elements of the retail model can be viewed separated in following perspectives: operational evolution, deep customer relationships, people and management and innovative use of technology. I will discuss these building blocks of its retail model in the following paragraphs.

Operational Evolution:

In order to better serve low-income customers, Magazine Luiza put much effort in operation innovation in order to encourage growth while limiting costs. First, because of Brazil’s history of economic volatility and vast geographic area, procurement and distribution were critical. Magazine Luiza operated mainly in small cities that did not accommodate large local inventory stock. Magazine Luiza delivered 70% of its products directly to the customer’s residence 48 hours after the purchase. Second, Magazine Luiza focused its product