Looking for a “Smart” way to get products into the new Brazilian border stores? Well-known Montevideo-based duty free executive Marcelo Montico has established Smart Duty Free, a new distributor targeting companies looking to enter the Brazilian border stores as well as other regional travel retail operators in Latin America.
Montico says that the market along the border could be changing fundamentally, offering many opportunities.
“The speed with which the Brazilian authorities are authorizing new border stores has been increasing over the last few weeks. As the macroeconomic conditions in Brazil begin to improve, we are convinced we will see a revolution in the border duty free trade in terms of size and its relative importance in the region,” he tells TMI.
To date, the town of Uruguaiana has been the epicenter of activity with five different points of sale now in operation. In addition, Montico reports significant activity in real estate deals and license applications in the towns of Jaguarão, Santana do Livramento, Barro do Quarai, Porto Maua, Dionisio Serqueira and Foz do Iguazu.
“Due to the size of the store or the town’s population, some of these new developments will be even more significant than the openings we have seen so far. Industry analysts estimate that approximately 35 stores will be up and running by the end of 2020,” he comments.
Convenient access to more consumers
Montico explains the criteria behind future openings and the advantages the new shops offer to potentially attract many more shoppers.
“The Brazilian legislation allows 32 Brazilian cities to open stores – the attractiveness of each city depends on its population, the population of the immediate zone of influence and the population of its sister town on the other side of the border. Differing from the traditional Uruguayan border business, in Brazil, Brazilian residents are permitted to make purchases, and many of the consumers live in or very close to the town where the shops are (or will be) located. To shop in the traditional Uruguayan system, people must travel by car for two, three or more hours to buy duty free goods.”
The type of operator on the Brazilian border will also differ, he says. “We will see some big global players with in-depth knowledge of consumer duty free purchasing behavior who will have critical mass from a logistics point of view; on the other hand we will see many of the stores operated by independent entrepreneurs who may have solid finances but very little knowledge of duty free retailing.”
Montico believes that these newcomers will have to go through the full learning curve for a gamut of basic activities, ranging from how to attract the consumer into his store, build an efficient logistics chain, discover what brands are in demand, plan the store layout to managing each category and installing the right furniture.
“These retailers will have to learn how to build a store in accordance with the expectations of today’s duty free shopper and offer them a great shopping experience,” Montico stresses.
Montico and his partners realized that these problems are likely to persist for some time, and launched Smart to provide the new entrepreneurs with the right advice and set of tools to allow them to compete on a level playing field with the global operators.
Distribution + brand selection
Montico stresses that Smart Duty Free offers more than an efficient distribution service.
“Our objective is to deliver a full-service offering of brands with a significant added value to the new retailers, along with the most efficient logistics service. We will offer brands with the correct commercial conditions and a fair package of trade marketing and promotional support. We will ensure that the retailers, as our true commercial partners, benefit from our many years’ experience in travel retail. We will help them identify the best brands in each category for their location and the people who visit their store; advise them what is the best support program for the brands and devise and execute a plan to ensure the best level of penetration in the store, looking at ways to increase the average sales ticket value and at the end of the day the value of total sales.”
Smart Duty Free is a multi-faceted company, he says. In addition to Smart’s distribution arm, its knowledge of the key travel retail categories and products that Brazilian consumers have traditionally purchased on border shopping sprees, is a critical service.
“Our main focus initially will be efficient and effective distribution, but we also offer complementary services such as designing and fitting out stores of all sizes. Many of the professionals involved in Smart Duty Free have years of experience in designing, manufacturing and installing furniture for a wide variety of categories in many airport and border stores throughout the Americas,” adds Montico.
Logistics & onsite service
Logistics is paramount to Smart’s success, says Montico. The company has established a warehouse structure in Zona America in Montevideo to receive merchandise from overseas, deconsolidate it, repack, reload and send by bonded international transporters to the Brazilian border stores.
Deliveries will initially be every 20 days, but this timeframe will be flexible depending on market demands, says Montico. The company will also have a sales team based in Uruguaiana to service retailer needs.
“This allows us to help the retailer manage the brands we represent on a day to day basis and ensure an efficient sale and reorder cycle. Our true mission is to help the retailer efficiently manage the brands we represent and ensure programs are in place for stock rotation,” he explains.
Smart will also assist suppliers to plan shipments with information on the Latin American duty free market. “We will provide monthly sell-in data by city, POS and SKU. All suppliers will have access to our digital order platform and will be able to track sales, orders and inventories,” says Montico.
Smart Duty Free’s biggest asset is how well it understands business on the border in Brazil and in other parts of the continent, insists Montico.
“We have extensive knowledge of the regional duty free channel, its rotation dynamics and consumer behavior in terms of the critical factors that determine the purchase and we will share this knowledge with our partners. We are confident that they will quickly see the benefits in increased sales and profits,” he says.
Marcelo Montico can be contacted at email@example.com.