Grupo Exito Braces for Amazon Competition with Digital Marketplace Expansion and Plan to Launch Puntos Colombia

Latin American retail giant Grupo Exito recently revealed an online strategy to confront competition in its local Colombian market, where sales are increasingly moving into the digital realm.

The retail group president, Carlos Mario Giraldo, said in an exclusive interview that he is acting now in anticipation of Amazon’s arrival in the Andean country.

So far, the U.S. retail colossus has not made a massive push into South America, but it is showing signs of movement, and Giraldo is aware of how much disruption will result when the Seattle-based company flexes its muscle on the continent. This may already be beginning, as Amazon recently announced a more aggressive online sales strategy in Brazil, adding a huge competitor for consumers in an economy recovering from a two-year recession.

As a result, according to Giraldo, Grupo Exito — which has operations in Colombia, Brazil, Uruguay, and Argentina — will boost its online strategy. That online strategy includes chasing additional income through the platform called Marketplace, which was launched in 2015 and next year will sell products from around 1,000 small companies.

With the Marketplace platform, Exito will earn a fee between 13%-15% for every single purchase made from those client partners. Currently, the company records roughly 300,000 e-commerce transactions per year from around 50 million visitors on its website and this move is expected to increase those figures.

When asked for a the possibility of partnering with Amazon in Latin America in the future,

Giraldo didn’t say no. “We have not thought about an alliance with Amazon,” he said. “We cannot predict the future. We have alliances with Rappi, with Bancolombia, with Sura, with Avianca, with Tigo. That is, we have worked through alliances and that works very well, and we do not discard future alliances. The world is bringing together companies that have the knowledge and complementary themes.”

Retail and Big Data

The second way to improve the online segment of Grupo Exito includes the monetization of Big Data through the program called Puntos Colombia, which has been developed in partnership with Bancolombia, the largest bank in Colombia.

The monetization will be “through the traffic in the warehouses,” which he says means credit cards, insurance, and Exito points. “Everything is a form of monetization and all that has a cost and price,” he said about the strategy that will be launched in the first quarter of 2018.

The business model of the program will look to make revenue by leveraging Exito’s extensive database, which includes some 10 million customers, in partnerships with companies including Bancolombia and Grupo Sura.

In this way, Giraldo said that the company will be able to use the information “that Exito already has” acquired through operating its customer loyalty program, which will further be improved by introducing technology in Brazil based on applications and algorithms that will allow users to offer more specific products according to their tastes and needs.

The executive compared Exito’s Puntos Colombia new loyalty program with LifeMiles, the frequent flyer program used by leading Colombian airline Avianca, which currently has third-party investments. Those 10 million customers, who earn and redeem points for their purchases in Exito stores, will in the future be able to do use the program with the different financial products of Bancolombia.

In addition, he noted, third-party allies will be added in complementary segments such as restaurants, gas stations, cinemas, and other areas.

Grupo Exito Financial Results

Grupo Exito had consolidated revenues of 40.7 trillion pesos ($15.7 billion USD) during the first nine months of the year, registering a growth of 11% and a net profit of 30 billion pesos ($10 billion USD).

According to a statement, the consolidated recurring operating income for the first nine months of 2017 was 1.6 trillion pesos ($533 million USD), growing 34.9%.

The company said that the results of the Pão de Açúcar Group (GPA) in Brazil show solid levels of performance. Up to the month of September, it registered income growth of 8.1% in local currency and an improvement in recurring Ebitda of 55.6% in Colombian pesos.

Talking specifically about the Colombian market, Exito revealed that the Surtimayorista brand — a new low-cost store strategy known as ‘Cash and Carry’ in Colombia — grew sales by 36.6% in the first nine months of the year, penetrating the discount market and capturing new institutional clients. Surtimayorista is projected to close the year with eight stores, up from the current four open locations.

Direct sales to the consumer (including e-commerce, home delivery, virtual kiosks, and Market Place) recorded a growth of over 20% in Colombia and the alliance with Rappi, a popular digital delivery startup for restaurants, grocery stores, and other errands.

Giraldo said that the debt will remain at $1.5 billion USD. He added that the capital expenditure goals are for $100 million USD in Colombia and expects the company to invest 1.5 billion reais in Brazil per year. He explained that the debt reduction will decrease as the Evitda in Colombia improves and interest rates fall and the utility in operations in Brazil improves.