Juan Benavides Feliú • The Transformation of Retail

Photo: Courtesy of Glasstech

Partner and CEO, Glasstech (former CEO of Falabella)
2012 CEO Lifetime achievement

One person, Juan Benavides Feliú, has spearheaded two of the most important changes in the Latin American retail sector. These changes happened while he held management positions in the Chilean chain Falabella, the country’s second largest retailer by revenues, and one of the largest and the most profitable in this category in Latin America. In the first change, as general manager of CMR, in 1996, he initiated the strategic plan for establishing the group’s finance business, and in the second, as CEO, he promoted its international expansion starting in 2004. In addition, he managed the merger of Falabella with Sodimac in 2002 and 2003, which was one of the most important transactions in the sector in recent decades because it brought together a huge number of synergies between the corporations, and increased the size of the company, which was essential for it to prosper.

These strategies, together with being in the real estate business, which Benavides also promoted, have converted it from being a typical company to being one of the most successful players in Latin American retail. Offering credit through credit cards, for example, is a way to make consumption easy, generate loyalty and, for the business, it’s a great way to increase the margin. Business establishments can make use of some of their advantages over banks, such as location or sometimes hours of business, but above all, precise knowledge of consumption habits and the way their customers make payments, a fundamental element for making the right credit decisions. Today, revenues from the banking operations represent about 17 percent of the group’s total revenues, and it has loans outstanding of more than $5.7 billion with its 4.2 million cardholders, an amount that lands the financial arm of Falabella on Latin Trade’s list of the 100 largest banks in Latin America.

Internationalization was also vital. “In retail, the size of the market is absolutely crucial,” said Benavides Feliú. Group Falabella opened in Argentina and Colombia in 1993, in Peru in 1995, and in Brazil in 2013. Unlike the commercial chains in Brazil or Mexico that are supported by their internal markets, the Chilean companies have no other growth option but to go beyond the country’s borders. Chile provided almost 80 percent of the group’s revenues in 2006, and just 65 percent in June 2013. But perhaps the success of this CEO was due to having maintained financial order at all times, together with the geographical expansion. This enabled him to maintain the difficult balance of having new proposals for customers, taking advantage of market opportunities and maintaining reasonable levels of risk.

The results of these strategies are there to be seen. The share price has risen by a factor of 15 since 1996 when the Solari family – who have controlling interest in the group – decided to list on the stock exchange.

Benavides Feliú also helped to construct what might be called the Chilean school of retail, which he has done using the experience of those who work in the sector. “We have achieved good development in every sense of the word: brands, design, product, logistics, and access to the best suppliers of India, China or Malaysia. Today, the disadvantage is in size more than in knowledge,” he said.

This sophistication has served the sector in attracting talent. “In all of the surveys among graduating professionals, the sector is among the most admired.” This is vital for companies like Falabella, which is number 18 among the best employers of Latin America.

He believes that the electronics business is still lagging in the region, and that to make it work, it must develop its logistics. He said it still needs two things: “Investment in distribution logistics companies so that goods can arrive at customers’ homes at the precise time and with the merchandise in good condition, and development of infrastructure that will require government support.”

For Benavides Feliú, the next move for Latin American retailers would have to be “developing abilities to make up for the volume of the large chains.” The issue is very important because the largest companies can operate with lower average costs, and because they can often more easily amortize the enormous investments in information technology that they require. To deal with this he proposes, for example, the integration of businesses to achieve synergies on smaller scales, and broadening the firm’s presence in the region before seeking other markets. Coming from a generator of change in the industry, it’s a prediction worth listening to carefully.

 

 

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  1. [...] The transformation of retail Juan Benavides Feliú, Partner & CEO, Glasstech, former CEO, Falabella [...]