Apparel Sourcing Intelligence - Worldwide

H&M reportedly studying Brazil entrance, as most other majors steer clear

After its reluctance to enter the Brazilian market from scratch, H&M is reportedly studying the acquisition of the Brazilian operations of Dutch rival C&A. But it has avoided making any public commitment to opening in either India or Brazil, although it announced its intention to open another 275 stores during 2012, mostly in China, US and the UK, Bulgaria, Latvia, Malaysia and Thailand.

According to Brazil’s Exame magazine, C&A, though Brazil’s largest apparel retailer with 210 stores, experienced inventory and financial difficulties in 2010. But C&A operations were recently streamlined and marketing campaigns gave new strength to the retailer. One analyst interviewed said that the domestic presence of C&A and the size of its stores would fit perfectly within H&M’s business model. Officially, the two retailers claim that there are no negotiations in progress but an executive in Brazil’s C&A, asking anonymity, confirmed that companies’ associates have been talking.

The report follows a survey in another Brazilian magazine, Veja, into international retailers’ attitude to Brazil.
Several world-known companies are hesitant to enter the (complex) Brazilian market. Although it’s been showing record growth rates, Brazil’s market is still avoided by many multinationals due to its high costs and bureaucracy (. Among the companies interviewed by the magazine for the survey were: H&M, Ikea, Best Buy, Abercrombie & Fitch, Tesco, Metro AG, and J.C. Penney..

Most of the companies interviewed operate in some of the other BRIC countries (Russia, India and China), and even in less developed regions such as Middle East and Africa. But they showed reluctance to move into Brazil, citing high costs and bureaucracy.

More specifically, they quoted high taxes, expensive real estate, a closed market with difficulties in importing parts, no incentive (and very high costs) for local manufacturing, lack of skilled labour, bureaucracy, and precarious infrastructure.