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Where is Brazil heading to?

Brazil shows a world record of automobile sales in 2010, a 12% growing market, Super Dilma inspiring confidence in the future, etc. The World Shopper® was in Brazil and tells you about his own car-shopping experience, in an explosive market full with good ideas…which runs the risk of ending like many others! The difference being, there is heat over here, samba and above all, spare time and money to avoid unsustainability. Come on, let’s see how it works there!


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About avoiding unfair judgments

São Paulo, January the 4th, 2011 – I find myself sailing in a sea of Golfs, Unos, Palios, Corsas Sedan, Celtas, Agiles... A fast growing new middle class in Brazil strongly encourages the demand for locally produced economic models, which constitute more than 50% of the sales. I must admit that in the beginning I was baffled with the size of the offer: there are very similar models, often with an awkward price positioning (ex. Uno/Palio/Punto and Golf/Fox).

The outdoors advertising new models enhance reliability, design and safety. It is not frequent to find out the sentence “from x$ Reais up” in publicity material, although there is an aggressive approach to price in the retail market. As to CO2 emissions: not a word…

“By the harvest season in Spring I will switch to alcohol” – a taxi driver in Rio de Janeiro, said. This is another factor which strikes the automobile landscape: Brazil is worldwide leader in “flex” engines (88% of total sales) which allow alternate use of gasoline and alcohol. In the latest models the dosage of either fuel is achieved electronically, without human intervention and without performance disruptions, even at low temperatures starts. I drove a Citroen C3 Aircross 1.6 flex and I did not notice any differences to the gasoline only version, except for a little bit more spiciness (113cv instead of 110cv). Fiat who enjoy here an image of advanced technology, market a Siena tetrafuel version, which combines LPG with the flex approach.

Please avoid misjudgments! The Brazilian market is not an underdeveloped European one what so ever. It is a true giant (3.515.120 vehicles in 2010), growing at an incredible rate, different with its own history, unique environment and excellent ideas. Are we finally in the track of an automotive industry with sustained development? Once more, the World Shopper® program went to the field to test customer’s experience.

Chevrolet: Where have I been through all this before?

I’ve started with a brand that is a sales champion and is established in Brazil since 1925. The  CARRERA’s  showroom which I visited in a wealthy area of São Paulo, is a pleasant surprise: the new cars are displayed in an attractive space outdoors, under an awning circling the sales offices. The atmosphere is different from usual stands, less intimidating and promoting a more natural contact with the displayed vehicles. Here, much like in other places I always met very friendly salesmen, courteous and ready to call the customer by his or her own name.

I used a convincing explanation why a Portuguese was trying to buy a new car in São Paulo, using arguments such as profession, family situation and others but …it was not necessary! Anticipating my interest in an economic vehicle, CARRERA’s saleswoman briefly described the available models focusing on the main differences of equipment. Not a single question about my needs of displacement. The dialogue often stopped as she waited for my reactions. The speech was much the same you would find in a readymade fashion store: “We have got these pants, and these other…and we also got these which are very beautiful… which would you like?”

I finally opt for a 5 door Chevrolet Celta1.0 flex with AC and without power-steering. The saleswoman invited me to seat inside the car but did describe neither the interior nor the trunk. After that she initiated the price negotiation and spontaneously granted a 10% discount on the Recommended Retail Price (RRP), mentioning she could go even further if I actually decided to buy.

“Go to Chevrolet website and download” she said when I asked for a catalogue. Today, all Chevrolet catalogues (except Camaro) are only electronically available. Considering cost and environment it sounds like a good option to me. However is this not another way of downgrading the roll of the Car Dealer in the process of purchasing a car?

The saleswoman said she had not a car available for a test drive. We must emphasize though that in certain urban areas in Brazil, hijacking occurred during test drives, which can turn sellers reluctant to provide such an experience. Anyhow, as the test drive is essential for the interaction customer-product, new avenues must be found in safe and boundary areas.

The performance of this saleswoman overlooked the argument of seducing the customer through the product appeal, and put all emphasis in the price argument. What is a customer expected to do in this scenario? Obviously to improve price even better, should he remain definitely interested in the product. I went back to my hotel and called another car dealer, ITALCOM, with whom I could easily obtain a discount of 12,5%. And it was barely the first call… Product appeal neglected by the sales force, price focus encouraging Customer to shop around, destruction of sales margins… Where have I been through all this before?

 

Mitsubishi ASX: super exclusiveness!

I entered BRABUS’ showroom in Av. Europa (SP). The salesman immediately explained to me that the ASX model I was interested in, had been launched in Brazil not before a month. …I was getting ready for the rest of the story.

The salesmen never showed the slightest interest in learning my own needs and the dialogue took place next to the vehicle, without any demonstration and even opening a door. The model was available in three colors only, with a time of delivery of 30 days (because it was very recent), a test drive could not be provided as no vehicle was available and no discount could be granted at all (again because it was very recent).

It is true that ASX was recently launched, and that it is an imported vehicle (in 1990, import restrictions were removed although there still exists a disruption in the market) in an industry with rigid importation quotas. However the 2WD version I was interested in, was shown for sale in the stand I visited. Could it happen that the sales force actually exists to promote solutions and the potential of the product, or just to stress supply restrictions that suggest a lot of demand and lead to a policy of fixed prices? I turned around and went back looking for another “soft” SUV…

At Citroen you might even speak with the President!

Bazilians love “rugged” versions of best seller models, and these automobiles actually possessing slightly higher distances to the ground, with seemingly plastic protections and, in several instances, also equipped with mixed tyres, are very well adapted to the local traffic conditions. Citroen C3 AirCross is the “adventurous” version of the european C3 Picasso and is produced at PSA factory in Porto Real (RJ).

The kind salesman of the car dealer CHAMPS ELISÉES, approached the presentation of the C3 AirCross , in the best manner, inviting me in and touching all the equipment that he was referring to. In the engine compartment he showed the auxiliary petrol tank, mentioning its autonomy and capacity. He also referred to the engine supports fitting as vibrations’ absorbers and the fact the engine slightly sinks after a frontal impact, thus avoiding that it invades the passengers’ compartment.

Unfortunately, the modularity, which is a strong argument in favour of this model was not demonstrated. The trunk was never showed neither in the vehicle in display (the battery of which was disconnected) nor in the one which was tested.

The salesman just asked me when I would settle in and where I was going to work in São Paulo. The only time he related a mobility requirement to a characteristic of the vehicle was when he suggested the option for a GPS equipped version, considering my lack of knowledge of the city. He missed other questions such as intended number of passengers, who would actually be driving the vehicle (I was not alone during the visit), type of circuits and hobbies. After the test drive the salesman asked me whether the vehicle met my expectations. Well done! However is it not up to the salesman to identify customers’ needs and relate them with the car features, leading them to conclude by themselves which vehicle suits them better? The presentation of this product started well but it missed the point when it did not take in consideration the needs of the customer in the first place.

The aforementioned test drive was requested by me though promptly accepted. It took place in a pre-defined circuit while the salesman introduced the equipment on board, but forgot to mention how the characteristics of the vehicles could be related with the test drive performance.  Not all the vehicles in Brazil are equipped with ABS yet, but C3 AirCross does it. It would have been nice to make a short and discrete presentation of how this equipment works, what would have made the experiment more memorable. The filtering capacity of the suspension would be worthwhile mentioning too.

The salesman handed out a catalogue of the C3 AirCross upon my request.

Although there existed a stand-up referring to after sales campaigns for the AirCross (first three services free), the salesman never mentioned any after sales argument. By the way, a new good idea collected in this market: like other makes, Citroen also announce in their own website the exact price of every service for all the models, as well as a full description of all the tasks performed. It is possible that this corrective procedure has been imposed upon the brands as a result of an intensive practice of overcharging by authorized workshops. Nevertheless this strategy can be a good example of how to improve transparence, the lack of which still prevails in other markets.

Speaking about image, a good one in this case: should you require something from this Citroen Dealer in S. Paulo, talk to me because I know their President! A plaque on the desk at the entrance read: “Talk to the President – should you have any queries or complaints, speak directly with our President”. The e-mail and mobile phone number were then indicated. What a difference to those Boards of Directors who hide behind several barriers of desks!

The salesman in CHAMPS ELISÉES demonstrated how easy it is to make an attempt to close the business. He asked me whether I was happy with the vehicle in the first place, then he went back to my initial requirement (you told me you wanted to buy the car this month) and finally asked me whether I wanted to close the business immediately.

He spontaneously mentioned that he could grant a discount on the vehicle which he had there (RRP: 64.200 reais). When I asked him what the final price would be he asked me back to offer a price myself. I risked 60.000 reais and he countered 62.000 reais, which I accepted as a possibility. (-6,54% in a model which “4Rodas” magazine mentions as having a retail price above the price list)

This visit had many positive aspects that demonstrate that it is by far possible to do better than in the previous two. The salesman was entrepreneurial, introduced the product well, offered a test drive and addressed smartly the price argument. However, the indifference regarding the customer needs killed the charm that would impress a client who even showed a lot of enthusiasm.


Brazil is still running on time

Regardless of the competition in the retail business in many urban zones, the Brazilian automotive market is still governed by a logic of spontaneous demand, contrary to other more mature markets where the industry survives because of artificial stimulation of the demand (government incentives, intensive promotional actions by the manufacturers, etc.). The current situation of the Brazilian market feeds demand satisfaction through intent of moving units out only. This strategy clearly observed at the retail level, is encouraging the Brazilian consumer to take an aggressive negotiation stance which will erode margins and lead the industry into a situation of non sustainability, as soon as the demand starts showing the first symptoms of weakness.

In Europe as in other markets which reached maturity, the strategy of centering the automotive industry in the Client must be applied in a recessive environment caused by the chronicle emphasis on sales volumes.  This means that change must be carried out with limited resources and high social costs. In Brazil, there is a strong opportunity to anticipate the need to focus the automotive industry on the Client yet, and ensure its profitability in the long run.


Ricardo Oliveira
World Shopper® Conference 2011 (April 15th)
Empowering creativity in car business

Notes:

The isolated Customers’ experiences studied by the World Shopper® program do not necessarily represent the typical attitude of analyzed Sales staff, Dealers and OEMs. More than to generalize tendencies and justify human behaviors, the purpose of this exercise is to make readers retain real-life examples that maybe pedagogically used to improve the industry as a whole.

In 2010 5.515.120 units were sold which means an increase of 12% over 2009

Fiat was market leader in 2010 with a volume sales of 760.474 units (22.84% of market quota) followed by Volkswagen (20,95%) and Chevrolet (19,75%).

In December 2010, were sold 381.498 units an increase of 30,2% over 2009.

The National Federation for the Distribution of Automotive Vehicles (Fenabrave) says there is no economic justification for the increase in 2010, and that the same was due to a practice of early registration by the makes, struggling to increase market quotas. This Federation foresees that sales in January 2010 will fall by 30% compared to December 2009.

World Shopper® Program

06-02-09 - World Shopper® London – Mini, Volvo
04-03-09 - World Shopper® Geneva – Smart
04-04-09 - World Shopper® Düsseldorf – Mercedes-Benz
15-06-09 - World Shopper® Singapore – Audi, Kia, Mitsubishi
15-11-09 - World Shopper® Shanghai – Mercedes-Benz, Porsche.
16-01-10 - World Shopper® Brussels – Seat, BMW.
23-06-10 - World Shopper® Bilbao – Nissan, Dacia.
01-10-10 - World Shopper® Paris – Renault.
04-01-11 - World Shopper® São Paulo – Chevrolet, Mitsubishi, Citroen.