Delivery is at the heart of business, particularly when it comes to online trading, and Brazilian retailer Netshoes is a testament to this.

The company is currently the largest online retailer of shoes and sporting goods in the world (according to an article published on Reuters website), and announced in October 2014 that it is expanding its delivery options. It has implemented four different types of freight charges, increasing delivery efficiency at a time when rivals are focusing on profitability.

When online retailing started in Brazil, free delivery and monthly instalments were the case,” Chief Operating Officer Graciela Tanaka said, adding that those practices were not financially sustainable over time (interview with investing.com in October 2014).

Netshoes can deliver up to 200kg (this includes heavy items such as bikes and treadmills) on the same day as the order is placed, if the customer is based in São Paulo. It is the only company in the country providing such an unusual service. It also has next day and free delivery options. The latter takes a longer period of time, but rarely exceeds one week.

Earlier in the year, the company launched a delivery service called Entrega Super Esportiva: the items are delivered by bicycle on the same day as the purchase (before 10 pm). It includes both home and sports products, and items weighing up to 2kg. At present, it is only available in the central districts in the city of São Paulo. The proposition highlights the sports, sustainability, and flexibility credentials of the organization. It also enables the company to engage with the community, as most cyclists are locally employed, and thereby to promote a socially conscious image. Finally, most couriers are young, helping to promote a dynamic and energetic image.

The delivery proposition is supported by very rigorous SLAs (Service Level Agreement). This means that the clients receive a significant compensation in case the company does not deliver the item on time.

Netshoes has very aggressive growth plans. The company has now expanded into the Argentinian and the Mexican markets, and it is considering an initial public offering (IPO) in the US. This demonstrates that e-commerce has a very strong potential in Brazil and beyond, and inventive organizations such as Netshoes can provide a successful blueprint for organizations everywhere.

Mitel’s upcoming Shopping Trends – Brazil, 2014 report revealed that “delivery options” are the second most important purchase criteria amongst Brazilians, being mentioned by 43% of respondents who were asked “which of these factors, if any, influences your decision to purchase one product over another”. This is even more pronounced for durable goods (such as shoes and sporting equipment), at 48%. Only brand reputation is ranked higher (mentioned by 46% of overall respondents, and 48% for durable goods). This helps to explain why Netshoes current business model with emphasis on the delivery proposition has been successful.

The Brazilian e-commerce sector is very promising. Mintel’s E-commerce – Brazil, 2014 report revealed the Brazilian online sales rose from just R$ 14.8 billion in 2008 to R$ 51 billion in 2013, a growth of almost 250% in five years. This was driven mostly by higher disposable incomes and an increased confidence in online shopping. This growth will continue into 2018, when the segment is forecast to reach R$ 115 billion. The growth rate will remain above 20% per annum until 2014, fuelled mostly by device penetration. It will then suffer a small decline, still remaining consistently above 10%.

This means that online companies like Netshoes could experience large sales growth and expansion if they implement flexible delivery options, allowing customers to select the duration of the cycle, the time of delivery and price most suitable to their requirements. A shared-risk proposition and clear SLAs in case the item is damaged or delayed would also help to attract customers, particularly disgruntled ones who had a negative experience in the past.

If you would like more information or to pre-order your copy of Mintel’s upcoming report: Shopping Trends – Brazil, 2014, contact us here.

Victor Fraga is Senior Analyst for Mintel’s Brazil report series. He has more than 13 years of experience in industries including technology, healthcare and the public sector. His previous roles have included companies such as Frost & Sullivan, and Guardian News & Media.

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