Analysis of the Effect of the Recession on Hypermarket Retailing Industry in Brazil - Essay Example

Download file to see previous pages The economic reviews of Brazil’s retail industry out that the Gross Domestic Product (GDP) rates are cumulatively increasing year by year. The practice of consolidation of the hypermarket retail industry has been continuing but in general, the hypermarket remains comparatively fragmented, representing substantial span for the big players to develop their market strength in future. The leading 3 market players are controlling the hypermarket retail industry in Brazil; they are Pao de Acucar, Carrefour, and Wal-Mart. Other players are leading through acquisition. The recession affects the revenue of sales and the decline of the profit in the retail industry, Recession is defined as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production and wholesale-retail sales" (What causes a recession? 2012).
In this study, the recession affects the business of hypermarket retailing industry. Recession affects various aspects of business such as the purchasing power of consumers, buying behavior, and the income disposable level of people has increased significantly. There are many other factors that contribute to the fall in economy's into a recession, but inflation is the major reason for recession. “Inflation is defined as a sustained increase in the general level of prices for goods and services” (All about Inflation 2012). Inflation indicates the general increase in the price of products and services over time period. The rate of inflation is higher; the consumers purchase lower percentage goods and services with the same price. The time of recession affects the hypermarket industry in Brazil; the major players of hypermarket industry in Brazil are Pao de Acucar, Carrefour and Wal-Mart. Recession mainly affects these companies because they are retail stores. “The economic crisis makes low-price concepts particularly adapted, and all three international retailers can potentially benefit from this trend. Expansion in Brazil is still ongoing and a strategic focus for all three groups” (Carrefour, Casino and Wal-Mart’s Expansion Strategies in Latin America 2012). Hypermarkets provide durable and non-durable goods. The retail industry of Brazil is segmented in three parts, they are Grocery Retail Non-Grocery Retail Non-Store retail These three categories are the main drivers of Brazil’s retail industry. The retailing of grocery is at a constant growth, and has gained its sustainability to the growing people who belong to low income group. The hypermarkets and large retailers are focusing on grocery, and also investing on the non-grocery items such as foot wears, fashion clothing, and sundries. The retailer’s Wallmart and Carrefour focus on developing personal labels for their own clothing brands and footwear. The Recession Impact of Retail Industry: “A recession normally takes place when consumers lose confidence in the growth of the economy and spend less, this leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment” (Malik & Pandit 2012). The impact of recession in retail industry will decrease the proper demand and also enforces stress on the prices, and leads to the absence of price-war in the retail market. To keep the consumers, the ...Download file to see next pagesRead More