Luiza Helena Trajano Inácio Rodriguez

Luiza Helena Trajano Inácio Rodriguez
CEO

Magazine Luiza SA

Luiza Helena Trajano Inácio Rodriguez has a bachelor's degree in Law. She joined Magazine Luiza SA in 1960. She became a Board Member in 2005 and took up the position of President in 2009. She is also a member of the Strategic Superior Council of FIESP (Federation of the Industries of the state of Sao Paolo) and the Economic and Social Development Council. She is the current Chairlady of the Board of Directors of Luizacred.

 

Quotes

Luiza Helena Trajano Inácio Rodriguez

Luiza Helena Trajano Inácio Rodriguez

CEO, Magazine Luiza SA

In a globalised world, even localised crises end up having an impact on all economies. The 2008 crisis taught us that.

Luiza Helena Trajano Inácio Rodriguez

Luiza Helena Trajano Inácio Rodriguez

CEO, Magazine Luiza SA

It is worth remembering that 40 million people have recently joined the consumer market and that Brazil is not seeing a crisis in demand. On the contrary, 45% of people do not yet have an LCD TV, 45% do not yet have a washing machine and 95% of the new middle class don’t own their own home, most of them in the northeast. As these people enjoy higher living standards, they will want their own homes, cookers, fridge freezers, LCD TVs, etc.

Luiza Helena Trajano Inácio Rodriguez

Luiza Helena Trajano Inácio Rodriguez

CEO, Magazine Luiza SA

Brazil has learnt to deal with the crisis, not by putting its foot on the brake, but by putting its foot on the accelerator with the necessary caution.

Luiza Helena Trajano Inácio Rodriguez

Luiza Helena Trajano Inácio Rodriguez

CEO, Magazine Luiza SA

Foreign competition is only natural and companies need to be prepared for it.

Luiza Helena Trajano Inácio Rodriguez

Luiza Helena Trajano Inácio Rodriguez

CEO, Magazine Luiza SA

Today, everything’s a commodity. Service quality is a commodity, price is a commodity. But there are two things that will make a difference for your company or your professional profile: customer service/relations and innovation.

Luiza Helena Trajano Inácio Rodriguez

Luiza Helena Trajano Inácio Rodriguez

CEO, Magazine Luiza SA

The government is aware that taxes are too high and that this inhibits the economy. Striking a balance in this equation is only a matter of time. I am far more concerned about bureaucracy which, although it is being reduced, is still excessive: bodies and procedures remain very bureaucratic. The challenge is to ensure safe, rapid procedures with less bureaucracy.

 

Read interview transcript

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How do you see the economic situation globally? What is Brazil’s position within it?

In a globalised world, even localised crises end up having an impact on all economies. The 2008 crisis taught us that. It is easy to see how Greece’s attitude towards its debt and the practices of banks, with their poor planning, affect this market. There’s no escape, because we are all interconnected.

In 2008, however, Brazil took a ground-breaking approach which meant it was able to minimise the effects of the crisis. The usual formula for managing crises is to restrict credit and thus reduce consumption and job creation. This brings the risk of recession. In the 2008 crisis the Brazilian Government did the opposite: it used the federal banks, like Banco do Brasil, to make loans whose approval was based on technical criteria, to small, medium and large companies, as well as doubling credit card limits for around five million consumers. At the time, these actions were much criticised: it was thought they would lead to high levels of default. But that didn’t happen. The measure was so positive that Banco do Brasil saw record profits in 2010. It seems simple, but this change in approach to managing the crisis was very significant.

The reduction in IPI (Tax on Manufactured Products) for purchases of vehicles and white goods was also part of the Brazilian strategy to combat the crisis. Through these approaches, we learnt how to deal with other scenarios at critical times. The current crisis, which took everyone by surprise once again, is proving longer-lasting, but it will bring new and important lessons. One of them is the fact that it has affected Europe as a whole, showing that the solution does not depend on each country alone, but that union is needed between all the economies which use the euro. This crisis is the big test for the euro, because countries with different practices, cultures and histories will have to learn to deal with a problem of this kind for the first time.

What is behind the European crisis?

Europe is going through a crisis in demand, because the population is ageing. When this is coupled with the employment crisis, resulting from a less active economy, the situation is very serious and affects the entire market. In 2008, the problem was more concentrated in the United States and, at that time, Brazil began working with other, non-restrictive scenarios, breaking new ground to come up with solutions. Change isn’t easy, especially in times of crisis, but if it happens and is successful, the country comes out of it more mature, more prepared and with greater reserves. That’s why things are easier now.

What is your view of the measures taken by the government to combat the international crisis?

The government has yet to take 5% of the measures it could take. Brazil’s rate of default is completely under control and the employment rate is growing month on month. The fact is that if demand is high there is no need for action. The concern is the risk of inflation and nothing has been done about that. When the government lowered interest rates, a measure criticised on all sides, it got it right. In a country like ours, there needs to be demand, and credit available to cater for that demand, but inflation needs to be kept under control. I believe the government will succeed in keeping this crisis under better control than in 2008, because it has learnt that this idea of offering credit based on technical criteria works.

Will there be a slowdown of the Brazilian economy as a result of the European crisis?

No, I don’t think so. November and December are the best months for demand. In addition, if the government realises that the crisis is going to continue, it will be able to attack on various fronts, starting in January. It is worth remembering that 40 million people have recently joined the consumer market and that Brazil is not seeing a crisis in demand. On the contrary, 45% of people do not yet have an LCD TV, 45% do not yet have a washing machine and 95% of the new middle class don’t own their own home, most of them in the northeast. As these people enjoy higher living standards, they will want their own homes, cookers, fridge freezers, LCD TVs, etc. And the government is also committed to encouraging 20 million people to consume more over the next three years. Not to mention the World Cup and the Olympics that are just round the corner. These events will stimulate around 10 million people to travel by air for the first time. On those trips, each person will take a new pair of shoes, new clothes, presents for their families, so each passenger represents a series of demands, as well as direct gains for tourism.

So the major risks for your business are inflation and credit restrictions?

This is the major risk not only for my business, but for the country. But Brazil has demand and control instruments in place to stave off the return of high inflation. And it isn’t only Brazil that needs to be careful, but all developing countries, especially those that once suffered from high inflation and know the risks it brings. I believe that Brazil will grow more this year compared to last year, particularly in the retail sector, which is the sector worst hit by the crisis. A global crisis gets in the way of things and a globalised economy can always bring surprises, but I can safely say that Brazil has demand, inflation is under control, the rate of default is controlled and the rate of employment is good. It also has very good economic reserves ? better than those in 2008. Brazil has learnt to deal with the crisis, not by putting its foot on the brake, but by putting its foot on the accelerator with the necessary caution.

Do you think the fact that Brazil is in better economic shape than other countries makes it attractive to international companies?

I believe so, but I think competition is only natural and companies need to be prepared for it. We don’t have as many competitors as the ready-to-wear and supermarkets sectors, but we too need to be prepared for international competitors. We also need to compete with other Brazilian companies, who understand the various “Brazils” within Brazil and have managers with experience of the many periods of turbulence and currency changes the country has seen. One thing that shows the Brazilians’ competence is the fact that many foreign companies take four or five years to become properly consolidated in Brazil. In any case, I think we have healthy competition.

There is a fear, however, that small retailers will be swallowed up by the big groups in the sector. I don’t believe this will happen. A responsible country that wants to create jobs has to preserve small businesses; Brazil is aware of this and is increasingly inclined to invest in small and micro-businesses.

In your opinion, what measures could the government take to strengthen small and micro-businesses?

The government is acting with that focus. This is important because often the law itself doesn’t take into account the peculiarities and business dynamic of micro-enterprises. Some countries offer specific incentives to smaller firms; they think about small businesses first because such firms are the main creators of jobs in a country. The government is aware of this and knows it has to focus on it. There are lots of programmes being developed by Sebrae [the Brazilian Support Agency for Entrepreneurs and Small Businesses] and other sectoral organisations. Brazil is waking up to the importance of small firms, and even big business knows how important they are.

Should any measures be taken by the government to address tax issues?

The government knows that lowering taxes stimulates sales and thereby increases tax revenue. That is what happened when taxes on computer purchases were lowered. Before, Brazil suffered from tax evasion and unfair competition from contraband products. When the government lowered taxes, sales increased, more people were given access to computers and tax revenue also increased. The government is aware that taxes are too high and that this inhibits the economy. Striking a balance in this equation is only a matter of time. I am far more concerned about bureaucracy which, although it is being reduced, is still excessive: bodies and procedures remain very bureaucratic. The challenge is to ensure safe, rapid procedures with less bureaucracy.

As a result of recent global events, have you had to make any changes to Magazine Luiza’s business management?

No, because we had already done our homework. Our balance sheets had been audited for several years, we floated shares on the stock market and capitalised the company. Not being indebted or needing to take out loans at this time was very important. What we did have to learn was how to deal with the capital market and its oscillations. This took us by surprise, because we had just launched the IPO and the global crisis came. But we are learning to deal with this.

Can you cite any practical measure you have taken to deal with it?

No, there has been no need. Magazine Luiza has grown by 28% this year. We were prepared. Besides the IPO, we transferred our entire management – which used to be in Franca, São Paulo state – to São Paulo city, and we moved into Northeast Brazil, increasing our market share through the takeover of the Lojas Mais chain. I think if we had been caught unawares it would have been more difficult, because credit is less readily available.

So the big challenge was to absorb these new operations?

We have taken over 13 chains in recent years. Our first move was to get a foothold in South Brazil, in the state of Rio Grande do Sul. It was a big challenge and taught us much about how to deal with the culture of each region of Brazil in a specific way, always with respect. We learnt a lot about the local culture from staff at the acquired company, as the former owners stayed with us for six months. In the Northeast we also kept on some staff in executive posts.

It is also important to keep the acquired brands alongside the Magazine Luiza brand for given period. So we demonstrate our deep respect for the local culture, we do a lot of research, we seek out local know-how and, above all, we have humility. That is particularly important after you have bought out a company, as there is a tendency for buyers to impose their own way of doing things and to think they know best.

So the idea is always to keep on staff at the acquired chains?

Yes. Even in the case of Baú da Felicidade, where we only bought the sales outlets, we hired the store staff. Retail is Brazil’s second biggest employer, after the government. Together, the 35 chains belonging to the Retail Development Institute (IDV) employ over 500,000 people.

Do you have trouble attracting and keeping hold of talent?

This question covers more than just the workforce. The focus today is on the consumer, whether you’re a manufacturer, a service provider or a retailer. Today, everything’s a commodity. Service quality is a commodity, price is a commodity. But there are two things that will make a difference for your company or your professional profile: customer service/relations and innovation. Innovation is not just about technology: it means having different ways of providing good customer service, because delivering what the customer wants is your obligation. This means that surprising your customers by doing things differently from your competitors is what makes a difference. The same goes for customer service: it doesn’t matter how many processes you invent or how many written procedures you have in place, your relationship with the person you are serving is paramount. In fact, innovation and service quality are skills which can only be achieved with a like-minded team that is committed and wants to make things happen, in a company that isn’t tied down by lots of processes. So you’ve got to go beyond investing in people to invest in talent.

How do you go about that?

Fifteen years ago, the last thing people wanted to be was a salesperson; if you were no good at anything, you ended up in sales. We have turned that around. We have invested in career development and in study grants so that everyone could study, whatever the course; we have encouraged freedom to be creative; we have set up vehicles like Rádio Luiza and TV Luiza so that communication within the company was very rapid. All of this was based on the idea that, in order to have satisfied customers, our staff have to be satisfied. Our focus is on customer service, and valuing our staff means they feel a commitment towards us and serve our customers better.

Are there regional differences in this kind of action?

There used to be, but not anymore. When we set up in the Northeast, we revolutionised human-resource management, because the staff there didn’t receive any benefits or education. So we proposed a challenge: if they achieved certain goals, we would extend the benefits, so that they received the same as staff in other states. Today, staff in the Northeast have all the benefits, including study grants and help with paying for the schooling of their children up to the age of 10, and it’s all tied to productivity. Nothing is given for free: it has to be earned through targets and challenges, and this shook up the local market. In this case, our approach was to take what we had here and knew was important and apply it, rather than simply adapting to the existing situation.

What is your main source of innovation?

We are constantly innovating. We launched an online store in 1991, before anyone else. We launched an annual sale 18 years ago, which has become a reference point. And we have just launched “Magazine Você”, to facilitate door-to-door selling through Facebook. A person can choose 60 products from our website, set up a store in their own name and sell the products over the social networks. When their friends buy the products, the person earns commission. We encourage innovation a great deal, which to us means thinking outside the box. We adopted another innovative and unheard-of approach when we began operating in São Paulo city, by opening 50 stores in one go. There was no way of buying a local chain at that time, and you couldn’t start operating in the state capital with one or two stores.

What is the main management challenge for the coming year?

It will be to go on growing and generating funds for investment, since any investment reduces a company’s profits in the short term. So the goal is to go on growing, to find ways of continuing to make profits without losing our culture, without losing our identity. There’s plenty of room for growth: we have not yet established a presence in the states of Rio de Janeiro and Espírito Santo or in North Brazil, for example.

And who is the driving force behind all these ideas?

Ah! It’s a team effort. We do a lot of team work and everyone is free to contribute. People feel very at ease because we encourage creativity and innovation.

Do you have a direct channel for communicating with staff and customers?

There is for customers (if you log on to the website you’ll see) and for staff too, but if it gets all the way to me it means it’s very serious. Usually things are resolved at lower-level channels. There is a great deal of respect, on the part of both customers and employees.