Casas Bahia

Presented By: Atul Jain

Robin Fernandes
 About Samuel Klein

From a war prisoner to The world’s most amazing business model developer

In the year 1952 Mr. Samuel Klein moved to Brazil in

order to support his family
He started his endeavor through door to door selling of
blankets, bed sheets and bath towel

In the year 2009 Mr. Samuel becomes one of the

richest person in brazil with 565 stores in brazil and
South America and with turn over of $6.5 billion
Wikipedia
 Contd..
• Today Samuel two son handles the major part of business
and he is considered as the brain of the giant organization
• Michael the elder son is responsible for
• Finance
• Stores
• Distribution
• Fleet
• Technology
• Employees

• Saul is responsible for

• Overseas supply
• Customer sales
• Marketing
Case Study of University of Michigun
 Culture At Casas Bahia

• Casas Bahia believes in staying true to his customer

• Sales agent has to be well dressed and properly shaved
• According to Michael he will never allow a sales person
to come to shop if he suffering from some disease
• Every customer is greeted by a warm smile from CRM at
store
• Maintaining a proper culture in Casas Bahia store is a rule
• Every employees have Samuel Klein’s painting in their
respective office or workplace, to remind them traditional
values of charismatic founder of Casas Bahia

Case Study of University of Michigun

 Why Casas Bahia

• Average population of Brazil is not wealthy

• At 1950’s people were migrating from northern
region of Brazil to Sao Paulo
• Bahia is the largest state in brazil
• Bahia is also among the largest community in
Brazil
• It was a vision of Mr. Samuel Klein that this
community will flourish in coming time

Case Study of University of Michigun

 Casas Bahia
• Casas Bahia Comercial Ltd. is the largest non-food
retailer in Brazil
• They dealing in furniture, appliances and other
household goods at low prices, chiefly on credit
• In the year 1952 he started his business as backpack
peddler by selling products like bed sheet, blankets and
towels
• Samuel Klein, purchased 1st store in the year 1957
named “CASA BAHIA” with the customer base of 800
• He started focusing on the BOP segment as a target
customers Case Study of University of Michigun
 Contd..

• In the year 1970 he purchased a half-share in a

consumer-loan company named “Financeira Intervest”
• He acquired a five-store chain in the year 1972 at port
of Santos, near Sau Paulo
• He also acquired a steady source of merchandise by
purchasing a major furniture manufacturer, Bartira, in
1981
• Casas Bahia continued to sell goods door to door until
1984, but all instalment buyers had to make monthly
payments at the nearest store
Case Study of University of Michigun
 Contd..
• Casas Bahia practically doubled its chain in 1981,
when they bought about 20 “Lojas Colúmbia”
stores in the greater Sao Paulo
• Although the entire country was in recession
Casas Bahia was spending a big chunk on
advertisement by hiring legendary footballer
“PELE” to maintain its growth plan
• By 1990 Casas Bahia was the second largest
advertiser in Brazil, spending $50 million a year
but producing its ads in-house to save money.
Case Study of University of Michigun
 Contd..
• By the year 1990 Casas Bahia acquired few more
business units such as
– Two Volkswagen auto dealerships; Bartira
– The furniture manufacturer; Intervest
– A brokerage named Interbens;
– The in house advertising agency, Interjob.
• 60% of Casas Bahia stores are company own
property
• In the year 1992 company faced huge loss on revenue
side as the sales declined by almost 50%
• Company immediately closed 15 stores and slashed
employment from 9500 to 6000
Case Study of University of Michigun
 Contd..
• Casas Bahia entered Rio de Janeiro by paying almost $60
million for the 33-unit Casas Garson chain

• Casas Bahia sustained a 17 percent drop in sales in 1997

and it recorded loss for the first time in history about $7
million

• Casas Bahia adopted a strategy to boost its sales by

marking its product’s price more than 15% from
competitor as they were relying on loyal customer
Case Study of University of Michigun
 Contd..
• Casas Bahia's sales rose to almost BRL 6 billion
(about $2.11 billion) in 2003 and its sales
exceeded those of its next four competitors
combined
• Casas Bahia entered into a contract with Banco
Bradesco S.A., the nation's largest bank, whereby
the bank assumed the direct financing of part of
the chain's customer purchases.

Case Study of University of Michigun

 Principal Competitors
• Globex Utilidades S.A.
• Lojas Cem S.A.
• Lojas Colombo S.A.
• Comércio de Utilidades Domésticos;
• Magazine Luíza.

Retail World
 Retail Industry- Brazil

Retail Industry

45%
Organized Retail
Unorganized Retail
55%

Retail World
 Sales Structure
Sales

25 5

Home Appliances
Furniture
Miscellanious

70

 Miscellaneous goods such as clothing and bicycles

 The chain was buying and selling 30 percent of all home
appliances manufactured in Brazil
Retail World
Revenue Structure
Sales

10

Credit
Cash/Credit Cards

90

Retail World
 No Of stores
Year No Of Stores
1957 1st Store
1964 2 Stores
1972 15 Stores
1981 30 Stores
1983 43 Stores
1988 56 Stores
1990 100 Stores
1992 90 Stores**
1996 250 Stores
2002 340 Stores
2009 565 Stores

Company closed 15 old Stores and opened 5 new stores Brand Story
 CASAS BAHIA BUSINESS MODEL

• The population Brazil is 186 million at present, out

of which 80% is considered to be at the BOTTOM
OF PYRAMID [BOP]
• BOP represents significant purchasing power in
brazil as they account 45% of total spending capacity
98.765

130.98

Total Spending IN US$ 92.76

49.67

11.87

Wikipedia
 Spending Pattern In Brazil

Total Appliances Spending Total Furniture Spending

2.88 1.56

5.98 2.89

3.46 2.10

2.37 1.13

388 million 265 million

Wikipedia
 Total Spending Outlay

Total Spending Outlays by Population categorized as C, D & E

60 49.00
40 27.50 23.30
20 16.30 14.60 12.90
6.70 4.80 4.90 3.14
0
g e c e rs e d n el e s
en
t re na
l
ra an t h e
l at t io a r
nc it u o
ev
e en O e rta pp ia n m rn ti
in
t R p o A pl t ai Fu uca
&
B a lth ns Ap t er E d
M ea Tr
a
En
o od & H
F s &
e nt ve
l
ym a
pa Tr
g
sin
u
Ho

Wikipedia
 Penetration of goods by Economic Status
120

99 97 99
100 96 96
93
88 88 90

80 78
72
62 Refrigerator
60 Radio
Television
40

20

0
A and B Segment C Segment D Segment
Wikipedia E Segment
 Market Share
Market Share

10% 21%
18%
Casas Bahia
Ponto Frio
Marabras
Lojas Cem
Magazines Luiza
19%
Others
15% 17%

Wikipedia
 Business Model
• The Casas Bahia customer had an income ranging
from virtually nothing to ten times the monthly
minimum wage of BRL 200 (about $70), a range
that comprised 84 percent of Brazil's population
• Seventy percent of Casas Bahia customers have
no formal or consistent income
• Casas Bahia customers primarily comprise of
maids, cooks, independent street vendors and
construction workers whose average monthly
income is R$400
• Casas Bahia sales consist 90% of credit sales
Wikipedia
 Contd…
• Samuel Klein never wanted any outsider to be the part
of business but in the 1998, Casas Bahia successfully
floated its debentures and a six-month promissory note
• Only he, his wife, and his sons had the authority to
sign checks.
• Casas Bahia stocks 60 days merchandise in three
different depots in the country
• The company had 65,000 employees, 600 suppliers,
and 12,000 merchandise items
• A fleet of 2360 trucks delivered the goods to the
stores.
Wikipedia
 Contd…
• A store manager has the right to cut prices by as
much as 10 percent
• A regional manager by up to 25 percent without
calling Michael Klein
• Each of Casas Bahia’s 565 stores runs completely
on SUSE Linux Enterprise Server, including
16,000 workstations and 4,000 POS terminals
• All stores are linked and executives can monitor
performance in real-time and track results from
the 14 million clients who enter the stores each
month. Wikipedia
 Company's Credit Policy
• Using information technology, the chain had
transformed its assessment of customer creditworthiness
to a near science
• If a new customer applied for credit to buy merchandise
costing less than BRL 600 (about $200), no proof of
income was required, only a permanent address
• Those applying for more credit were quickly evaluated,
using a computerized system, and offered a credit limit
based on occupation, income, and presumed expenses
• Those rejected were directed to a credit analyst for
further evaluation.
Wikipedia
• The company's 900 credit analysts had been trained to
formulate questions and interpret responses carefully and with
subtlety.
– For Example
• If an applicant presented himself as a manual labourer, the analyst checked
his hands for calluses and his clothing for stains
• A stonemason might be asked to explain why he wanted to buy a computer

• The company's default ratio of 8 to 8.5 percent was only about

half that of its competitors

• Instalment payments were made over a period of one to 15

months, with the average term being six months and the
average interest rate 4.00 percent
Wikipedia
a month
 Casas Bahia and India
• According to C.K. Prahlad who is one of the most
influential management gurus in the contemporary world
and the co-author of the book “The Fortune at the
Bottom of the Pyramid”

• In India we can not follow the same model

because of
– High Interest rate
– Low literacy rate
– Fear of Defaulters

Wikipedia
•Thank You

Wikipedia