Jorge Lizan (Lizan Retail Advisors): “Going to a‘ mall ’in Latin America is better than going to one in the US” Fashes Premium Fashes Premium

Jorge Lizan has more than twenty years of experience in the retail world. Six years ago, the executive founded the firm Lizan Retail Advisors (LRA), which provides consulting services to companies in the sector in international expansion, strategic market planning and the franchise business, advising companies such as Equivalenza, Hema and LC Waikiki, among others. The specialist reflects on the shopping center model of the future, the current situation of retail in Latin America and the lack of franchise partners in the region.

Question: In Europe and the United States there is talk of a Retail Apocalypse. What is the current reality of retail in Latin America?

Answer: It is a reality that in the United States there are closures and sales of businesses, however in Latin America the openings and launching of new concepts in shopping centers are increasing; you see many examples of groups that are having success. In the region, shopping centers are very relevant and play a more important role than in others, due to the lack of public spaces and the safety factor. Most of the shopping centers in the region have a better occupancy rate than in the United States, where the rise of e-commerce has been an important factor. In Latin America, department stores have a very low percentage of sales through the online channel, also driven by the recurring problem that postal services in the region have not been reliable.

Q: How is the sector in Latin America different from that of Europe or the United States?

A: In the United States and Europe, retail is highly evolved, it is in a very mature stage, the percentage of expansion and positioning is lower. How many more Zara or Mango could be opened in the region? In most cases in Latin America, retailers do not enter directly, so they do not have to make large capital investments, the risk is assumed by the partner in the region.

“The economic and political situation of the sector is clearly taken into account, so retailers take very limited and measured risks, working with partners who already know the sector”

Q: The region is currently going through greater social and economic instability, why do international giants continue to bet on Latin America?

A: Not only in Latin America, but also in Asia, Thailand, India and other emerging markets. This is mainly due to the fact that it has already penetrated its local market and these emerging markets represent an interesting sector of 600 million inhabitants. These have less commercial offer than there is in Europe, and that registers a greater population growth and a middle class that is increasing. The economic and political situation is clearly taken into account, but retailers take very limited and measured risks, which is why they enter with franchise partners who already know the market, who have the capital and who know how to navigate the sector.

Q: The number of shopping centers has registered positive growth, but the number of outlet centers has been stagnating. Why?

A: The funny thing is that anyone would think that in Latin America there should be more outlets, however in Mexico there are seven and more than 700 regular price shopping centers. In the region there are around twenty outlets compared to the 2,000 existing shopping centers, which means a penetration of 1%. This is because in the United States the retailers began to produce a lot and to reduce this inventory these discount centers were created, since having large warehouses represents a significant cost in rent, then they realized that it was a profitable business And so the industry was created. In Latin America it has not grown because retailers do not have this excess, when working with franchises, they must manage the stock in a more limited and more efficient way.

Q: Is the commitment to the shopping experience the new key to shopping centers?

A: Yes, worldwide. Going to a mall in Latin America is better than going to a mall in the United States, due to the level of experience, commercial offer and the fact that these spaces are not only intended for shopping, they inevitably become community centers. Operators in the region are extremely interested in developing shopping centers that not only have better brands, but are also destination centers.

“The mall will become more integrated with the community, social media and technology, and will become the social hub of the community”

Q: What will the shopping malls of the future look like?

A: Increasingly far from shopping centers that only offer clothes, clothing and department stores, leaving behind the model that the shopping mall must be anchored to a department store like Macy's or Falabella. The shopping center will become more integrated into the community, social media and technology, and will become the social center of the community, offering other services such as networking, schools and clinics. For example, the most successful projects in Latin America are those of mixed use, even developers are already leaving their comfort zone because they know that if they do not invest in these changes, they will lose value.

“The region is gaining momentum and there is constant concern because the number of brands that arrive exceeds the number of members that exist”

Q: Generally, the Latin American consumer is very traditional and a bit insecure when shopping online. What strategy should brands follow to position themselves in ecommerce within the region?

A: People doubt that their product will arrive on time and in the right state, there is also a level of insecurity that does not assure me that if I am not at home, no one will take my order. For this reason, there are other proposals such as click&collect that is growing a lot in the region. There is another factor, which is that the penetration of credit cards in Latin America continues to be very low. In order to buy online, you inevitably have to have a credit card and it must have sufficient credit.

Q: What are the countries to consider in the region?

A: This changes all the time. 15 years ago, Argentina was a focus point that people in the sector visited a lot to learn, the developers were highly respected and recognized. Currently, the two countries that are leading the sector are Mexico and Chile, which serve as an example of good practice. Mexico, especially, is a country where there is more development and international brands see more potential, 80% of the interest of international brands is focused on Mexico. The place that Chile represents in South America with its retail offer has not been lost despite the social situation in recent months. The region is gaining momentum and there is constant concern because the number of brands that arrive exceeds the number of partners that exist, there is always a brand that is left without partners.