On this blog, Casas Bahias, Brazil’s largest retailer, which has garnered its financial success by extending affordable credit to low income consumers, has been championed as a successful BOP business model. Strictly in terms of the bottom line, I agree. However, there is reason to believe that some of its business practices may actually harm the BOP. Case in point: Before this year’s World Cup, Casas Bahia made an offer that low-income consumers could not refuse: Buy one $3600 Philips plasma screen television and get a second one for just $.40. Of course there was one condition: Brazil must win the World Cup.
The deluge of buying that followed the promotion was simply phenomenal; in just seven days the retailer sold 2,000 plasma televisions, a quantity that, according to Michael Klein, the Director of Financial Relations, Casas Bahia normally sells in seven months.For most Brazilians, the national team’s 1-0 loss to France was, well, a loss. And for low-income consumers who took the gamble and bought a plasma television, it was a double loss. But for Casas Bahia it was victory.
As we have tried to make clear many times on this site, engaging the BOP does not need to be a zero-sum game. That is, businesses that market their products to low-income consumers can turn a profit while actually improving lives. Unfortunately, it is also true that they can turn a profit by using the hopes of the BOP to sell exorbitantly expensive televisions.
