What scared H&M off from Brazil?

Brazil is notorious for its red tape process for new business operations. The country ranked 126th out of 183 countries – lower than Burkina Faso and Nigeria -  in the World Bank’s latest annual global report which evaluates the ease of starting a business, dealing with construction permits, registering property, and paying taxes. 

In late 2013, H&M announced that it would open its first Brazilian store in 2014.  At that time , the brand said it would reach 40 stores in the country on a medium term, opening 5 stores within 12 months. But in August 2014 , H&M's ambition to start their operation in the country was put on hold. According to news site Exame, the company's executives even negotiated location with few shopping centres but all plans fell through and Brazil was crossed off from their list. 

The reasons given were costs to set the business - much higher than expected - bureaucracy and the high competitiveness of the players that are already here.  

But, not all is lost for foreigner fashion brands wanting to set up business there. American Forever 21 caused a lot of buzz and huge queues (there were rumours of people queuing over 5 hours) at its first store opening in Sao Paulo last year. Despite the red tape, the company couldn't deny the huge market that Brazil is. The company ended 2014 with 11 stores nationwide. For 2015 , their plain is to open another 16 stores.  

According to the brand's director of marketing in Brazil , Eduardo Barbieri , the products are not yet manufactured in the country but there are plans to find manufacturing partners there. Forever 21's main selling point is still to focus on accessible prices. With more money in the pockets, Brazilian consumers started travelling more abroad -  specially to the US - and that helped the brand to break into the country.  “The earlier knowledge that Brazilians bring with their travels [abroad] helps in our brand awareness”, added Barbieri .

 Ana Paula Picasso is a Brazilian born Market Research Analyst based in London. She also started "The Emerging markets hub" blog, writing about Brazil and other emerging economies https://emergingmarketshub.wordpress.com/