Although Disney has marketed cartoon-based merchandise in Latin America for decades, retail sales totaled just $110 million for the region as recently as 1989. Phenomenal growth has come this decade, and Disney's experience there imparts key lessons for anyone selling at retail.
To hear it from Lisa Kauffman, a Disney executive who spoke at a Miami conference recently, the story is illuminating for several reasons. Sure, Disney has a powerful brand name and an army of persuasive little fans. But even so, the entertainment giant made mistakes in Latin America, just like almost everyone else, and Disney has learned -- not just from the currency devaluations and painful blips it's feeling this year in Brazil, but from the shifting retail landscape, itself. In Latin America, unlike Europe or Japan, for example, Disney does not operate company stores right now. Instead, it licenses companies to manufacture Disney-approved goods and distributes them through thousands of retail sites, such as department stores, discounters and mom-and-pops. Brazil and Mexico are its top markets.
Unlike many U.S. companies marketing in Latin America, Disney isn't just after the rich. Of course, families who've visited Disney World, seen the movies and can afford to outfit their little girls in Minnie Mouse attire from head to toe are important customers. But Disney also markets to the middle and blue-collar classes, whom researchers call the B and C groups and who greatly outnumber the A's. "A bigger target for us are the B and C consumers who don't travel to the U.S. at all, but may have seen Disney movies or TV shows at home," says Kauffman, director of business development in the consumer products unit's Latin American region. Like parents anywhere, these consumers spend on their kids before they spend on themselves, and a coveted cartoon-character toy won't break the budget.
About 70% of buying decisions are made at the "point of sale," at the product display in the store, research has shown. Just a few years ago, Disney believed its brand was so strong that a Disney department within a store, with all kinds of merchandise from apparel to books, would draw shoppers like a magnet. The displays were eye-catching, the products plentiful. It just didn't work.
"The major learning we had was that only in rare circumstances is that successful," Kauffman says. "That's not how consumers shop. We learned the hard way it's difficult to entice consumers to go there." And since the Disney area didn't fit into a traditional department like housewares or toys, store employees were reluctant to take charge and keep stock fresh.
So the Disney mini-departments have been closed. Better, Disney learned, "to make sure the products are visible to consumers in the department where they're shopping." In other words, toys in the toy aisle, apparel in the clothing departments, bedding in domestics. Especially in huge stores, where one department can be a city block away from another, putting relevant merchandise where customers are looking for it was critical.
Some big retailers, called "hypermarkets" -- like Extra in Brazil and Exito in Colombia, vast stores that carry fresh food as well as clothing and housewares -- are fast gaining market share in Latin America because of convenience and volume pricing. In Brazil, for example, sales in hypermarkets and department stores rose 149% between 1991 and 1997; in Argentina, those stores' sales leapt 163%.
As these chains have been expanding, WalMart has opened in Argentina, Brazil and Mexico, as has Carrefour, a French discount chain. Even J.C. Penney has entered Mexico and Chile. Meanwhile, local store chains like Mappin and Mesbla in Brazil have merged. For Disney and others in the retail market, maintaining sales momentum has meant keeping in step with these changes and new players.
Kauffman says the trend toward bigger, national stores is helpful. Using large chains "provides national distribution in an organized and systematic way," she says. Big chains have strong brand names, themselves, as well as promotion budgets. "It's efficient," she says.
Maximize profits
At the same time, these are demanding retailers who are increasingly sophisticated about managing in-store stock to maximize profit from inventory and space. "We have to make sure they have the right assortment because these retailers will edit it," Kauffman says. This year, Disney's "sitting by the side of our key accounts" in an effort to provide the right mix of products at the right price, when they need it, with timely marketing support.
In unusual cases -- as in Argentina, which is in the midst of a recession -- Disney has stationed merchandisers in major stores during back-to-school time to make sure stock was replenished. In Brazil, hit hard by currency devaluation and unemployment, "what we're feeling is retailers' conservativeness -- they don't want to get stuck with too much inventory."
When the occasion calls for it, as when Tarzan opens this summer, the company musters big-time marketing support for stores. When Mulan launched last summer, the company set up a "Villa Mulan" outside a major store in Mexico City: a tent-covered playground, promoted in advance, where kids played on Mulan-themed toys and met life-size characters from the film. In Brazil, Disney has been sending live character shows to perform in shopping malls to draw customers.
So does that mean Mulan or the Little Mermaid or the Lion King has supplanted the classic cartoon characters we grew up with? "We have a strong Mickey business in the region," is all Kauffman will say. "Mickey is our mouse."