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A HOME RUN

Latin Americans embrace expanding home improvement chains

By María Bird Picó

Last year was a big year for Costa Ricans interested in fixing up their dwellings — the country got its first home improvement chain.

The novelty for shoppers visiting EPA, a Venezuelan home improvement chain that set up shop in San José’s Curridabat neighborhood, is that for the first time, they can find construction materials, doormats, gas grills, plants, shower curtains and the like under one roof. Clearly, the concept is a hit with Costa Ricans and Venezuelans alike: This year EPA is opening a second store in San José, and the additional three the company is rolling out in its home country will bring the total there to 16.

Latin Americans have developed a taste for do-it-yourself projects and are visiting home improvement chains to buy more than nails and a hammer. “After food, our homes are the second source of significant mass consumption,” said Juan España, EPA’s general manager. “Something breaks down every day in our homes.”

EPA is not the only beneficiary of this phenomenon. Venezuela-based Ferretotal, a seven-store chain, will open two more stores in its home country this year. And the Chilean Easy and Sodimac chains continue to expand too. Sodimac is entering Peru and Colombia, while Easy is scouting new markets within the region. In Mexico, meanwhile, Home Depot operates 55 stores in 33 cities, following its $500 million-plus program to build and acquire stores there. And the French Leroy Merlin chain has 11 stores in Brazil, where it competes with Home Center TendTudo, having entered the country nearly 10 years ago.

Home improvement chains offer both convenience and low prices, says Juan Gramage, a Venezuelan retail consultant who worked with ConstruCentro, the first home center to open in Brazil, and later with EPA. “These home improvement stores can reduce the cost of their products by buying in bulk directly from the suppliers, rather than going through distributors,” he said. “Consumers also love the fact they can purchase all the materials in one place.”

The growth of home ownership among Latin America’s middle and lower classes is fueling sales of these goods, says Philip Hordern, a Chile-based retail consultant who worked with Sodimac when it established its first store in 1984. “The houses they obtain only contain the minimal structure and basic elements,” said Hordern. “The result is many homogeneous suburban housing developments. People want to be different from their neighbors by adding to the basic package, expanding to accommodate additional family members and applying their own creative touches. They are very house proud; their home is their castle.”

“Doing something around the home brings a tremendous personal satisfaction and praise from their families and friends,” he said.

Latin America still offers ample opportunities for growth, says Sandro Solari, general manager of Sodimac Chile. And besides providing these much needed products, Sodimac also offers the means to pay for them. “We offer excellent financing tools to consumers,” Solari said.

Sodimac pioneered the home improvement concept in South America when it opened its first store in 1988. The original Sodimac, a construction cooperative formed 54 years ago, was bought by the Chilean Dersa group in 1982 and then bought again by the Chilean retailing group Falabella in 2003. But Sodimac went into Colombia in 1997 and roughly two years ago hit Peru.

This year Sodimac will open two more units in Peru, bringing its total there to four, and two as well in Colombia, boosting its stores there to 11.

“Sodimac is evaluating other markets in Latin America with the goal of becoming the main player in the region in the home improvement and construction materials market,” said Solari, though the company has not finalized which countries it is targeting yet.

Both Sodimac and Easy, which is owned by Chile-based mall development and retailing group Cencosud, cater equally well to homeowners and small and midsize construction companies, says Hordern. “This has added a tremendous lift to their sales,” he said.

Knowledgeable sales associates are important to a home improvement store’s success, and many chains also provide free informational workshops. Consumers are learning that they can do a whole lot more than they would ever have believed, says Poldi Weil, commercial manager at the Lima, Peru-based Ace Home Center. “In the past they would hire a contractor to do most of these projects,” said Weil. “Now we sell them the projects and give them the tools and instructions to get them done.”

Ace Home Center launched in 1994, but sales really took off three years ago with an improvement of the Peruvian economy, says Weil. Peruvians are estimated to spend some $1.5 billion annually at home improvement centers. Ace has five stores in Peru, all of them in Lima and each measuring about 107,600 square feet (10,000 square meters). The company plans to roll out one or two stores over the next several years. Do-it-yourself stores are an attractive option for consumers during economic downturns, says Pablo Neto, Argentina-based general manager of Easy.

Easy opened its first Argentinean store in 1993 at Cencosud’s first shopping center there. The chain says it plans to open six new stores and remodel an additional six existing ones this year. At present, Easy operates 26 stores in Argentina and 17 in Chile. Like every other home improvement chain, it is banking on customers to keep building so that it can do the same.