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CHAPTER 7: TECNOLATINAS PROFILES

 

The store that bet on the Internet when nobody did it and was not wrong


 

Industry: E-commerce
Country: Brazil
CEO: Marcio Kumruian
Website: http://www.netshoes.com.br
HQ: Sao Paulo
Office: Sao Paulo, Buenos Aires, Mexico City
Employees: 2,000+

Netshoes is one of the most renowned brands in the Latin American E-commerce scene, and the world’s largest in the sports goods category. With a strong focus on footwear and sports clothing and gear, this online retailer has grown to become one of the region’s largest. But, unlike most of its competitors, this company wasn’t conceived as an online venture, nor was it the product of the traditional startup building and expansion process. Rather it became what it is thanks to its founders’ courage and vision.

While today it may be hard to imagine, Netshoes came to life in 2000 as a 50 squared meters brick and mortar footwear store in Sao Paulo. Founded by Marcio Kumruian and Hagop Chabab, two cousins of Armenian descent, the store soon expanded to shopping centers and gyms, until it operated seven different branches.

In 2001, the founders decided it was worth it to give the online channel a try. The Internet was still a novelty, and they believed it showed promise and opportunity. Launching the online store was not easy. At that time, there were no platforms or marketplaces to build the operation on, so it required investment and a lot of trial and error. On the first two months, the store didn’t sell a single item. The third month, however, marked a breaking point, when the website sold its first pair of shoes. And then, on the fourth month, it grew 100% by selling two. In spite of these results, Kumruian and Chabab trusted on their vision, and kept the online store going, and invested to make it grow.

Over the following years, the online channel kept growing at staggering rates, a trend that became even more pronounced as banks and credit cards launched plans that allowed buyers to pay in up to 12 installments.

Observing that the E-commerce store was growing at 130% rates, and the physical stores at around 7%, Netshoes’ founders made a radical decision, and decided to shut down their physical businesses in 2006. It was a bold move, which at the time many believed was a mistake.

Moving their entire staff and operation to a warehouse, the team started to focus on things like providing good customer service, which included writing thorough product descriptions, making it easy to exchange or return products, shortening delivery times, and managing their stock in order to be able to offer a wide catalogue.

This gave credibility to the store. By 2009 the company had 250 employees, and the founders decided it was time to speed up expansion, and so they raised capital from Tiger Global Management. But even with more resources managing a 20% montly growth was not easy. Netshoes was taking a risk, as things could go out of control, and service quality decline.

In order to avert this possibility, the company started to implement very systematic processes, planning every move ahead. This allowed it to successfully launch some daring features, like launching one day shipping, something unprecedented in the region. And it paid off, as customer satisfaction grew, and the brand positioned itself as a reliable retailer.

In 2011 Netshoes started its international expansion, opening stores in Argentina and Mexico. On the first year, the Argentine operation grew more than 230%, and kept expanding ever since.

Between 2009 and 2016, the company raised more than $215 million dollars in venture capital, from investors like Riverwood Capital, Tiger Global Management, Kaszek Ventures, and from Singapore’s sovereign wealth fund GIC, which invested $170 million in 2014.

But Netshoes operations go beyond that of its iconic website. The company also operates Zattini, a fashion retailer it acquired in 2014; and it manages the online stores of the Brazilian Football Federation, the Mexican National Football Team, and of 15 different soccer teams throughout the region, including the Sao Paulo, Palmeiras, River Plate, and Monterrey clubs.

Besides managing these signature teams online retail operations, the company has also developed mobile apps and other digital resources for these teams, helping it improve its positioning among sports fans, an important consumer niche in its category.

For the future, Netshoes is betting on mobile to expand its operations, and reach the millions who only access the web through their smartphones in the region, something common among those entering the middle class.

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