Neutral targets new milestones after ‘spectacular’ sales bounce in 2023

“Our performance places us back on the podium of regional operators and gives us the confidence to regain the leadership we once held.” So says a bullish Neutral by Luryx CEO Marcelo Montico, as he looks back on a strong year of growth in 2023 that has continued into 2024.

Founded in 1987, Neutral is among the largest and longest-established border store players on the Uruguayan side of the border with Brazil. It runs nine stores covering around 15,000sq m of retail space in six cities: Artigas, Rivera, Bella Unión, Río Branco, Aceguá and Chuy.

Sales climbed by +37% year-on-year in 2023, which represented a “truly spectacular” performance, according to Montico. As of the end of May 2024, turnover is a further +21% ahead of the same period last year. That is despite the impact of flooding in southern Brazil that affected 2.2 million people – 500,000 were evacuated from their homes – and hit the flow of shoppers from Rio Grande do Sul to the Uruguay border. Montico notes that while the situation is being resolved, it slowed growth in May.

Assessing the dynamics that are driving the strong performance, Montico cites investment in the shopping experience – including store renovations – alongside promotions.

He says: “Our Neutral brand was a pioneer in developing this channel, so our connection with customers is almost like family. Based on this strong bond, we have emphasised the emotional connection that unites us, launching the campaign ‘Vale a pena vir’ (‘It’s worth coming’). Based on this concept, we developed many cross-promotions for different brands and categories.”

“We believe that retailers must increasingly integrate AI into our daily operations. This is not to replace our employees but to enhance their efficiency and effectiveness.”

This is one of several initiatives taken to lift the shopper experience and drive spending.

Montico comments: “Merely maintaining updated facilities with excellent lighting and cleanliness is no longer sufficient; we must exceed expectations to delight our customers. To achieve this, we leverage key dates throughout the year to create unique experiences, blending entertainment with customer interaction. The positive feedback we receive from events during Carnival, Easter and Christmas is particularly rewarding.

“These efforts have been greatly appreciated by our customers and have formed the core of our competitive advantage.”

Other factors beyond the retailer’s control are feeding positively into its growth. One is the recent profound macroeconomic changes in Argentina, which ended the availability of products and services at very low prices. “This change helped us recover much of the tourism that in 2023 was almost captive in Argentina,” says Montico.

The second key factor is renewed political and economic stability in Brazil that has allowed the Real to remain relatively steady in value.

This newfound stability has boosted growth for Neutral, says Montico. “The variation between the extremes [in currency valuation] so far this year has not exceeded 5%, fostering consumer confidence and preventing our portfolio offerings from becoming more expensive when measured in reais.”

Commenting further on this key nationality’s spending habits, he adds: “Brazilian consumers are displaying increasingly rational and well-researched purchasing behaviours, with social networks playing a significant role in this shift. We have some clients who prioritise new launches or exclusivity, often disregarding savings.

“However, the majority remain highly sensitive to savings in the local market, striving to optimise their US$500 [allowance] by purchasing only items that offer at least -20% savings. This sensitivity is evident when a distributor or local subsidiary in Brazil adjusts its pricing strategy, which quickly influences demand in our channel.”

Among the key categories, beauty is growing fastest in 2024 at +32% year-to-date, well ahead of the +21% rise overall. Other strong performers include fashion & accessories (+29%) and electronics (+26%). Wines & spirits represent the largest category at 35.8% of turnover so far in 2024, with beauty at 30.5% and fashion & accessories at 19.4%.

Montico says: “Beauty is driving the growth, thanks to highly successful launches that have encouraged consumers to incorporate these products into their shopping baskets, significantly increasing the average ticket and conversion rates.

“Our preferred partner brands are also growing above average, with GAP, MAC and Adidas leading the way, in that order. Additionally, the technology sector is demonstrating greater dynamism compared to its historical performance.”

Neutral share of sales by category YTD 2024

Source: Neutral

Since Q4 2022, the presentation of key categories within the Neutral store network has shifted. Then, the company began developing distinct retail environments under a Store-in-Store (SIS) model featuring highly sought-after brands, including MAC, Pandora, Adidas, GAP and others. The goal was to enhance the shopper experience while increasing the average purchase value.

Reflecting on this strategy today, Montico says the SIS model remains a “clear differentiator” for the business.

“The top-performing brands in terms of sales are those exclusively available at Neutral by Luryx, such as MAC, Pandora and GAP,” he says.