H&M has just announced the opening of their first store in Brazil in 2025, with plans to open physical stores and online shopping first in the major cities of the South East (Sao Paulo and Rio) and further expand to other locations.
But this is not the first time that H&M has announced its plans to enter the Brazilian retail market. In late 2013, H&M announced that it would open its first Brazilian store in 2014, with plans to open five stores within the first 12 months. The Brazilian press reported that the company’s executives even negotiated locations with a few shopping centers, but all plans fell through and Brazil was crossed off their list.
The reasons given were costs to set up the business (much higher than expected), bureaucracy (Brazil is notorious for its high customs duties, which can be a barrier for foreign companies), and the high competitiveness of other fast fashion players that are already here.
Fast forward 10 years, and the Brazilian fashion retail sector has become even more competitive and H&M announced again they are entering the Brazilian market, this time for sure.
Brazil’s Fashion Retail Landscape: Key Players and Trends
The biggest fashion retailer in the country is C&A. With a mix of physical and online retail, the chain has a total of 300 stores in Brazil, located in over 125 cities across the country.
Talking about online sales, Brazil will be the 15th largest e-commerce market in the world in 2023. According to Statista, the Brazilian e-commerce market is expected to reach a value of US$55.8 billion in 2023, up from US$41.8 billion in 2022.
And the fashion retail segment is the largest in the Brazilian e-commerce market, accounting for 25% of total sales in 2022.
Amazon and MercadoLivre are the biggest online retailers, and that shows Brazil’s digital maturity not only in market size but also as an attractive new market for international retail brands.
Shein’s Meteoric Rise in Brazil
Chinese retailer giant Shein started selling and shipping to Brazil in 2021. The company launched its Brazilian website and app in Portuguese, which has been downloaded millions of times and is now one of the most downloaded apps in Brazil.
And their competitive advantage was low prices and offering free shipping on orders over R$150 (about US$25), which made Brazilians go on a shopping spree.
To illustrate the retailer’s meteoric rise in the country, Shein opened a pop-up physical store in Sao Paulo in a marketing move to raise brand awareness and boost online sales. The store opening day saw hoards of shoppers and long queues to pay, which caused arguments and even some fights between shoppers.
Social media posts showing the fights “a la Black Friday” went viral, and despite all that, the opening day was dubbed a success.
Now, Shein is set to invest nearly USD $150 million in Brazil to make the country its production hub in Latin America and aim to have 85% of its sales in Brazil generated by local manufacturers and sellers by the end of 2026.
Shein partnered with 2,000 Brazilian textile manufacturers, potentially creating 100,000 jobs over the next three years. According to the company’s website, the investment will provide technology and training to domestic manufacturers so that they can upgrade their operations to match Shein’s on-demand model.
That sounds good on paper, but localizing their production in Brazil will come with a lot of challenges. For instance, Brazilian wages are higher compared to those in China, and labor and sustainability laws were in place decades ago.
Sustainability consultant and podcast guest John Pabon lived 10 years in China, and when asked about how Shein will work with local manufacturers in Brazil, he answered: “We have to remember China’s labor laws and sustainability regulations are very strict. One of the things that I still don’t understand is how Shein has been able to get around many of these regulations.”
On the question of how Shein can remain profitable, Pabon added: “Shein can remain profitable as long as they continue with the channels that have worked for them in the past. That includes social media and influencers. I wouldn’t think things would be very different in the Brazilian local market when it comes to these marketing approaches. What they shouldn’t do, however, is start to embed sustainability messaging into what they’re promoting.”
H&M’s Sustainability Claims: Genuine Efforts or Just “Greenwashing
It’s still not very clear if H&M will manufacture their products in Brazil or if they are going to import their products and eventually localize their manufacturing in the country, like Shein did.
That brings up the question of sustainability. Internationally, H&M has shown a message of being a sustainable brand with recycling initiatives, but when these sustainable initiatives were put under scrutiny, they showed a very different outcome.
In his latest book, The Great Greenwashing, John Pabon explains why brands do that: “When these retailers push their greenwashing messaging, consumers feel they’re doing good through their purchases, regardless of legitimacy.”
The most recent example was an investigation by the Swedish newspaper Aftonbladet, where reporters put AirTags on a few items of clothing that were left in one of H&M’s recycling boxes. They found out the items ended up in landfills in different African countries. Consumers and sustainability advocates were shocked by the results of this investigation, leading to accusations of greenwashing against the brand.
Talking about H&M’s strategy in Brazil, Pabon added: “Given H&M’s business model is fast fashion, there is no way that they should focus on the environment as part of their overall sustainability messaging” .
So, what should their sustainability approach be in Brazil? Pabon made two important points: “The first is to improve the amount of transparency that exists in their supply chain. The stronger their handle on what their first, second, and third-tier suppliers are doing, the better their overall supply chain management will be. As they’re just starting off in Brazil, it’s an opportunity to really set the right foundations at the start.”
The second point was for the company to focus on their workers: “H&M’s issue has always been around workers rights and labor rights, especially in the developing world where they produce most of their products. With Brazil’s labor laws being relatively strict, hopefully that will help H&M get in line.”
During his time in China, Pabon collaborated with H&M and explained that there were sustainable strategies in place, at least on paper. The gap was in the implementation of these strategies.
“At the end of the day, most of these issues are something H&M faces on an international level. Whether or not they will be able to use their entry into Brazil as a springboard for improvements in their sustainability practices will be interesting to watch”, added Pabon.