Mobly plans to unlock sales in the Northeast with a new distribution centre

Source: Valor Econômico

With the opening of its first distribution centre in the Northeast, in Cabo de Santo Agostinho (PE), online furniture retailer Mobly will try to solve a bottleneck in the company's sales to the region, where the consumer's cost of shipping is at around 30% of the product's value. The investment in the unit was a strategic part of the company, which made an IPO this year to start operating with profitable margins.

The distribution centre in Cabo is Mobly's fourth in the country, followed by São Paulo, Minas Gerais and Santa Catarina. With the new unit, the company intends to stock the products that sell the most in the region. In addition, Mobly closed a partnership with 15 local suppliers from furniture centres in Pernambuco and Ceará, to offer specific products for the Northeast.

Vitor Noda, President of Mobly, says that sales to the region currently represent 10% of company sales. "The potential is much greater, not just because of the region's representation in the country's GDP," he said. Before opening the distribution centre, the company simulated what would happen with sales to the Northeast if freight and delivery times were drastically reduced. On average, sales would rise 60%.

Even with an increase in revenue of 43%, to R$ 344.6 million, Mobly had an operating loss of R$ 38 million in the first half of this year, almost four times the loss registered in the same period of the previous year. The company still needs to gain more scale to dilute fixed costs and start showing positive results, says Noda. "Profit should start this year or 2022", he says, without specifying the 'breakeven' estimate.

The short-term scenario is challenging for the sector as a whole. Mobly's average annual input inflation is 25%, says the executive, and the company has opted not to pass on the cost increase to prices as a customer acquisition strategy.

According to Noda, most basic items have steadied prices, but some continue to increase, with wood and imported inputs impacted by the increase in sea freight. Noda says that in the first three quarters of this year, with the reopening of commerce, the movement of online consumers retreated year on year. For the fourth quarter, however, the executive predicts that the online market for the furniture category should show growth compared to the fourth quarter of last year.

In addition to investments in the logistics area, the company has implemented other strategies to improve its margins. Born online, Mobly started a sales operation in physical stores, where it achieved better profitability. For now, the stores are restricted to São Paulo. At the same time, the company is also investing in expanding its portfolio of private label products. Currently, the segment accounts for between 45% and 50% of sales, but the goal is for this share to rise to 65%.

Noda says small local mobile networks have been losing market share to e-commerce, but the sector's sales dynamics are likely to remain hybrid. "By acting only in the physical, the retailer faces the limitation of offering products to the size of the store. By restricting itself to online sales, it loses the chance of winning over customers who need to feel the product when deciding to buy physically", he says.