Value retail encompasses all forms of business geared towards offering more for less across different product categories, business models, store formats, and sales channels.
It includes cash-and-carry wholesalers, membership clubs, discount stores, marketplaces, and e-commerce platforms focused on low prices across a wide range of categories.
However, it’s important to remember that the growing informal economy also represents a form—albeit illegal—of value retail disguised as affordability.
The rise in value retail participation is a global reality, with continued growth expected in total retail business. There may be a few exceptions in some Asian and Pacific countries—such as China, South Korea, Indonesia, India, and Thailand—where economic growth has led to an overall expansion in consumption less focused solely on value.
But when we look at more developed economies in North America and Europe, and also in Latin America, Africa, and Brazil, what we see is an expansion that involves various value retail concepts.
This has a lot to do with consumers who are more empowered by digital tools and the ability to compare and assess offerings, yet who display predominantly austere, rational, pragmatic and conscious behavior—a result of an increasing turbulent socio-economic and political landscape in many different aspects.
This leads to far more cautious decision-making when it comes to what to buy, where to buy it, and which products and brands to choose.
It is always important to highlight that this analysis considers the broader market realities rather than divergent behaviors in specific geographic or atitudinal segments. The numbers clearly show this evolution across different market contexts.
In Brazil, cash-and-carry stores accounted for about 35% of food retail sales in 2021. In 2022, that figure rose to 40%, and currently, it’s approaching 50%, driven by a combination of increased offer and significant growth in demand.
In the U.S., just the wholesale club segment grew its share of total food retail sales from 8.7% in 2017 to an estimated 12% last year. Costco alone is estimated to hold an 8.5% share of total food retail sales.
In Europe, value-oriented chains such as Metro, Lidl, Aldi, Schwarz, Rewe/Penny, Netto, Edeka, Rema, Biedronka, and others have shown significantly higher growth compared to other food retail players in various countries.
It’s also possible to identify the evolution of concepts within value retail, from the most basic part of the first-generation models to more advanced ones, such as Trader Joe’s in the United States.
On the flip side, in Brazil, the rise in informality—both in physical and digital environments—is also a consequence of growing demand for lower and more competitive prices.
Beyond food
But value retail hasn’t expanded just in the food segment.
In the apparel sector, the rapid growth of chains like Primark, H&M, and Uniqlo in Europe and North America is evident, as well as Pepco in Germany and the many operations of the Inditex-Zara group around the world.
In the furniture sector, Ikea is a clear example of this movement in both the U.S. and Europe, along with Conforama. The same applies to the sports goods segment, with REI in the U.S.—a hybrid retail/co-op model — and Decathlon in Europe and Brazil.
The digital challenge
But the strongest value orientation is happening in the digital environment, with e-commerce and social commerce platforms—especially those of Asian origin—offering disintermediated models that connect producers almost directly to consumers.
By operating with more competitive pricing, these platforms are forcing a structural repositioning of traditional retail.
Examples include platforms like Alibaba, Shein, Taobao, JD, Pinduoduo, Temu, and TikTok Shop, which recently began operations in Brazil. In some countries, these platforms benefit from tax advantages, as is the case in Brazil.
The unique aspects of these e-commerce business models, especially cross-border platforms, represent a huge challenge for all traditional formats and business models due to the inherent structural disintermediation and their undeniable logistical capabilities.
Informality as ‘Made in Brazil’ value
The scenario of consumers being extremely price-sensitive, combined with heavy tax pressure is fertile ground for the growth of informality in Brazil, both now and in the future.
The outlook of a tax reform that would place greater burdens on the service sector—including commerce and retail—combined with the broader value-driven context is expected to further increase the informal sector’s share in total retail.
Even with all the technological tools available for monitoring, auditing, and collecting taxes, the forecast is that the level of informality in retail and overall consumption will rise significantly in the coming years, as it represents the most “accessible” and simple form of value retail.
Rationality vs. informality: an unequal fight
The more conscious, rational behavior of consumers—especially younger and more informed segments—faces a complex moral dilemma when making purchasing decisions and considering the possibility to pay less for the same product or service.
At that moment, a more conscious and ideologically consistent stance is often overrun by reality, and consumers choose to pay less, even if that means supporting or stimulating informality.
This can be seen in neighborhoods, local markets, and various other scenarios that encourage this “concession” to lower prices, even if it directly fuels informality.
All signs indicate that this trend will continue, as illustrated by the Laffer Curve, which shows that as tax burdens increase, so does informality.
And the global surge in demand for value across all product categories finds in Brazil’s informality its most basic and expandable operational model.
In conclusion
While in more developed economies taxation is more concentrated and modulated by rising personal income, in Brazil’s current and future reality, it’s more focused on taxing consumption, which encourages transactional informality.
Globally, the motivations behind value retail’s growth are structural and behavioral—but in Brazil, it’s also fueled by the ease of informality.
It’s worth reflecting on.
Marcos Gouvêa de Souza is the founder and general director of Gouvêa Ecosystem and publisher of the platform Mercado&Consumo.
This article expresses the author’s opinion and does not necessarily reflect the views of Mercado&Consumo.
Image: Envato
*This text was translated by AI
