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Brazil is ready to reduce the bureaucracy of its omnichannel operations

If the Law of Omnichannel is passed, operating multi-channel sales in Brazil will be much simpler

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The unhindered growth of e-commerce in Brazil has brought big challenges with it. The taxation legislation of the country, first conceived for the analogue world, was not ready for the boom of the Digital Economy in the biggest market of Latin America.

In the search for the best purchasing experience for the consumer, reducing bureaucracy of multi-channel regulation has become a priority. Given that companies operating in multi-channel sales in Brazil nowadays need to navigate some taxation and logistic difficulties, the good news is that such a scenario is close to ending.

After identifying the urgency of streamlining multi-channel regulations in Brazil, the Brazilian Association of Electronic Commerce (ABComm) meet with retail players, with lawyers specialized in taxation, and with politicians to formulate the best way of reducing the bureaucracy of multi-channel sales. That was how the Law Project (PL) 148/2019 emerged; the law is also known as PL of Omnichannel or PL of Multi-channel.

Currently being processed in the House of Representatives of the Brazilian Parliament, the project proposes a fiscal update that, among other things, facilitates the opening points of collection and withdrawal for products acquired online, while also allowing a reverse logistics less costly for e-commerce.

With the approval of the project, buying online and picking up or returning in physical stores will be far simpler in the country and, due to that measure, the numbers will show a growth trend. Studies by ABComm indicate that e-commerce sales will be 25% higher, an increase of 75 million of orders a year by 2020.

That number by itself is already a big benefit to be gained from the approval of the project.

Guilherme Martins, director of the Omnichannel Committee of ABComm.

A drastic reduction of bureaucracy in multichannel sales in Brazil

In an interview for LABS, the director of the Omnichannel Commitee of ABComm, Guilherme Martins, explains that the project seeks to solve two hurdles that omnichannel has in Brazil: the fiscal complexity of creating points of collection and withdrawal and the possibility of an integrated reverse logistics.

Currently, Brazilian legislation ends up restricting the ability of the consumer purchasing online and picking up his or her order in a physical venue. For companies, offering multi-channel options becomes a complex task.

Players that possess physical stores and the chain stores face fewer bureaucratic hurdles. In Brazil, some examples of e-commerce that already operate a multi-channel are the clothing and apparel stores Amaro, C&A, and Renner.

Already the “pure players,” those that only sell online, are unable to set up authorized partner venues as points of collection and withdrawal, a limitation to multi-channel operations.

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“To open a locker of collection and withdrawal, an e-commerce needs to generate a specific CNPJ* for itself, create its own account so as to withdraw Income Tax in a segregated manner. In our evaluation, such legislation does not consider the digital advances in the branch of retail and for that reason we need to integrate the physical and virtual worlds,” explains Martins.

When suggesting the simplification of taxation laws and the possibility of authorizing physical venues for collection and withdrawal, the PL of Omnichannel proposes a drastic reduction of bureaucracy in multichannel sales in Brazil.

Besides that, the project will promote advances in the integration of reverse logistics of merchandise. Today, Brazilian legislation doesn’t authorize the emission of a fiscal receipt for the return based on regret or dissatisfaction, only authorizing in case of warranty or exchange. With the absence of this legal provision, e-commerce end up paying taxes on a purchase that was not completed.

For Martins, the ease of authorizing points of collection and return near the consumer will simplify the reverse logistics in the country. “There will be an enormous ease of offer, to that client that regretted his purchase, that, instead of going to Correios and sending the product, he simply goes to the nearest store of that chain or to the nearest point of collection,” he explains.

Consumers and stores, everybody wins

“Without the need of investing a single real, merely adjusting the legislation, it is possible to offer real increment in the market. It is a project that doesn’t hurt anyone,” assesses Martins, emphasizing with optimism the chances of approval of the Law of Omnichannel. In other words, everybody wins: consumers, e-commerce, and small-to-medium-sized physical stores.

For the big players of the market, which are already searching for alternatives to operate multi-channel in Brazil, the changes to legislation will contribute with a reduction of the costs of those operations, primarily the expenses tied to excessive taxation and shipping costs.

With that development, Brazil will get closer to the reality of more mature markets, like the United States, the United Kingdom, and Japan, where the omnichannel is practically consolidated and irreversible.

The benefits for big players of cross-border that operate in Brazil are various. In addition to the simplification of taxes as stipulated in the law project, the multi-channel regulation will provide a greater penetration of deliveries in difficult access regions.

In the near future, for example, AliExpress, the giant e-commerce that is betting on the Brazilian market, will arrive with more ease to consumers that reside in more distant states or municipalities without an adequate logistics infrastructure.

ALSO READ: AliExpress opens its first physical store outside China

The small-to-medium-sized e-commerce stores and physical stores will win. E-commerce of lower volumes doesn’t have a network of physical stores in which in can apply that model of integration. When the PL facilitates the creation of partnerships with physical stores para collection and withdrawal, these e-commerce are able to reach a greater number of consumers.

Smaller physical stores, which still operate under the traditional and analogue model of sales, will also enter a more promising scenario. “It is going to transform the point of collection and withdrawal without complexity and that is going to generate at least two benefits. In the first place, the commission that it is going to receive from sales made over there and, in second place, an increase in the flux of the store itself, with a greater number of sales,” highlights Martins.

Concerning the consumer, the PL also has the potential to democratize access to e-commerce in more distant and lacking regions, known as regions of risk. Given the presence of violent crimes or being farther away from urban centers, some communities don’t receive transport services or of Correios. With the ease of creating accessible point of collection and withdrawal, that part of the population will be included in the world of e-commerce, which generally has more accessible prices.

“That brings benefits for the entire logistics. If it is possible to centralize the delivery in a single point in the community, instead of going through 100 addresses, we will have a reduction of costs and this benefits the consumer directly,” complements Martins.

No less important is the incentive that the approval of the PL will provide to innovation in Brazil. The simplification on multi-channel regulation will open up a space for the emerging and maturing of startups focused on developing innovation and logistics solutions, the so-called “LogTechs.”

The benefits of the project are many and, according to Martins, its processing in the National Congress shouldn’t be faced with much resistance. Currently, the proposal is being evaluated by the Taxation and Finances Commission (CFT) of the House of Representatives. If it were approved in the rest of the commissions and the plenary, it will continue to the Federal Senate, so as to be evaluated there. 

Translated by Axel Diniz

*The “Cadastro Nacional de Pessoa Jurídica” (CNPJ) is an identification number issued by the Brazilian Federal Revenue to companies in Brazil.