For Brazilian distributors, data is the new oil

Brazil's top three fuel distributors have joined the big data revolution and launched cashback programs over the last year, in an attempt to incentivize gasoline and ethanol sales.

Yet the long-term sustainability of these programs has been called into question amid traditionally thin margins in the retail segment and data privacy concerns.

BR Distribuidora's partnership with cashback app AME pioneered the new business model in the country. Their partnership, launched in May 2020, drew customers in with its 20pc cashback rates during the first month, and 10pc during the remainder of the first year--higher cashback rates than any other program at the time.

A year later, after gathering information from a large user base, and successfully connecting it to an app with diverse spending options, BR has opted to alter its reward system as the high cashback rewards failed to evolve into a sustainable, long-term model, a premise many in the retail industry had questioned. Clients now claim personalized cashback rewards, calculated by the app according to each customer's profile.

The success of the initiative also led BR to broaden its relationship with AME's owner, department store chain Lojas Americanas, and partner up in a shared territory, convenience stores. Now combined, their leadership in this retail segment has become dominant.

With access to a wide range of data from possible clients' smartphones, BR and AME can analyze behavioral patterns that range from where they go, to what they are planning to buy, even to what they are feeling. The use of big data positions companies to know exactly when to market what to which client, and in BR and AME's case, brings in a large number of people, with different profiles, to an app with all kinds of consumer goods. The end use of this data for marketing purpose looms large and goes beyond the fuel retail sector.

BR's gasoline market share rose by 2 percentage points to 24.2pc in April 2021 from the same month of 2020. No other market participant achieved as much growth in the sector during the same period, according to oil regulator ANP, with Ipiranga and Raizen, BR's biggest competitors in the sector, lagging behind the company with 18pc and 15pc market share, respectively.

But this profitable use of people's personal information is not without its challenges. It is not easy to retain this large number of users without the initial high discount—which is unsustainable in the long-run, since distributors already operate on low margins. For franchisees, the program has even backfired, as some stations have already reported drops in sales after the app changed its discount policy.

The use of personal data is another thorny issue, with potential legal ramifications. Local personal data protection institute Sigilo is suing Ipiranga for allegedly selling users' data from its own cashback app, Abastece Aí. The company declined to comment to Argus on the case. Sigilo says it has received complaints that the app had opened bank accounts in users' names without authorization.

As legislation advances regarding data protection and customers become better informed, other spats are likely to arise.

By Rebecca Gompertz