Every day she does everything always the same. Resident of Duque de Caxias, in the state of Rio de Janeiro, Simone Reis, 35 years of age, wakes up in the wee hours of the morning when the sky is still dark. By 6 in the morning, she is waiting for her bus that will take her to the small restaurant where she works as a kitchen assistant earning a minimum wage of 510 reais. Simone is a typical representative of Brazil’s new Class C. Her family – comprised of her husband, a cleaning products sales rep, and four children – has a monthly income of nearly 3 000 reais. Over the past three years, the Reis have financed a four-door car, did a little remodeling on their home, bought a notebook and began to pay for a broadband Internet access plan. Contact with the digital world has transformed Simone’s routine and lifestyle. Today, before she leaves home for work, she checks her e-mails and messages left on her Orkut page, the most popular social network in Brazil, with more than 29 million users. Simone receives the orders for Natura and Avon cosmetics and lingerie and creams from Victoria’s Secret, which she began to sell three months ago, over the Internet. With her online sales, Simone makes nearly 1 000 reais per month – or one-third of the family income. “Whenever necessary, I show the products by web cam and solve doubts using instant messaging services," says Simone. “Only my family is not for sale. The rest goes over the Internet.”
Stories like Simone’s have become increasingly more common in the enormous contingent that today comprises Class C, a mass of 95 million Brazilians with family incomes between 1 126 and 4 824 reais per month, according to Getúlio Vargas Foundation criteria. The emergence and growth of this new middle class – equal to nearly half of Brazil’s population – may be the major story to be told by the country since the currency stabilization process in the beginning of the 1990s. We now see that phenomenon overlaying another that is equally powerful and transforming: the country’s progressive adherence to the digital wave. Faster than many analysts ever expected, the social stratum comprised of Simone Reis and another 95 million Brazilians has surrendered to the Internet and taken to the web. It is estimated that over the past three years, 45 million people from Class C have begun to access the Internet, the largest migration ever seen towards any single media since the arrival of television in the country in the 1950s. In 2006, 65% of all Internet users in Brazil belonged to Classes A and B, and only 39% to Class C. Last year that different fell significantly. Classes A and B began to respond for 50% of all accesses, compared to 42% by Class C. “The Internet shall never be the same,” says Renato Meirelles, of the Data Popular consultancy. “These people have a specific profile.”
An unprecedented study conducted the American advertising agency Razorfish, obtained exclusively by EXAME, helps understand this phenomenon. For just over three months, a team of nine Razorfish professionals accompanied the everyday lives of seven Class C families in Greater São Paulo to discover their Internet habits. How much do they spend navigating? What do they look for? How do they behave? Where do they connect from? And most important: what do they buy and not buy? The observations were crossed with data from a survey with 4 000 interviewees throughout Brazil. The result is a precious photo of the web’s influence in the fastest growing social class in the country. Computers that access the Internet became part of the lives of 40% of these consumers – in 2006, this number did not exceed 13%. Cell phone use increased 10% over this period, reaching 88% of those interviewed. And little by little, these new forms of communication get closer to the leading means of communication among Brazil’s middle class – TV and radio, with 99% and 88%, respectively. This situation has remained practically unaltered since 2006. “Access to the Internet has become something essential in the lives of these people,” says Fernando Tassinari, president of Razorfish in Brazil and one of the research coordinators. “The computer is currently one of the home’s major electronic products.”
This behavior change explains the multiplication of Internet users who connect to the web from their homes. Today, 33% of all users access the Internet from home, compared to 19% in 2006, as per Cetip consultancy data, specialized in technology. The case of the Gonçalves family in São Paulo is an example of this new reality. Together, Antônio Marcos, a 32-year old electrician, and Paula Regina, a 36-year old telemarketing operator, bring in a monthly income of just over 1 200 reais (the sum fell 500 reais since Paula lost her job two months ago). They live with their two children in a 30 square meter home in Jardim Neide in the extreme south of the city of São Paulo. Big LAN house clients, about two months ago Antônio Marcos and Paula decided to invest in buying their own computer. For such, they saved 600 reais over a one year period and then they paid off the rest in ten payments of 60 reais each. However, the constant dispute among family members for the machine made the couple decide to buy a second computer at the beginning of this year – this time a notebook that cost 999 reais (like the first one, it was also paid in ten installments). It costs another 40 reais per month for the company to have access to the web. “Between fixing our washing machine and guaranteeing another Internet point in the house, we opted for the Internet,” says Paula. “We shut off the refrigerator at night to save energy. But we cannot be disconnected from the world. Today, everything happens on the Internet."
Members of Class C tend to reproduce the same system of help networks that permeate their everyday lives in the Internet environment
In order to understand Class C behavior on the Internet, first it is necessary to understand how this group functions in real life. Members of Class C tend to reproduce the same system of help networks that permeate their everyday offline lives in the Internet environment. “In the neediest communities, everyone helps each other, whether indicating an acquaintance for a job, or advising a friend about a promotion,” says the anthropologist Luciana Aguiar, director of Plano CDE consultancy, specialized in low-income market research. “That’s why they tend to be more active in social networks than Classes A and B, for example.” That’s what American Kraft Foods’ Brazilian subsidiary recently discovered. In order to promote its new Mini Bis chocolates among Class C youths, the company created an application for one of Orkut’s most popular games, Happy Harvest. Each participant received a virtual cocoa seed, which became a tree after 48 hours. But, since this “asset” could be “stolen” by other users of the social network (the game was part of a campaign with the slogan “Trust No One”), it ended up becoming viral in less than a week. More than 70% of Orkut users – or nearly 20 million people - interacted in some way with the game. “It was one of our best cost-benefit campaigns,” says Eduardo Caldas, director of marketing for Kraft chocolates. “A traditional campaign would have cost at least 20 times more expensive.”
Consumption
Although still mainly used to exchange e-mails and participate in social networks, the Internet has been increasingly viewed as a shopping channel by these new consumers – and this is where this phenomenon can make all the difference. A survey conducted by the Data Popular consultancy with 2 000 people shows that 68% of Class C members use the Internet to research prices, not far from the 82% for Classes A and B. It is true that the number of online purchases made by the new middle class is small when compared to the top of the pyramid – Class C was responsible for only 7% of the transactions made on the Internet in 2009, compared to 55% for Classes A and B. However, the advances of electronic retail in this social stratum are notable. Last year, nearly 40% of all consumers who made their debut in the world of virtual shopping belong to the new middle class Articles like computers and refrigerators head the list of purchases that generated an average ticket of 321 reais, just 12% less than the market average. The BuscaPé price research site is a thermometer for the effects of this mass digital insertion. From 2008 to now, the tool that offers the possibility of ordering searches according to the number and value of installments, something vital for Class C purchase logic, has become the second most important site, of the eight available, trailing only ordering by lowest price. “This public comes to the Internet at a time when companies are more prepared to service them,” says Pedro Guasti, director of E-bit, a consultancy specialized in e-commerce. “Classes A and B have gone through a slow learning process. With Class C, everything happens at the same time."
Clayton Guilherme Ferreira, 31 years of age, from São Paulo, is living that exact process. Transportation coordinator for the Federal Attorney General’s Office, Ferreira was promoted three years ago and began to make 2 200 reais per month, or two thirds of the family income, comprised of his wife and 2 year old daughter. With the promotion, he decided it was time to install Internet access for his computer. His major objective was to navigate the Internet in search of complementary material for his night course in Business Administration at Jabaquara College. Ferreira loved the novelty. He began to research prices on the Internet before going shopping, to speak to friends about electronic messaging systems and even to schedule his weekly football matches with friends via Orkut. This year, he reinforced his life online with a laptop and BlackBerry – bought over the Internet – and today he estimates he spends at least 10 hours per day connected to the web. Encouraged by his first experiences, Ferreira decided get radical. One of his most recent acquisitions over the Internet was a series of auto parts, including battery, bearings and a brake cable for his 2003 Stilo. "At first, I was extremely untrusting," says Ferreira. “But I began to realize that things kept arriving without a hitch. Now, I do everything over the Internet.” This change in middle class behavior caused by access to the Internet was measured in a recent survey conducted by TNS Research at the request of Google Brasil. When comparing the conduct of Class C Internet users to Class A and B users (the so-called early adopters of new technologies), it was ascertained that the Internet is already the main source of price research for 52% of emerging users, compared to 63% of those at the top of the pyramid. “The videos posted on sites like YouTube enabled Class C to visualize the products functioning without having to go to stores,” says Leonardo Tristão, director business for technology at Google. “Now, simply go to the Internet and look for the opinions of other users in social networks.”
New public, new approach
What some Brazilian companies are doing to attract Class C Internet users
In 2009, nearly 40% of all consumers who made their debut in the world of virtual shopping belong to the new middle class
Just as in the physical world, the opinion of friends or acquaintances has a great impact on choices made by the new digital consumers. And that is capable of greatly changing retail’s old logic. In October 2009, Magazine Luiza reformulated its “virtual assistant”, transforming it into young Lu — a 20 some year old young woman who explains on the computer screen how electronics and household appliances available on the site function. (A clear attempt at transforming Lu into an empathetic character for this new consumer.) At the same time, the company doubled the number of items available on its online store to 15 000. That was sufficient to increase site earnings 90% in the first semester of the year compared to the same period of 2009. Magazine Luiza expects online sales to reach 840 million reais this year, compared to 550 million reais in 2009. For some companies, the results from closer contact with Class C over the web brought even more encouraging results. About three years ago, a survey conducted by the Goldfarb real estate developer, today controlled by PDG Realty, showed that 70% of its public, the vast majority from Class C, between 28 and 35 years of age, not only have computers, but also look up most of the information about properties on the Internet. Based on this survey, Goldfarb began to set aside 25% of its advertising funds for Internet actions, such as ads in news sites and local newspapers. That is more than the sum destined to advertising in newspapers. Today, of Goldfarb’s nearly 2 000 monthly sales, at least 400 begin with the Internet. “The tendency is for our presence on the Internet to grow more and more,” says Milton Goldfarb, company president.
Using the Internet to be informed, talk with friends and shop are, no doubt, important achievements for the emerging Class C public. What many representatives of this public are beginning to find out now is the web’s enormous potential as an income multiplier. Simone, from Rio, who sells cosmetics over the Internet and opens this story, for example, is already beginning to feel this sort of benefit in her pocket. In more extreme cases, online life can be synonymous with social mobility. Digital technology thus transforms itself into a sort of shortcut for entrepreneurship. Pay attention to the story of the taxi driver from Paraná, Isaías da Silva, 38, and living in São Paulo the past seven. Last year, Silva bought a BlackBerry for 400 reais, paid in four installments to his operator. At the same time, he contracted a data plan for about 70 reais per month. In order to compensate for his increase in expenses, he began to work 2 additional hours per day. The investment began to pay off the moment Silva found out he could schedule taxi runs by e-mail. The number of requests increased 65%, from 15 per week to more than 25. With that, his family income went from 4 000 reais per month to between 5 000 and 6 000 reais, equal to Class B earnings. “It was the best investment I made in my life,” says Silva. “I even changed my consumption habits. A month ago, I traveled with my family to Argentina.”
For retailers, the effect of Class C’s arrival to the web is enormous – 68% of these Internet users research prices on the Internet before shopping
By opening the windows of the world and increasing the chances for growth, the Internet becomes a good to be conquered by Brazil's new middle class, a stratum that avidly seeks to continue moving up the social pyramid. For them, the Internet ceased being a luxury some time ago, and became a promise of a future. Therefore, selling this promise has become big business. At the beginning of the year, Telefônica launched a series of broadband plans for Class C. Offered for less than 30 reais per month for 1 mega of velocity, they were the most responsible for the 70% growth at Speedy, the highest rate this decade. The volume of consumers from this social stratum who migrated to more expensive plans has been surprising. According to those close to the operator, from January until now, more than 30% of them acquired broadband with twice the speed - and, obviously, a higher price (the company does not officially confirm this information). This low-income appetite for Internet also explains Multi Group’s, the largest language school chain in the country, recent turn towards the computer segment. From 2008 to now, the company has invested 150 million reais in purchasing four computer skills education chains, including SOS Educação Profissional and Microlins, and today it has more than 100 000 students throughout the country. “Many people in Brazil do not even know how to turn the computer on, but they already understand there will be no future if they don’t learn how to use it,” says Charles Martins, chairman of the board of directors at Multi Group. For Brazil’s emerging Class C, it seems the future will be increasingly more connected. And that could be different from everything we have seen thus far.