CEO Lifetime Achevement: Juan Benavides • The man behind Falabella’s regional expansion

Juan Benavides has succeeded in business despite, or perhaps because of, a childhood marked by tragedy and sacrifice.

The fifth of nine siblings, he lost his mother in a car crash when he was just 10 years old. His father, a Chilean congressman in the 1950s, was seriously injured but recovered to raise his children alone.

“He sat us all down and taught us about duty and responsibility,” Benavides recalls. “For him, the way to get on in life was hard work. He was a very strong man. Despite the hardships he suffered I never once heard him complain.”

Benavides says that growing up with so many brothers and sisters taught him lessons that have served him well in business: teamwork, compromise and dealing with setbacks. He considered following his father into politics at one point but decided against it. Today, at age 54, he says politics are not in his plans.
 
But it was in his next job, as head of CMR Chile in the late 1990s, that he made his name. CMR is the credit card of Falabella, the Chilean department store retailer, and although the card had existed since 1980, its appeal was limited. Customers could use it only in Falabella stores. Benavides opened it up, allowing clients to use it in other stores too.
“We enjoyed extraordinary growth. It was beyond what we could have hoped for,” he says. In the 17 years since that process began, the value of CMR’s loan book has soared from $100 million to $5.2 billion.

During his time at CMR, Benavides also oversaw the launch of Falabella’s own retail bank, as well as insurance and travel divisions –Banco Falabella, Viajes Falabella and Falabella Seguros– before being appointed as company CEO in 2004.

Under his guidance, Falabella has gone from strength to strength, expanding in all four countries where it operates– Argentina, Chile, Colombia and Peru. When he took over, Falabella owned 121 stores in these four countries. By the end of last year it had 259, with plans to reach 457 by the end of 2015. Sales have risen from $4.3 billion in 2004 to $11 billion last year while EBITDA has climbed from $510 million to $1.6 billion.

At the end of 2011, Falabella owned 79 department stores and 116 Sodimac home improvement stores in its four countries. It also owns 64 supermarkets in Chile and Peru, and 14 shopping malls in those two countries.

Chile accounts for the lion’s share of revenue– 67 percent. Peru brings in 20 percent, Argentina 7 percent and Colombia 6 percent. Department stores accounted for $3.7 billion of last year’s revenue, home improvement stores for $4.2 billion and supermarkets for $1.4 billion, with the rest coming from the financial division.
The obvious next step would be to expand into the two biggest retail markets in the region, Brazil and Mexico, and Benavides acknowledges that he’d like to do just that if the opportunity arises.

“But they are difficult countries and it would be a big gamble, because of the strength of the companies that are already there,” he says. “We wouldn’t be able start from zero and rely on organic growth so we think the right way to do it would be through a sensible takeover or a joint venture.”

He also says there is plenty of room for expansion in Falabella’s four existing markets, which have a combined population of over 130 million. All four countries have emerging middle classes with more and more spending power.

“This company is very innovative,” he says, when asked about Falabella’s strengths. “There’s a motto that’s deeply ingrained in the culture of the company and that is: ‘What was good yesterday is no good today.’ Innovation is part of everything we do, every day of the week.”

Looking ahead, Benavides says the big challenge will be to take advantage of the relentless growth of online shopping, which currently accounts for only a fraction of company sales, but is sure to rise.

“We have to serve the customer both online and in the flesh,” he says.
“Online, we have to reach the customer in the most tangible ways possible, so that when they see a sweater or a shirt on our website they can really feel what it’s like. And in our stores, we need to give the customer entertainment, something surprising, something new– not just a place to shop.”

More than 120 years after Italian immigrant Salvatore Falabella founded his first tailor’s shop in Santiago, the company he started has a bright future.
“But these challenges are not something you can mull over for too long,” Benavides warns. “If you do, you’ll be overtaken before you know it.”

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