Shopping for PCs, the Brazilian way

SAO PAULO, Brazil--Enter the midrange Extra department store and it is easy to find the PCs--they are right in front, just as customers enter the store.

What's harder to find is the total price of said machines. Sure, there's a price sticker next to each machine. But the featured price is not the total, but rather the monthly payment, when the price of a computer is spaced out over 10 to 20 months.

It's not a trick. It's just that for the folks who shop at places like Extra, Casas Bahia, and other stores, that's how purchasing decisions are made.

If one looks closely enough at the fine print, the total price is listed, as well as whether the product is being offered with or without interest. Interest on some models at some stores can be as much as 40 percent a year, with the highest rates often attached to the cheapest models. That said, retailers often give credit to those even without any proof of income.

The move to offer financing has been a boon to the Brazilian PC industry, now the world's fifth largest market. Computer sales here grew 40 percent last year, with 10.5 million computers sold in 2007, according to Gartner.

The PCs themselves are fairly expensive by U.S. standards, particularly for those sold by global brands like HP and Dell. However, the ability to finance PCs has made them affordable enough to be attractive to many of those in Brazil's middle classes.

"Credit has changed dramatically," said Gartner analyst Luis Anavitarte. "Retailers in Brazil, Chile, Argentina, Peru, and Mexico are becoming banks."

Not all stores are set up that way. At the high-end Fast Shop, the store lists total prices, though it too offers customers the option to buy in installments.

It's not just the pricing that varies depending on the type of retailer, but also the kind of computers. At low-midrange store Casas Bahia, all the desktops are from Brazilian maker Positivo, while at Fast Shop, it is the multinational brands like Sony and HP and even Macintoshes that dominate the prime real estate, with a few models from Brazilian brands like Itautec placed in the back.

As for the machines themselves, the cheapest model I saw was a Positivo for 699 reais ($422). It included a 15-inch monitor, CD burner, 40GB hard drive, and 256MB of memory and used Windows XP Starter Edition. While this model was both underpowered and dated, there were plenty of low-end models with much more standard feature sets.

On the high end, Fast Shop's shelves were stocked with the latest models from HP and Sony as well as brands like Philips and LG that aren't known in the U.S. for their computers. The Mac models there were also the latest, but a 20-inch iMac with a 320GB hard drive sold for $3,620 and a MacBook Pro with 2GB of memory and a 120GB hard drive fetched $3,923.

Positivo also went fairly high-end, including a $1,810 desktop that included a 22-inch wide screen, 2GB of memory, a Core 2 Quad processor, and a 320GB hard drive.

Another striking fact is that there is also a far broader range of operating systems to be found on the machines there than in the U.S. At the middle-class shops, it was common to see a mix of Linux, Windows Vista Starter, and Windows Vista Basic.

And despite the range of operating systems that were offered, it typically wasn't one of the items mentioned prominently in the marketing of the machine. That's probably because most of the machines that aren't running a full version of Windows typically get "upgraded" with a pirated version of the operating system.

Positivo, for example, sells machines with Linux and the Starter edition of Windows, but its chief executive said the choice in operating system is usually to hit a particular price or to satisfy government officials as opposed to actual consumer demand for those products. Brazil's government has a program that provides subsidized financing for low-cost computers, but requires that they use (or at least be sold with) open-source software.

About 70 percent to 75 percent of the people who buy Linux convert to Windows--usually a pirated copy, said Positivo CEO Helio Rotenberg. Of those who buy a machine with the Starter edition of Windows, about two-thirds convert to full Windows, he said.

Others put the figure even higher.

"Ninety percent of them, if not more, are converted to Microsoft in less than a day," Anavitarte said. He noted that one Latin American retailer did a survey and found that a month after their sale, 95 percent of the machines sold with Linux were running Windows.

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