As Amazon continues to spread its influence throughout North America, Europe and Asia, it is now eyeing South America. Just a few months ago, after five years of selling books in Brazil, Amazon announced it would launch an electronics and appliances marketplace in South America’s largest economy. Now comes rumors of Amazon looking for warehousing space in Brazil.
According to a Daily Mail article, Amazon is looking at leasing a 50,000-square-meter warehouse near Sao Paulo. This would mark a big step for Amazon into Brazil, where it currently relies on third parties to ship their own goods sold on its marketplace.
In 2017, Brazil cautiously emerged from one of its worse recessions in history. Continue concerns of political scandal and a still weak economy plague the country but Brazil is South America’s largest e-commerce market and the fourth largest Internet market in the world in terms of number of Internet users.
If rumors are true, they will be expanding into a promising, but difficult country – from persistent weak infrastructure concerns to ongoing bureaucratic red tape, despite recent attempts to correct.
The local favorite, Argentine-based MercadoLibre, has a commanding lead according to statistics gathered by Export.Gov. Based on number of users, MercadoLibre has a 77% share of the Brazilian e-commerce market. Similar to China’s Alibaba, MercadoLibre offers the following:
- MercadoEnvios Shipping Service – Integration of logistics and shipping carriers to sellers on the MercadoLibre platform
- Mercado Shops Web store Service – Fully hosted online store solution in which users can set-up, manage and promote their own web stores. Users can choose from a basic free web store or pay monthly subscriptions for enhanced functionality and added services on their web stores.
- MercadoPago Online Payments Service – Integrated payment solution to facilitate transactions both on and off the MercadoLibre Marketplace. At the end of 2016, 79.1% of MercadoLibre’s total GMV was completed through MercadoPago.
Speaking of Alibaba, their presence in Brazil is via a partnership 2013 partnership with Correios, the Brazilian post office, promoting cross-border e-commerce between the two countries. In fact, AliExpress is one of the most used website for international markets at 45% share.
As Amazon looks to expand its presence in Brazil, Walmart is looking to reduce their own footprint. Walmart has found it difficult to replicate its success in Mexico in Brazil. Since 2009, Walmart’s Brazil operations have operated at a loss and according to Reuters, Walmart is shopping a major stake in its Walmart Brasil Ltda unit to buyout firms with Latin American experience. To sweeten the pot, Walmart combined its local e-commerce unit with its Brazilian brick-and-mortar operations in December.
In our opinion, it’s a mistake for Walmart to pull out/significantly reduce its presence but if it insist, Amazon could help its rival out by acquiring its stores and warehouses, thus giving Amazon not only just an online presence but a physical one as well.
Brazil’s middle class has been written on quite a bit in the press, it’s a large, vibrant and youthful group that is turning towards e-commerce more and more. It’s certainly not the only South American country that offers such opportunities. Brazil can serve as an entry-way to other promising countries such as Argentina, Chile and Colombia. To not take advantage of what Brazil and for that matter, Latin America as a whole has to offer would be foolish for any company. All it takes is knowledge of the markets, creativity and perseverance.