Few industries across Latin America grew as rapidly in 2020 as e-commerce, a direct result of the retail closures and lockdowns caused by the pandemic. The region experienced a whopping 36.8% increase in retail e-commerce and, for the first time, claimed the number-one spot worldwide, thus knocking the Asia/Pacific region (APAC) out of the top spot it’s held for the past 10 years. Another recent study by Euromonitor found that Latin America posted the largest growth in goods sold online with a 60% jump during 2020.
That tremendous growth was three times more than the 12% expansion originally forecast back in Q4 2019 (pre-COVID-19), according to Matteo Ceurvels who serves as research director for Latin America and Spain at eMarketer, an Insider Intelligence company. Sharpening the focus, Brazil’s e-commerce sector grew by 35% in 2020, and it ranked number four in the list of top-10 growing e-commerce markets by country. Argentina, the only other Latin American country to make last year’s list, came in at number one with 79% growth.
Where does Amazon, by far the leading e-commerce player in the U.S., fit against this backdrop of tremendous Latin American growth in digital shopping? One might expect the e-commerce behemoth with nearly half of the U.S. market share (47%) in 2020, might claim a sizable chunk of the market specifically in Brazil and, more broadly, across Latin America. However, the story is not so straightforward.
Amazon faces stiff competition from major — and deeply entrenched — regional players such as Mercado Libre (the largest e-commerce site in Latin America), Magazine Luiza (Brazil’s largest multi-channel retail platform), Americanas/B2W, OLX and others.
A recent EBANX Beyond Borders study on cross-border e-commerce in Latin America reports the following monthly visits in Brazil alone: Mercado Livre: 267.9 million; Americanas: 119.4 million; OLX: 102.5 million; Amazon: 74.5 million; and Magazine Luiza: 67.4 million.
In terms of the overall Latin American market share, Matteo Ceurvels tells LABS that, in 2020, Mercado Livre grabbed nearly a quarter of all e-commerce business at 24.6%; Magazine Luiza captured 6.5% — for the first time outpacing B2W, which claimed 6.3%, as the company ramped up acquisitions last year.
Ceurvels, who is still waiting on the final numbers for Amazon, offers this bit of insight: “In 2019, Amazon captured between 3.3 and 3.5% of the market share in Latin America,” he said. “Adjusting for the pandemic bump, I estimate Amazon will come in somewhere between four and six percent.”
Why such a relatively small number? Ceurvels speculates this has to do with Amazon being a bit late to the game in focusing on the largest Latin American economies and navigating Brazil’s challenging business environment — a key point other analysts have mentioned as well.
The numbers matter, but they don’t paint a complete picture. Consider the major operational challenges all e-commerce players face in Brazil: a huge cash-based economy, limited internet access, the need to implement various payment options, delivery logistics in a massive geography that is home to the Americas’ largest city (São Paulo) and mobile e-commerce to name a few.
Amazon has certainly made significant strides in these areas since it entered the Brazilian market in 2012. More on those in a moment. But, let’s look at just one example of how an established local player leverages a strategic advantage in logistics.
Founded in 1957, Magazine Luiza (Magalu) started out as a small chain of retail stores. Fast-forward to 2020, and its physical presence across Brazil plays a huge role in its ability to, literally, deliver the goods.
“Magalu has a mix of online and physical presence. Our more than 1,300 stores allow us to have easy access to all corners of the country,” said Eduardo Galanternick, Magazine Luiza’s vice president of business. “So, in Brazil, with little infrastructure and with very difficult access points, we have very advanced logistics [which are] vital to provide a good online sales service.”
It’s neither wise nor accurate to assume that Amazon’s resting on its e-commerce laurels as it continues building its presence in Brazil.
“Brazil is diverse and dynamic,” said Alex Szapiro, vice president of Amazon Brazil. “I’m pleased with our accomplishments to date.”
Szapiro provided LABS with the following timeline of the company’s activities in Brazil:
- 2012: Amazon Brazil launches with eBooks and Amazon Kindle e-readers.
- 2017: Amazon launches stores with selling partners that span multiple categories, including books, electronics, home & kitchen goods, appliances, office supplies, fashion and sports.
- 2019: Amazon opens fulfillment centers in Cajamar-SP and Cabo de Santo Agostinho-PE; Introduces Prime (the fastest-growing Prime program to serve customers across all regions in Brazil).
- 2020: Amazon adds four new fulfillment centers in Cajamar-SP, District Federal, Nova Santa Rita-RS, and Betim-MG; Increases the number of cities with two-day delivery for Prime members from 120 to more than 600 and growing; Launches Fulfillment by Amazon; Launches Amazon Delivery Service Partners; Donates BRT $5 million to two organizations on the frontlines of COVID-19; Introduces seven new Amazon devices; produces All or Nothing: Seleccion Brasileña’ [‘Tudo ou Nada: Seleção Brasileira’] the first Brazilian Prime Video original; Ads 10 million songs to Amazon Music for a total of 70 million titles available.
- 2021: Donates BRT $5,3 million and joins forces with 50 other Brazilian companies to enable a COVID-19 vaccine production facility under the administration of Instituto Butantan in São Paulo, which will produce more than 100 million doses per year.
Still, Ceurvel’s Amazon 2020 market-share estimate (4-6%) begs the question. What strategies does Amazon need to implement to challenge its competition and bring home a larger piece of the total market share in Latin America’s largest economy?
“It’s a paradox because Amazon provides a good user experience and options to pay in cash,” said Ceurvels. “It has the advertising tools and the logistics. The timing and figuring out that sweet spot to chip away at the other players has been a challenge.”
Not surprisingly, Amazon’s Szapiro offers a totally different perspective on the company’s e-commerce strategy in Brazil.
“We’re focused on customers, not competitors. We keep our focus on inputs such as speed, selection and convenience for our customers in Brazil.”
Will that customer-centric strategy be enough to displace Mercado Livre, Magazine Luiza or any of Brazil’s other leading e-commerce players? That remains to be seen. But, Amazon is an 800-pound global gorilla, and when you have one of those playing in your backyard, it’s advisable to keep a sharp eye on it.