Well known by virtually any Latin American, how much a powerhouse such as the Argentinian e-commerce giant Mercado Libre – also known as MeLi – is worth?
On market cap, above US$ 90 billion. The retail giant, founded in 1999 by Stelleo Tolda, Marcos Galperin, and Hernán J. Kazah, reached a net revenue of US$1.1 billion during the third quarter of 2020. Mercado Libre was even placed as the most valuable company in Latin America, surpassing Brazilian giants and old acquaintances like Vale, Petrobras, and Itaú Unibanco last year.
According to the AI-based market intelligence platform Similar Web, the region’s e-commerce titan Mercado Libre also figures as the number one player among the top 10 e-commerce websites in Latin America. Of the general traffic to these sites, 21.28% is for its Brazilian subsidiary Mercado Livre.
Mercado Libre also figures in three other positions at SimilarWeb’s ranking in addition to the Brazilian website: Mercado Libre Argentina in the second position, with 12.45% of the traffic; Mercado Libre de Mexico in fourth, with 9.19%; and Mercado Libre Colombia in tenth, with 3.63%.
READ ALSO: Mercado Libre reports 13% growth in sales during the third VAT-free day in Colombia
Regarded by market analysts as the great Latin American competitor of the global giants Amazon and Alibaba, Mercado Libre is expected to surpass US$20 billion in e-commerce sales for the accumulated result of 2020, according to a report from eMarketer/ Insider Intelligence that predicts that Mercado Libre sales are likely to surge 46.5% in Latin America to reach $20.51 billion. MeLi shares its results for the fourth and last quarter of 2020 on February 8.
What is Mercado Libre: How it all started
1999, Stanford University, Silicon Valley. Birthplace of a multitude of tech powerhouses, it was at the stage of companies such as Google that Brazilian Stelleo Tolda and the Argentine Marcos Galperin came up with the idea of what would become, years later, Latin America’s e-commerce titan Mercado Libre.
But before taking off, the project raised some doubts. “Everyone was skeptical, but we were always very confident about the viability of the business,” the president of Mercado Libre told the Brazilian news outlet Estadão, explaining that there was distrust about whether the venture – inspired on the American eBay, launched five years before – would be successful in replicating the model for the Latin American region.
From Stanford, Galperin returned to his hometown Buenos Aires, Argentina to officially launch Mercado Libre, in the basement garage of a building in August 1999. Two months later, Tolda joined the business he helped to draft to launch Mercado Livre in Brazil, a market that currently represents 53.5% of Mercado Libre’s regional e-commerce business.
From a website that started by selling second-hand items from family and friends to a tech ecosystem that operates in solutions ranging from e-commerce and logistics to financial services, Mercado Libre plans to launch a new vertical to keep expanding: fresh products, including delivery to restaurants, services that spurred in adoption due to the pandemic.
The same pandemic was the one driving the e-commerce giant’s growth in terms of customers. With over 112 million unique active users in the period comprising January to September 2020, MeLi almost doubled its customer base, that in the same nine month of 2019 was 61.1 million.
Other verticals of Mercado Libre have not been any less successful. During the third-quarter of 2020, the company’s logistics arm Mercado Envios was able to ship 187.6 million items, a 131.1% year-over-year increase, while the firm’s financial division Mercado Pago processed (TPV) $14.5 billion in its platform, a 91.7% YoY surge. Total payment transactions increased 146.6% compared to 2019, reaching 559.7 million transactions for the quarter. “We are still far from the e-commerce levels seen in places like China, for example. And, in the financial service, I think we will see the end of cash in Latin America in 10 years,” declared Galperin in an interview with Reuters.
Mercado Libre has started to invest more strongly in services and partnerships, such as the one with Disney Plus, through which the company offers up to six months of free subscription at the streaming service in an action linked to its own loyalty program, Mercado Pontos. The inclusion of basic care products to increase the recurrence of use by customers was also a strategy pulled out by the company, a movement recalling the one made by Amazon when buying Whole Foods in 2017.
“We’ve begun to consolidate our leadership position both for mid and long tail segments and started to strive for the higher segments of the merchant pyramid. Once again, we want to reinforce our commitment to the democratization of commerce and payments in a region in urgent need. The opportunity ahead of us is sizable, and we feel increasingly confident that we can capitalize on it,” stated Pedro Arnt, Chief Financial Officer of Mercado Libre, at the 2020 Q3 company’s earnings release.
Currently, MeLi is in eighteen countries including Argentina, Brazil, Mexico, Colombia, Chile, Venezuela, and Peru.
“We are much more a company of builders than of buyers. We have typically built our way into Mercado Libre: we built our logistics platform, we built our payments platform, we have written the code and developed the software for each one of these things,” Galperin told the Financial Times recently when asked by its acquisitions strategy. “We don’t believe in shortcuts.”
READ ALSO: Mercado Libre is not acquisitions’ target, says company’s president
Mercado Livre Brazil: The strongest market
In Brazil, its most prominent market, Mercado Livre, is likely to grow 39% to reach $10.97 billion in sales, according to eMarketer/ Insider Intelligence, something that places the country as Mercado Libre top one, with 53,5% share among the other markets.
Recently, the company announced the opening of five new logistics centers in Brazil in order to strengthen its structure after the rise of e-commerce in the country due to the COVID-19 pandemic. “This will help us to increase the volume of deliveries we make in up to two days in the country,” said Galperin, in an interview with Reuters, at the announcement’s occasion.
The new facilities, part of the company’s BRL 4 billion investment plan for the country, increased Mercado Libre’s logistics centers in Brazil from three to eight, doubling its capacity. The bet on logistics went beyond: the BRL 4 billion amount also supported the company to launch MeLi Air, a fleet of four aircraft (from different airlines) 100% dedicated to its deliveries in the country, as an effort to reduce delivery times for parcels in Brazil, in addition to increasing the delivery capacity for the next days, especially for products stored in the company’s distribution centers in São Paulo and Bahia.
With a fleet of over 10.000 vehicles, 600 trucks and 50 own electric-powered vans in operation in the country, Mercado Livre has also announced earlier this year that it has started offering financing for the purchase of electric cars for its deliverers in Brazil. The plan went public after the Argentine-based company raised $ 1.1 billion in bonds, with $400 million in notes tied to good socio-environmental practices, reinforcing the growing market demand for the subject.
Mercado Libre de Mexico: Growing at a faster pace
With a 19.8% share of Mercado Libre’s regional e-commerce revenues, Mexico is likely to be the fastest-growing market for the company in 2021, according to eMarketer/ Insider Intelligence. While in 2020, e-commerce sales in the country are likely to account for $4.06 billion, in 2021, the consultancy expects a 24% growth, to $5.04 billion.
In 2021, the retailer closed two debt offerings totaling US$ 1.1 billion to address part of the resources, US$ 400 million, to be invested in projects in areas such as credit and sustainability, especially in Brazil and Mexico. “In transportation, we are going to increase investments in electric vehicles. There are 50 electric vans in Brazil, out of a total of 71 in Latin America, and the idea is to scale this up,” Andre Chaves, senior vice president of strategy and investor relations told Valor Econômico newspaper.
Mercado Libre Argentina: Home sweet home and second-largest market
With $4.41 billion in online sales in 2020, Mercado Libre has in its homecountry Argentina its second-largest market. According to eMarketer/ Insider Intelligence, that figure is expected to climb another 20% in 2021 to reach $5.29 billion.
The intelligence market firm also predicts that about two-thirds (65.1%) of Mercado Libre Argentina business will come from mobile devices. In 2020, the growth forecast for the company’s total m-commerce sales in the country was 80.0%, to reach $2.87 billion.
