After the spectacular growth of e-commerce in 2020, Latin American giant Mercado Libre managed to sustain its expansion path. In the 2021’s earnings results released on Tuesday (22), what really caught analysts’ attention was the fact that the approach taken so far by the third-largest publicly traded South American company will practically not change in the face of the global and local scenario of persisting inflation and rising interest rates.
Hours before the company’s conference call, Stelleo Tolda, CEO of MeLi until April, spoke at the CEO Conference 2022, an event promoted by BTG Pactual. Asked about the impact of the Asian tsunami on Latin America‘s e-commerce, he was emphatic: “They are investing lots of money to make themselves viable for the consumer, but they are not viable from an economic point of view. From now on, we should see some rationalization,” evaluated Tolda.
“We are very calm about the competition. This makes us evolve. We have learned from them; this Asian pattern of discovering products through the customers’ eyes,” highlighted Tolda, stressing that what really makes the difference is customer experience. “Here in Brazil, Mercado Libre is a leader and will continue to be.”
Even in the face of 2020’s roaring growth — a benchmark that many companies have stumbled on over the past year — MeLi saw its fourth-quarter net revenue total $2.1 billion, up 60.5% from a year earlier. It was the company’s best quarterly result ever. In Brazil, which accounts for more than half of the company’s revenue, the gain was 56% in dollars and 62.4% in reais.
A year earlier, in the wake of the explosive growth of digital commerce in Latin America due to the pandemic, the revenue of the Argentine-based company had practically doubled in dollar terms.
The revenue slowdown reflected a more gradual – although consistent – growth in both new customers and sales. The active unique user base counted 82.2 million at the end of 2021 (an 11.1% growth in 12 months) after having soared 74% in the previous year. MeLi’s sales volume (GMV) increased by 21.2% from October to December, reaching $8 billion after a 70% jump a year earlier.
Year over year, the company’s GMV grew from $20.9 bln in 2020 to $28.3 bln. TPV (payment volume) jumped from $49.7 billion in 2020 to $77.3 billion in 2021 – a direct result of the growth and diversification of the company’s financial services.
“More importantly, we saw a sustained shift in consumer behavior on our platform. Customer loyalty and retention are improving consistently and our clients are buying more with us – on average items per buyer were up by 17% on a year-over-year basis, growing over a strong 2020 baseline. Even with the reopening of physical stores, customers in Latin America have embraced shopping online, paving the way for further long-term growth in our region,” said Mercado Libre‘s CFO Pedro Arnt to analysts. The number of active users in MeLi’s ecosystem went from 132.5 million in 2020 to 139.5 million in 2021.
To keep growing, Mercado Libre will focus on logistics investments and financial services diversification, and portfolio expansion.
That means more distribution and fulfillment centers, and even dedicated aircraft to streamline deliveries. In the case of Brazil, the company told Reuters that it plans four new centers, all in Sao Paulo state, throughout 2022. The new centers will increase MeLi’s daily logistics by more than 1 million packages, doubling the potential for parcel deliveries in the country.
The company’s own logistics network, under Mercado Envios management, already answers for 89% of items shipped through MeLi – 91% in Argentina, 90% in Brazil and Mexico, 86% in Chile, and 81% in Colombia. Fulfillment by Mercado Envios reached a 40% penetration in the region, led by Mexico (67%) and Brazil (nearly 40%).
In terms of categories, Mercado Libre targets grocery sales, given that the macroeconomic environment will lead consumers to spend on more essential items, to the detriment of products such as electronics. The segment is also one of the last frontiers of e-commerce and delivery companies in general.
In November, MeLi launched an app for autonomous couriers in an effort to increase the speed and capillarity of its deliveries, especially for shorter distances, within cities.
Another priority is the financial businesses, led by Mercado Pago, which registered a 52.1% advance in payments volume in the fourth quarter, to $24.2 billion. Loan volume ended 2021 at $1.7 billion, tripling the previous year’s results.
At the same time, the number of active users (of any Mercado Pago’s services) ended 2021 at 34.5 million – in 2020’s fourth quarter this figure was at 28.1 million.
During 2021’s last quarter, MeLi introduced important additions to its fintech services, including the strong scale up of its credit card, the launch of its cryptocurrency trading platform, new insurtech products, and the acquisition of Redelcom, in a move to expand its payment processing operations for SMBs in Chile.
For 2022, the company plans to offer new types of investments linked to cryptocurrencies. The first move in this direction was taken in January when MeLi bought a stake in 2TM, the parent company of the crypto unicorn Mercado Bitcoin, a platform for buying and selling cryptocurrencies. Recently, Mercado Libre also announced a strategic investment in Paxos, a blockchain platform that partnered with Mercado Pago in offering the cryptocurrency buying, custody, and selling service launched in December.
(Translated and co-written by LABS)