Reports indicate that online retail giant Amazon has set its sights on a major warehouse located outside Sao Paulo, Brazil as it negotiates an air cargo deal that will cover the entire country and lines up local suppliers. However Amazon may find it hard dominating online retail in the South American country unlike what has happened in other areas. This is because while the ecommerce sector in Brazil is relatively young compared to the United States, Amazon has been slow to rollout and this has given competitors the time to prepare.
Amazon’s signature moves are also being copied by would-be competitors in Brazil. This includes speeding up delivery, earning the loyalty of customers and boosting offerings by partnering with third-party sellers. Brazil’s home-grown online retailers that include Magazine Luiza also possess an edge over Amazon in that they have built relationships with working-class consumers as well as learnt how to navigate the country’s endemic red tape.
“We see room for several players. We think the winner-take-all model that played out in the United States is going to be tempered in Brazil,” AZ Quest Investimentos’ fund manager, Eduardo Carlier, said.
With Brazil boasting of a human population exceeding 200 million the biggest economy in South America is key to the global expansion plans of Amazon. And just like in India and China where Amazon encountered stiff competition, Amazon is also facing the same challenges in Brazil.
The Seattle, Washington-based online retail giant started its Brazilian operations quietly in 2012. Initially Amazon sold books and e-readers as well as streaming online video content in an e-commerce market that is now worth approximately $20 billion. Last year in October Amazon launched a marketplace for its Brazilian operation giving third-party sellers a chance to peddle products on its platform.
Weathering the storm
Following the news shares of online retails in Brazil such as MercadoLibre, B2W Cia Digital and Magazine Luiza fell by close to 20%. In the weeks that followed however the shares quickly rebounded and have been on an upward trajectory this year as the economy of Brazil picks up.
B2W Cia Digital is backed by Jorge Paulo Lemann, a Brazilian billionaire, and 3G Capital and this has resulted in the online retailer spending aggressively to build its own in-house logistics as well as a third-party marketplace. MercadoLibre was started in Argentina but is now the largest with regards to online sales in Brazil according to Euromonitor, a market research firm.