28 February, 2019 BeOn

Amazon lands in Brazil

Amazon has just started operating in Brazil and this is the beginning of their expansion plan in South America. Their main competitors are reacting quickly and strong investments by Mercado Libre and Falabella are shaking up the online market. Main FMCG categories seem to be the most relevant sources of growth for the Market Places in the region. In this article we will analyze Amazon’s start of operations in Brazil and their competitors’ reactions. 

The e-commerce giant led by Jeff Bezos, Amazon, has just started their operations in Brazil, the most important economy in Latin America. Though they suffered some delays due to insufficiencies in the logistic structure and the complexity of the Brazilian tax system, the platform is ready and counts with a wide variety of products and categories.

As part of its strategy, Amazon will launch its own fulfillment system. For this they built deposits where sellers can stock their products and then, through an automated packing and categorizing system, deliver them. The company also stated that they plan to strengthen their investments through alliances with logistic operators and Last Milers.

Amazon’s previous experience in Mexico

 

The results from their previous experience in a Latin American country are very encouraging for Amazon. In the case of México, the eCommerce giant managed to defy Walmart’s leadership position in key FMCG categories after a very short amount of time. Besides their know how and financial back, Amazon counts with another hey element to keep threatening traditional retailers market position: their 14 million user base that more than doubles the number that all Mexican Brick&Clicks together have. They also have 4 times more visits than the retailers. This means that as Amazon keeps expanding its portfolio to more relevant categories, like food (and the are already doing so) the threat for the retailers promises to deepen even more.

The expansion threat and competitions’ reaction

Amazon’s expansion plan for the region will be in phases. They are starting to disembark in Colombia with a Customer Center that will provide service to all the Spanish speaking countries in the region. The idea is to continue with Chile and Argentina, countries with a high development index of online sales. Amazon also wants to continuously expand the number of products they offer in the platform, with the objective of being able to provide Latin-Americans with everything they need in one platform. This is why FMCG products will have such a key role.

Aware of Amazon’s aggressive expansion plans for the region, their main competitors are starting to materialize their reactions.

In the case of Mercado Libre, the arentinian company led by Marcos Galperín which up to now remains as the undisputed Market Place leader of the region, is currently developing its own fulfillment system, similar to Amazon’s in Brazil. For this, Mercado Libre invested several millions in the construction of a 38.000 m2 distribution center. In this deposit, top sellers will be able to stock their products so they can sbe delivered directly when purchased. Through alliances with logistic and software suppliers, Mercado Libre plans to give Amazon a tough battle and seems to have no intention of giving away an inch of their current market share.

 

The case of Falabella

It’s not only Mercado Libre who is reacting to Amazon’s growth in the region. The Chilean retail giant, Falabella, closed a deal in August to acquire Linio for USD 138 million. The site currently operates in 8 countries in Latin America. Falabella also signed with IKEA, the Swedish retailer focused on furniture, with the objective of launching their proposal in the region by 2020.

Through Linio, Falabella will not only be able to strengthen their position in some countries of the region but will also be able to establish a direct commercial bridge with Panama and China. This will enable them to significantly broaden their product portfolio and drastically improve prices. In addition, they are investing USD 1500 million in infrastructure improvements, logistics and IT in order to improve shopping experience.

 

Alibaba starts to flirt with the region

Though with their focus more on importing and exporting general merchandise, Alibaba, the giant Asian e-commerce company has also started to show their interest in Latin America. Their plan is to start by Chile though this would only be the beginning of a very quick expansion both geographical and category wise.

All in all, the fight for online consumers in the region is becoming more and more intense and interesting. The development of FMCG categories within this race will have a crucial role since it is the industry with the highest development potential within the channel and where eCommerce is growing at a rate 5 times higher than the rest. We will keep close tracking of the development and plans that each of the most important players have in the region.

 

Sources:

iProup

Reuters

Publimetro