Local online retailers in Brazil stand ground against international giant Amazon

By April 27, 2018

Six years after their entry into the Latin American market, online retail giant Amazon has finally kick-started development, after getting off to a slow start in a country with over 207 million inhabitants.

The multinational company finally stepped up their game in October of last year, opening third-party selling platform ‘Amazon Marketplace’ in Brazil. As a result, shares in e-commerce businesses such as MercadoLibre and B2W, which operate across South America, as well as national retail company Magazine Luiza, fell by almost 20% despite their steady growth over the past five years.

Amazon arrived in Brazil in the year 2012, selling just about everything online. With it, came the e-reading service ‘Kindle’ and online movie streaming platform ‘Prime’. However, unlike the huge steps Amazon have taken in countries like China and India, Brazilian businesses are yet to experience the full force of their competitor.

Until last year, smaller-scale online retailers in Brazil enjoyed a chance to flourish. Brazilian retailer Magazine Luiza SA, which retails goods through both physical stores and e-commerce, has experienced rapid growth in the past few years. Last year, shares rocketed a whopping 500% and have so far seen a 20% increase this year.

Likewise, thanks to recent investments from Brazilian billionaire Jorge Paulo Lemann and its parent company Lojas Americanas SA, shares in B2W have been steadily on the up. Coincidentally, B2W also uses the name ‘Prime’ in its services, although referring only to fast shipping services. In Brazil, Amazon ‘Prime’ only refers to the online movie streaming service.

On the other hand, market leader Mercado Libre, who have already withstood the likes of Amazon in Mexico, opened up a warehouse near São Paulo last year to speed up delivery services. Its Brazil branch also reportedly grew by almost 80% last year.

Nevertheless, according to Reuters, these local businesses have some stiff competition, as Amazon is also looking to open up a 50,000 square foot warehouse just outside São Paulo. However, Brazilian business leaders have seen this coming and are doing everything in their power to prepare the e-commerce industry for this change. In conversation with Euronews, for example, Claudia Sciama (Google’s head of retail in Brazil) explained how she had conducted “an exploratory study to understand how they might enter different markets”.

For now though, it seems unlikely that Amazon will trump local businesses in Brazil, who have worked hard over the past years to build on customer loyalty, faster delivery services and a better understanding of what the average Brazilian consumer wants.