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/ All categories of countries are / Covide 19 awakens a new customer base for Latin America’s e-commerce giants

Covide 19 awakens a new customer base for Latin America’s e-commerce giants

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The coronavirus pandemic is reshaping consumer habits in Latin America, sending droves of buyers online for the first time.

The coronavirus pandemic is reshaping consumer habits in Latin America, sending droves of buyers online for the first time.

MercadoLibre Inc, the region’s largest e-commerce marketplace, said it registered 1.7 million new customers from February 24 to March 22, up 28 percent from the same period a year earlier.

While lockdowns to slow the spread of the coronavirus have been a boon to e-commerce retailers everywhere, the trend is all the stronger in Latin America because online shopping never really took off in region in the first place. Only 34 percent of consumers 15 years and older buy goods over the Internet, compared with 82 percent in the United Kingdom, 74 percent in the United States and just above 60 percent in China, HSBC Holdings Plc notes.

It’s a “point of no return,” MercadoLibre Chief Operating Officer Stelleo Tolda said in an interview. “Digitalisation will stabilise at a much higher level.”

Online world

Online shopping, which now accounts for just five percent of the region’s retail sales, will surge to 25 percent in a decade, HSBC analysts led by Ravi Jain said in an April 22 report. The coronavirus is accelerating the shift, said the firm, which previously forecast 18 percent penetration by 2030.

“Covid-19 could do to Latin America what SARS did to Chinese e-commerce in the early 2000s,” Jain wrote.

Tech firms like MercadoLibre are the “big winners” from the current turbulence, said Aline Cardoso, a São Paulo-based portfolio manager at Trafalgar Investimentos, which has been buying shares in the e-commerce platform and Globant SA, Argentina’s largest software developer.

In Argentina, the strict lockdown is also finally pushing suspicious consumers into formal banking and online payments.

As of Wednesday, Buenos Aires-based MercadoLibre’s US depositary receipts had rallied 35 percent since April 1, when they touched a 13-month low amid the global market rout.

Optimism for the future of digital sales comes with a caveat: Consumers may be buying more online, but they’ll struggle as the economic fall-out from widespread lockdowns weighs on employment and salaries. The International Monetary Fund has warned that weakness going into the pandemic means Latin America may be in for a “lost decade.”

E-commerce companies including behemoth Amazon.com Inc have tried for years to win the hearts of Latin American consumers. Seven years after entering Brazil as a platform for books, Amazon announced in 2019 it would expand its offerings. But while online shopping is relatively well established in the big cities, outside of Brazil’s more developed South and Southeastern regions, delivery drivers must contend with rough roads and bandits bent on stealing their cargo. In some remote areas, it often takes more than two weeks to get a package ordered online and delivery fees can exceed the cost of the products.

MercadoLibre has a much bigger logistics operation, plus online payment services and more than 11 million vendors selling over 270 million items. While Brazil is historically its largest market, the company is seeing a faster pace of growth in Mexico, Chile and Colombia since the pandemic began, Tolda said.

Malcolm Dorson, who helps manage about US$700 million of emerging-market funds at Mirae Asset Global Investments in New York, said a US$1.9-billion equity raise last year puts MercadoLibre in a strong position to take advantage of the surge in demand. It “came at the perfect time,” said Dorson, who owns shares of the company.

Revenue from online shopping across platforms in Brazil rose to 20.4 billion reais (US$3.82 billion) in the first quarter, up 27 percent from a year earlier, according to Compre & Confie, a local project supported by companies in the industry. That’s three times the nine percent pace in the UK, according to data compiled by Bloomberg.

Online boost

Amid the pandemic, MercadoLibre has been calibrating some of its investments and prioritising fast-growing items such as consumer packaged goods, including drugstore and personal care items, Tolda said. That category’s gross merchandise volume grew 71 percent between March 17 and April 13, compared with the average in the first two months of the year.

“The essential categories took priority over others where we were seeing less traffic,” Tolda said. “We’re not prepared yet to sell fresh food, but it’s part of our thinking in the future.”

Sales of toys, baking supplies and gym equipment have also jumped as consumers adapt to shelter-in-place orders.

“Once we go into a new normal, I expect that overall penetration of e-commerce will be significantly higher than it was before,” Tolda said. “More people are going to be buying, and those that are buying are now buying more often.”

Source: by Vinícius Andrade & Carolina Millan, Bloomberg

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