E-commerce boom: Brazil the next major country to reap the benefits

Summary

• People are switching to e-commerce sites to purchase essentials amid work from home and social distancing becoming necessary due to COVID-19.
• Three more logistics centres were opened in Brazil by the e-commerce giant Amazon to gain from the e-commerce boost driven by COVID-19 pandemic.
• The new units are already functioning in states of Rio Grande do Sui and Minas Gerais and capital city of Brasilia.
• Brazil's e-commerce industry is estimated to grow by 18% with e-commerce sales reaching US$24.6 billion in 2020.

E-commerce activity has soared to record heights throughout the current coronavirus pandemic due to rise in demand levels. The widespread use of e-payments from ordering food to shopping online has given a boost to some companies amid the digital push intensified by coronavirus.

With movie theatres, bars, gyms, and restaurants shutting down in many major cities and as more towns went in a lockdown, there have been considerable changes in the shopping behaviours and patterns of individuals. People are spending more time shopping using smart devices while they stay at their respective homes amid the pandemic.

Let's have a look at how the e-commerce market is faring in Brazil. 

E-commerce market of Brazil

Brazil has a population of 213.11 million that provides the Latin-American country, with an enormous ability for global e-commerce growth.

Image Source: ©Kalkine Group

In its Global Payments Report 2020, which gives an analysis of the present payment landscape in 36 countries worldwide, Worldpay found that Brazil's e-commerce turnover is projected to grow to US$8 billion in 2023.

Brazil has a vivid and expanding e-commerce market with about 11% CAGR all through 2023 in spite of difficult financial headwinds. Credit cards continued their long reign of dominance in e-commerce payment method with 42% of consumer spending in 2019. 

E-commerce sales peaked to an all-time high in Brazil due to coronavirus outbreak. Brazilian e-commerce market increased by 56.8% in the first 5 months of 2020 compared to a year earlier, reaching US$20.5 billion in sales revenue.

As per the data compiled by Compre&Confie, Brazilian e-commerce consultancy and industry body ABComm, the number of online orders increased by 65.7% from Jan-May 2020 compared to a year earlier, majorly led by 3 categories- cosmetics and perfumes, furniture and electronics.

As smaller vendors and conventional brick and mortar stores have moved to boost their online revenues, Brazil's e-commerce growth also accelerated.

Amazon expands in Brazil

Recently, Amazon notified that it opened 3 more logistic centres in Brazil to support the mounting demand for the e-commerce giant's services amid COVID-19 pandemic. The new units are now functioning in the states of Minas Gerais, and Rio Grande do Sul and the capital city of Brasilia.

ALSO READ: Role of Technology in Todays Digital Transformation: 5g Technology Stocks Worth the hype?

Subsequently, the number of Amazon logistics centres have now increased to 8, adding 75,000 square metres of distribution space to aid network for the e-commerce operation of the Company.

The expansion is Amazon's biggest since it started operating in Brazil in 2012 and will produce about 1500 direct jobs as per the Company.

Alex Szapiro Chief Executive of Amazon stated that the new centres would help the Company to quickly expand the number of cities in which Amazon Prime consumers would get orders, from 400 to over 500 within 2 business days.

He also stated that delivery guarantees must be logistically credible, which will be the result of Amazon's expansion in the country.

Several businesses in Brazil switched to e-commerce platforms due to social distancing and lockdown measures imposed to control the spread of coronavirus. The migration to digital sales has continued even after easing of restrictions gradually in the country.

MercadoLibre, Latin America's e-commerce pioneer, reported last week that in the third quarter, its net sales in the region rose almost 150%.

MercadoLibre's operation has doubled in Brazil, which is regarded as more than half of its business. Via Varejo, GPA and Magazine Luiza, are amongst other firms in Brazil that are purchasing logistics startups to drive the same surge of e-commerce.

Brazil's e-commerce industry projected to grow in double-digits

As per the Brazilian Electronic Commerce Association, the average ticket for online purchases will be US$72 with 342 million orders made by around 68 million customers.     

E-commerce in Brazil could reach US$24.6 billion in 2020, that is equivalent to 18% growth compared to 2019. About 135,000 e-commerce businesses will be operating in Brazil by the end of this year, particularly small and micro-companies.

E-commerce in Brazil is projected to grow by 17% in 2021, as per the industrial body ABComm. 2020 will be the first year when e-commerce revenue would surpass the 100 billion reais mark.

Although major players such as Brazil tends to make progress in widening access to e-commerce, there are specific bottlenecks to e-commerce in the country such as sluggish customs approval, congestion, and low-quality set-up for last-mile distribution and difficulty of reverse logistics procedures for returns.