RIO DE JANEIRO, BRAZIL – After more than doubling sales in one of its most intense quarters, Mercado Libre plans to invest billions next year.
For this year, the company’s expected investment in Brazil is R$4 billion (US$750 million), already ra ecord amount compared to past years. For 2021, the value should be even higher and the company will reinforce its logistics to meet the increase in demand.
“We have now started next year’s planning and we want greater investments than this year”, said Fernando Yunes, Mercado Libre country manager for Brazil, in an interview to Bloomberg. “There was a structural change of habit and the market has moved up a level. The behavior of consumers should not return to what it was before the pandemic”.
In May, by reinforcing the billion-real investment projected for this year, Mercado Libre said it could change the direction of part of these investments to focus greater efforts on logistics. “We may have to redirect some investments to logistics, due to the increase in e-commerce demand, but at the moment the plan is to maintain the total volume,” said the company’s vice-president for Latin America, Stelleo Tolda, in May.
With an investment of R$4 billion in Brazil this year, Mercado Libre expects to beat the record next year; logistics should continue to be one of the main areas of investment. The most valuable company in Latin America, Mercado Libre reached US$63.2 billion in market value this year, with a growth of over 100 percent in the year.
E-commerce growth
Before the pandemic, e-commerce had a projected growth of 18 percent in 2020. This figure should be much higher. In one semester alone, Brazilian e-commerce grew at levels unseen in the past 20 years. According to an Ebit/Nielsen survey, conducted in partnership with Elo, online sales invoicing has increased by 47 percent in the first semester, totaling R$38,8 billion. In all, 90.8 million orders were placed between January and June 2020.
The e-commerce peak occurred between April 5th and June 28th, when most Brazilian cities were subject to measures to contain the flow of people. In this period, the number of orders grew by 70 percent compared to 2019.
Less dependent on the Correios (Post Office)
However, the growth in sales coincided with a strike affecting the Correios, one of the main logistics services in the country. Eight out of ten small and medium-sized online retailers depend on Correios as their main source of shipping to customers. In Mercado Libre, the state service was responsible for over 50 percent of deliveries. With mammoth investments, the company hopes to reduce this dependence.
Founded in 2013, a few years ago the Mercado Envios (Shipping Market) managed only the technology for the payment of shipments for logistics. It progressed to having a logistic network on the roads, last-mile delivery, several distribution and cross-docking centers, and hundreds of physical points to deposit products. Over 50 percent of products now leave a Mercado Libre center warehouse. The last step is to perform the whole logistics service for the seller, from stock management, order preparation, shipping, and delivery, now used in 20 percent of sales.
Mercado Envios has recently inaugurated its new distribution center in the state of Bahia, its third in the country, and will open another one in the South region soon. Next year, it plans to open more centers, both for vendor fulfillment and cross-docking. In Brazil, the company has opened 18 assortment centers in the second quarter alone, with over 35 openings in the year.
Black Friday
Black Friday will be the next major challenge for the marketplace company, one of the main e-commerce shopping events in Brazil and which will be celebrated on November 27th this year. In 2020, daily visits to Mercado Libre have already exceeded last year’s Black Friday: the peak of the year was 41 million daily visits, compared to 32.8 million during 2019 Black Friday.
To cope with the date this year, the company will invest three times more. “We would like to exceed growth in three digits on Black Friday this year, given that we approved investments three times higher than last year,” said the executive to Bloomberg. The goal is to deliver approximately 75 percent of all items stored and delivered by the company’s own network within 48 hours of ordering, compared to approximately 55 percent on Black Friday in 2019.
Source: Exame