Brazil’s online marketplaces grow in pandemic, specialize in niche businesses

RIO DE JANEIRO, BRAZIL – During the pandemic, marketplaces posted significant growth within e-commerce. If in 2019 they represented 35% of the sector’s revenue, in 2020 they increased their share to 51%.

Marketplaces work as digital retail malls, in which small stores are sheltered by the large networks’ umbrella.

Ana Paula Simões, 45, founder of APL Simões Shop, is one such storeowner. Since March 2020, the watches she sells are part of Magazine Luiza’s online catalog.

The entrepreneur was attracted by the Magalu Partner project, which the chain launched at the start of the pandemic, to attract micro and small businesses, mainly those that had not yet debuted in the digital world.

“In the first month, we made R$10,000. In June, we exceeded the annual turnover limit of a MEI [individual microentrepreneur], of R$81,000,” she says. According to her, the large customer base of the marketplace and the confidence that the brand inspires consumers made the difference for the good result.

In exchange for a 3.99% commission on sales made, Magalu is responsible for the logistics, from the removal of products from stocks to delivery, and provides after-sales support.

According to Leandro Soares, 47, executive director of the Magazine Luiza marketplace, the conditions offered by the chain have attracted a large contingent of micro and small entrepreneurs, mainly in the fashion, footwear, accessories and home products sectors.

“30,000 new partners have joined our marketplace, most of them through this new platform for small businesses,” he says.

The agility that marketplaces guarantee, between the moment of payment and delivery to the consumer’s door, is one of the main advantages offered to small retailers and manufacturers.

It was with this in mind that Olist, an integrator that allows customers to sell simultaneously on several large marketplaces, acquired Pax logistics company in December 2020.

According to Tiago Dalvi, 37, Olist’s founder, the acquisition enabled deliveries in less than 24 hours in capital cities and metropolitan areas. “The pandemic has led marketplaces to greatly evolve. Today, any company, regardless of size or industry, can sell over the Internet and deliver quickly.”

Another phenomenon prompted by the pandemic was the proliferation of niche marketplaces.

Founded as an online store, Sonoma was transformed in December 2020 into a marketplace specializing in wines and gourmet foods. The catalog features 1,000 items from 30 suppliers, including micro-producers and small emporiums. The goal is to reach 120 sellers by the end of this year, says founder Alykhan Karim, 36.

The company offers two types of packages. In self-service, the shopkeeper opens an online branch within the website, but takes responsibility for everything from technology integration to the shipment of goods. In this case, commission ranges from 15% to 18%.

Those who choose the full service package pay up to 35% commission, but leave all the sales routine in the hands of Sonoma, which generates the ads, stores the stock and takes care of deliveries.

Bruno Faccin, 30, who runs small winery Faccin, in Monte Belo do Sul (RS), signed a contract in December 2020. At first, with no experience in online retail, he was a little suspicious of the system, but he decided to take a risk and signed the full service package. The first batch of 300 bottles sent to Sonoma, in December, quickly sold out. Another batch of 200 is already in the warehouse. “The return was immediate. Today, the marketplace accounts for about a third of sales.”

Former colleagues in an automotive company, Gustavo Cinquegrana, 40, and Alberto Grave, 42, also decided to invest in a niche marketplace. They have just launched Elfcar, specialized in parts for different types of vehicles, from cars to tractors. They invested R$2 million in the venture and intend to invoice R$ 2 million in the first year of activity.

The company receives 12% commission from storeowners, who can allow consumers to pay in up to 12 installments, with a monthly interest rate of 1.15%. The duo expects that 70% of the clientele will comprise micro and small entrepreneurs. “Segmentation allows us to better understand the operation and storeowners and buyers’ needs,” says Alberto.

For Eder Max de Oliveira, a business consultant specialized in digital marketing at Sebrae-SP, starting online retailing through a marketplace is a good way for those who do not master the universe of technology. To start, he suggests conducting a careful survey of all the resources offered by the marketplace and how much it charges for it.

“The commission may seem high at first, but it is necessary to calculate all the costs that the company would have with the operation independently, from advertising to delivery logistics. Most of the time, there is not much difference in the end,” he explains.

When comparing, he says, one should take into account that marketplaces have more negotiating power with logistics companies, ensuring agility for friendlier freight rates.

They also solve another common bottleneck for micro businesses that operate in online retail: the lack of employees. “Those selling online need to be attentive all the time and process orders instantly, because this impacts the delivery time and, consequently, the company’s reputation.”

On the down side, says the consultant, using a marketplace does not help strengthen the brand of the small storeowner or manufacturer, because, when completing the operation, the consumer will remember that he bought from a large network, and not from a small company.

“The entrepreneur may even start selling exclusively through the marketplace to reach a larger customer base. But to put your own brand in evidence and gradually render the business more profitable, the best alternative is to invest in your own e-commerce.”