Analysis: How Brazil Can Overcome Historical E-commerce Backlog

RIO DE JANEIRO, BRAZIL – Brazilian e-commerce took about 20 years to reach 6% penetration of the Brazilian retail market, between 1999 and 2019.

Therefore, no one could have envisioned that the next four percentage points would be achieved in only 12 months. This was the extent of the progress that 2020 brought to Brazilian e-commerce, in a year when this channel became a lifeline for many people.

On the part of consumers, many new people, of different age groups and purchasing power, have resorted to websites out of need, faced with stores closing and the fear of Covid-19, or out of curiosity: will the order really be delivered quickly?

On the retail side, from small and medium-sized storeowners to major players in the industry, most have either built or expanded their operations in the online world. The need to sell, pure and simple, has made the digital alarm sound for many.

The infrastructure created over more than 20 years in this sector has served both ends, for the most part. Consumers had a good experience, the products arrived.

Physical retail found dozens of companies and tools willing to store their products, provide online service and secure the complex logistics.

The direction of e-commerce henceforth is only one wau: upwards. It is true that both the lockdown and emergency aid provided an extra boost to the sector in 2020, but even without these two factors, there is no chance that online retail will lose market share.

A four-point growth should not occur again within such a short time frame. But, with the convenience of buying at one click, those who already knew e-commerce are using it more, while those who didn’t know it have begun to use it frequently.

Moreover, 2021 will likely see continuing restrictions on store openings, affectic physical retail, which will push a new influx of new entrants into digital shopping.

Among the main trends in e-commerce spurred by the pandemic, mobile purchasing – whether through access to websites or apps by cell phones – has experienced a boom in usage. Many people have had their first experience with e-commerce directly on their cell phones and this should be maintained.

When it comes to the consumption of new online product categories, supermarket items should continue to expand. It is much more convenient to buy everything in just a few clicks and wait for the products at home.

This is one of the categories Mercado Libre is focusing on, both to attract new customers and to increase recurrence. Currently, its active users buy, on average, once a month. It is expected that by attracting more consumers to supermarket items and also fashion, average activity may increase to one purchase per week.

Another interesting trend that has come with the pandemic and should continue is e-commerce becoming more and more social and interacting with people on their networks.

Live commerce, which promotes products through live streams, for instance, combines two concepts: entertainment and online shopping. It holds great potential, and in markets such as China it is now much more developed.

Greater investments in logistics is another e-commerce trend. There were some major announcements in 2020 and this should continue in 2021. Consumers’ experience on e-commerce is closely linked to their delivery experience.

While buying happens in just a few clicks, consumers typically wait for products for several days. Shipping in Brazil is still relatively expensive. Reducing delivery time and lowering costs is essential. This is achieved through scalability and automation.

The integration between the physical and online worlds is also a great technological challenge for many storeowners. Small retailers still lack sophisticated software to digitalize their inventory – something more evolved in markets like China. This ultimately increases delivery time in Brazil.

Despite the growth of domestic e-commerce, the bad news is that it is still lagging behind in the penetration of online commerce in retail. The most developed markets, China, the U.S. and Europe, have seen its percentage grow in the pandemic, and Brazil is lagging behind.

The good news is that Brazil has the best conditions for the future growth of e-commerce.

With over 212 million inhabitants, its market size is very good. The 30% penetration of e-commerce on the retail market in China and of 20% in the United States proves that Brazil could still grow on its 10% index.

Moreover, many companies are investing in building large infrastructures in different e-commerce areas such as logistics, technology and customer service. Brazil is still to grow significantly.

Source: Infomoney