Publish in Perspectives - Wednesday, June 10, 2015
In Brazil, online shopping offers a reprieve from traffic delays. (Photo: Camapua Government, Brazil)
E-commerce is expected to grow in reals this year. (Americas Market Intelligence)
Brazil’s e-commerce grew to $30 billion last year. Next: More mobile commerce.
BY LINDSAY LEHR
Brazil’s economy will shrink this year by 1 percent in real terms, by as much as 15 percent in dollars. Maxed-out credit cards, rising inflation, and government hikes on fuel prices, transportation and electricity have Brazilian consumers squeezed to the limit. Consumer spending stagnated in 2014 and could decline by 3 percent in 2015.
The one bright spot in retailing is e-commerce. In 2014, Brazilians purchased $30 billion online, up 9 percent over 2013, versus traditional retail that flat-lined. Brazilians are gravitating to online sites for two important reasons: price savings and convenience. Online retailers avoid much of the custo brasileiro that comes with traditional retailing and can offer discounts that brick and mortar competitors cannot match. In Brazil’s 51 cities with populations more than 500,000 people, traffic plagues the timetables of the middle class. Online shopping offers a reprieve from traffic delays. For these reasons and the sheer scale of demand in Brazil, it is little surprise that e-commerce in Brazil is 2-3 years ahead of other Latin American markets.
POTENTIAL OF CROSS-BORDER E-COMMERCE
In 2014, Brazilian e-commerce got a boost from imported goods. Last year, cross-border transactions accounted for $2.7 billion, or 9 percent of all e-commerce transactions. During the Christmas purchase rush, E-Bit reports that four out of ten Brazilians made an international online purchase, up from three out of ten in January of the same year.
The weakening of the Real in 2015 will likely put a dent in the online purchase of imports, but 2013-2014 whet the appetite of Brazil’s middle class for foreign goods. In 2013, some analysts estimate that PayPal captured about $250 million of purchases on Brazilian issued credit cards from Brazilian merchants versus a whopping $1 billion of PayPal purchases spent by Brazilians using international credit cards at foreign sites, for delivery outside Brazil.
The e-importado channel itself is transforming rapidly, thanks to the Chinese. From January to December 2014, Aliexpress.com climbed from the number three spot to the top of Brazilian e-commerce ranks, representing 50 percent of all e-commerce transactions by the end of the year. Of the top 20 e-commerce sites in the country, 12 are Chinese. Oriental e-retailers offer cost-savings that are irresistible to a price sensitive market.
Given the lack of product choice to the upper middle class in Brazil, e-import growth potential is vast but remains riddled by challenges. Currently, most foreign e-commerce merchants only accept international credit cards, to which access is restricted in Brazil. Thus, only the wealthy – who can afford to travel and open an account overseas - can buy from foreign sites. Most middle class Brazilians use domestic cards or pay online via a boleto bancario, a pre-deposited cash payment, neither of which is accepted by international sites. This points to an opportunity, for payment enablers who can capture payments locally and later settle up with foreign merchants.
Enter EBANX, the Brazilian payment provider start-up launched in 2012. EBANX signs up foreign merchants and collects payment on their behalf, enabling the Brazilian consumer to pay in Reais using local payment methods. It effectively “democratizes e-commerce”, explains Carolina Pascowitch, EBANX business development manager. By accepting both local credit cards and boleto bancario, EBANX has tapped into ‘repressed demand,’ essentially unlocking millions in spend there for the taking. EBANX currently processes $35 million in online purchases per month. By the end of 2015, it expects that number to triple. If they reach the mark, EBANX alone could expand Brazilian e-imports by 40 percent.
80 percent of EBANX’s business comes from Chinese merchants. EBANX has launched an e-wallet for Aliexpress shoppers, enabling customers to load funds in reais onto a digital wallet that is stored in US dollars outside of Brazil. This converts one-time shoppers into loyal repeat customers. The top three Chinese e-retailers operating in Brazil (Aliexpress, Deal Express and Miniinthebox.com) are all EBANX customers, while the top US e-retailers (eBay and Amazon) are not.
By facilitating local payments for international websites, EBANX (and any future copycats) will dramatically widen the market for e-imports and by extension, e-commerce. While an estimated 2-3 percent of Brazilians might qualify for an international (dollarized) credit card, closer to 25 percent of Brazilians are viable customers of e-imports if they can pay domestically. At the start of 2015, EBANX claimed to have five million registered users out of an estimated pool of 60 million Brazilian e-commerce users.
FUTURE OF MOBILE COMMERCE
The fastest growing channel of Brazilian e-commerce is
mobile, via phones and tablets. At an estimated $1.5 billion in
2015, m-commerce provides a vital sales channel to merchants who appeal to
consumers on the move (like car rental, movie tickets) as well as impulse
buyers. The user base of smart phones that can access 3/4G infrastructure
long ago (2010) outgrew the Brazilian user base of PCs accessing broadband
Holding back m-commerce in Brazil (and elsewhere in Latin America) are two important factors. One is the simple technical fact that most e-commerce sites in Brazil are still not yet mobile optimized. Mobile e-surfers find themselves trying to navigate a traditional site, a daunting task without a magnifying glass. A recent survey in the US found that 61 percent of mobile surfers leave un-optimized sites, never to return. The other challenge is to convince Brazilians that their identity is safe when transacting via their mobile phone. A lot of Brazilian press on the subject has frightened consumers into thinking that their card data and identities are more vulnerable to theft while they are on the move with their cellphone.
Helping overcome consumer fear are the efforts of digital wallet providers who help consumers store their credit card data in an account that can be safely and conveniently accessed at an m-commerce or e-commerce site. Brazil has by far the largest digital wallet market in Latin America, thanks in part to the early efforts of b-cash, Pagseguro, and Mercadopago who furnished thousands of small e-merchants with the ability to accept digital wallet payments and the more recent efforts of PayPal who has invested millions in developing consumer demand.
In spite of Brazil’s macro-economic challenges of late, its potential as a digital commerce market will continue to attract the disruptive and creative investments of global players trying to expand their footprint. Many analysts anticipate large payment sector investments from firms like Facebook, Google, Apple and others in Brazil. The PR splash that their expansion will generate will help raise consumer awareness of the potential of m and e-commerce, further boosting growth, disrupting traditional retail and satisfying the demands of Brazil’s mighty middle class.
Lehr is Senior Director at Americas Market Intelligence. She can be reached at
Republished with permission from AMI.