Brazil’s eCommerce Scenario and its Positioning in Latin America

Juliana Grunwald
Juliana Grunwald May 7, 2018
Brazil’s eCommerce Scenario and its Positioning in Latin America

The growth of the eCommerce segment in Brazil is a fact. For several years now, Brazil has been a major player in Latin America’s electronic commerce.

Brazilians have become very well-adapted to technology, and they feel safer in regards to shopping on the internet. Because of this, among other reasons, many companies are using digital channels to sell their products and develop start-ups focused entirely on virtual operations.

This article will provide an overview of the eCommerce market in Brazil, and discuss what may be expected in the near future. Take a look!

A Brief History of Brazil’s eCommerce Sector

The local eCommerce sector reported accelerated growth in revenues from 2001 through 2015, as shown on Sebrae’s website. In 2015, 39.1 million consumers placed 106.2 million orders from virtual stores.

Ebit, a company specializing in electronic commerce data, reports that numbers for 2015 were up 15.3% in 2014, when sales reached R$35.8 billion. 2014 had already shown 24% growth in 2013, totaling R$28.8 billion.

Ebit adds that despite 2016 being a crisis period, the sector showed 7.4% nominal growth against the previous year, and revenues ended the year at R$44 billion.

Update: In 2017, according to EBIT, sales grew 8%, order volume increased 5%, and e-consumers broke the 55 million mark.

Online retailing saw sales fall as new members of class C – which was essential for the sector’s growth – were hit by the economic crisis of the last 4 years and as a result, they became less active in online shopping. On the other hand, consumers with high purchasing power boosted their share of online transactions, and their average spending was higher too.

So despite the lower number of class C consumers, higher purchasing power users made for a 12% higher ticket average without affecting growth in turnover.

The Current Situation for Brazilian eCommerce

Brazilian e-commerce revenues are now at R$47.1 billion, which is 2.8% of the retail share, according to Forrester research institute.

Brazilians are now more connected; access to technology is cheaper, so shoppers’ customs and habits are becoming more and more virtual.

While there is still a general preference for shopping in physical stores, eCommerce numbers are not mistaken – the sector is very much growing. Considering that internet shopping habits are still somewhat new to Brazil, we are seeing the development happen more in Brazil than in other countries.

Factors contributing to the success of eCommerce in Brazil:

  • There is a greater sense of purchasing safely because websites display safety seals and certifications, and this feeling is reinforced by the positive experiences of friends and acquaintances;
  • More options in trading platforms, such as social commerce (commerce driven by social platforms);
  • The growing use of electronic means of payment, such as credit cards, making shopping more convenient and safer.

Compared to eCommerce for Latin America as a whole, research shows that Brazilian eCommerce is ahead of the pack. Different sources report it has a share ranging from 60% to 75% of this region’s total, well ahead of Mexico, the second largest market, with an estimated 8.5% share by 2017.

B2B and B2C Markets

B2B (Business to Business) is when business is transacted on a digital platform between two companies, or from one business to another.

In short, eCommerce enables companies, distributors, and other types of organizations to trade products and services between themselves electronically. Forrester researchers estimate that 30% of corporate purchases are now being made on digital platforms and they predict this number will be up to 56% in three years.

Their survey shows that Brazil, Argentina, and Mexico are expected to grow 135%, thus taking current sales revenues from US$20 billion to US$47 billion.

Another interesting point is that Gartner’s predictions for 2015 -2020 show B2B growing 15% to overtake B2C (Business to Consumer) in online sales.

Spending on technology, systems, infrastructure, and services is also growing faster than in the B2C sector. The survey estimated that the B2C eCommerce market will be worth US $480 billion by 2020, and B2B will reach US $1.1 trillion in the same year.

Projections made by Forrester research institute for a study commissioned by Google analyzing the eCommerce market in Brazil show eCommerce doubling its share of Brazilian retailing by 2021 and growing at an annual average of 12.4%.

The survey found that the sector will perform well due to diversified types of purchases, as we shall explain further below.

This market is currently dominated by electronic books and articles, but developments are expected in sectors such as clothing, food, beauty, and footwear, which will be more in demand as of next year. Google’s projection is that approximately one in four internet sales will be in these segments in 2018. The clothing, food, and beauty sector is expected to account for 25% of total purchases – against its current 11%.

Growing the share of these items will take Brazil into the anticipated “fourth phase” of eCommerce: frequent purchases of subjective goods such as beauty and fashion items. But with 52% of the total, books and electronics would still retain the lion’s share of sales.

One factor that will be driving overall growth of sales for the sector is the number of users connected to the internet, which is now 60% of the population, or approximately 124 million people, and it is set to rise to 151 million by 2021 when the internet is expected to reach 71% of people nationwide.

Other factors that will pose a more optimistic outlook for eCommerce sales in 2018 include the World Cup – especially in the first half year – with the overall economic scenario becoming more stable as times progress beyond the crises of recent years.

Brazil’s eCommerce has now reached a sweet spot where both B2B and B2C markets are showing growth in online sales. In addition, surveys and projections show the sector will be likely to benefit from higher sales revenues and volume sales over the coming period. Companies investing in the sector must be ready to leverage this opportunity to develop and grow. Investing in state-of-the-art technology, intelligent systems, and gaining an edge through customer service and customer relations are some of the factors that will ensure competitive advantages.

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