MercadoLibre, the ‘Next Big Thing’ for US eCommerce Sellers?

Brazilians love three things: soccer, samba, and shopping. When it comes to shopping, Buenos Aires-based e-commerce behemoth MercadoLibre Inc. seems to be the clear favorite in the region. This gives the likes of Amazon a run for their money in terms of regional dominance and attracting eCommerce sellers.

MercadoLibre is valued at $60 Billion

The Latin American giant is planning to boost its operations beyond its borders in a bid to boost international sales. Interestingly, MercadoLibre seems to be following the playbook of its bigger rival Amazon by growing across international borders. It realized the hard way that international expansion is the only way to counter operational challenges in its home turf.

mercadolibre marketplace
mercadolibre marketplace

Just to rewind, the most valuable company in Latin America has grown exponentially in Brazil over the last two decades. MercadoLibre enjoyed clear advantages of being a local player. It allowed it to have extensive delivery networks and a solid understanding of the Brazilian psyche. It has a well-established logistics network and an online payment system. More than 12 million eCommerce sellers hawk over 260 million goods on its platform.

A Wakeup Call

The Brazilian postal service drastically increased its freight rates in 2018. This dragged down down MercadoLibre’s profits and made it realize that it cannot afford to be complacent. Brazil also ranks way below in the World Bank’s Ease of Doing Business Index. It is notorious for red tapism and highly restrictive trade barriers.

33% market share

To put things in perspective, international sales contribute less than 10% of MercadoLibre’s total revenues. Countries such as Colombia, Mexico, and Chile are the major contributors. By contrast, Amazon garnered 28% of its revenues from its international operations in 2019.

The Latin American e-commerce giant is leaving no stone unturned to expand across South America. It envisions more cross-border trade and is already running pilot programs to widen its delivery network.

Building a Logistics Network

Establishing distribution centers in free-trade zones is a key element of MercadoLibre’s strategy, which it hopes will speed up deliveries. The company has earmarked a war chest of $500 million to spruce up its logistics network. This includes investments in warehouses and to augment subsidized shipping to lure customers.

man packing shipping boxes

Unlike Amazon which has a well-established delivery network of its own, MercadoLibre has the capacity to handle just over half of its own deliveries. It has set its sights on neighboring countries such as Colombia and Chile for now, not to mention additional investment in its home country Brazil as well as Mexico.

Realizing that it cannot compete head on with Latin American players like MercadoLibre which come with a distinct local advantage, Amazon has been trying to lure customers with its Prime subscription model that offers free shipping, music, movies and games.

MercadoLibre seems to be on the right track with its focus on international expansion
. This could potentially end up being a fantastic place for eCommerce sellers to grow. Stay tuned for more MercadoLibre updates.

Paul Andrews
If you are looking to sell on eCommerce or are already selling on the platform but looking to scale up operations, then I am that guy you think you’re not looking for! But if you think again you can let me leverage my years of selling experience on ecommerce platforms to provide hands-on, strategic guidance to your brands or private labels to help set up, grow and scale your business.

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