Ecommerce In Brazil | Trends and Opportunities
Ecommerce in Brazil is a promising venture for anyone looking for business growth. World Bank data says Brazil has the 11th largest Gross Domestic Product in 2022, making it the largest economy in Latin America.
Worldometer, on the other hand, reports that Brazil has the biggest population in 2023, with over 216 million people. Mexico is a far second, with more than a 128 million population.
GDP by country 2022 (Source: World Bank)
Aside from having a large market, Brazil’s government is also doing its best to accelerate the economy further:
- The country’s leadership is actively engaged in boosting private investments in railway projects, particularly those focused on cargo transportation.
- The privatization of the Santos Port Authority (SPA), considered the largest bustling port in Latin America, could reduce the average shipping cost to Brazil and make the process more efficient.
- Brazil’s information and communications technologies (ICT) ranked 10th in the global IT market in 2021, encompassing a substantial 40% share of the Latin American market.
- The Brazil Country Commercial Guide of the US International Trade Administration (ITA) forecasts Brazil is poised to become one of the top 5 global markets for smartphones by 2025.
IT World Market 2021 (Source: ABES)
It goes without saying that the country’s present economic, infrastructure, and ICT conditions hold numerous encouraging prospects for anyone looking to do ecommerce in Brazil.
How Big is Ecommerce in Brazil?
Brazil’s economy is thriving, and most of its population is online. If you put two and two together, you’ll see that exporting to Brazil or launching a Brazilian store online can be a lucrative project.
After all, ITA says ecommerce in Brazil is projected to exhibit a striking 95% growth by 2025, resulting in a total worth of $79 billion. Data from Mordor Intelligence Research & Advisory, on the other hand, forecasts a Compound Annual Growth Rate (CAGR) of 16.63% in five years.
Amazon ecommerce CAGR (Source: Mordor Intelligence Research & Advisory)
Over the past years, many locals have been attracted to the convenience of Brazilian online shopping. But one factor propelled robust ecommerce growth over the start of the Covid-19 pandemic: the Brazilian government’s pandemic relief.
The government disbursed pandemic relief through digital wallets. Such an initiative allowed millions of Brazilians a chance to access online retail platforms for the first time.
Since then, the Southeast region, encompassing major cities like São Paulo and Rio de Janeiro, has emerged as the epicenter of ecommerce in Brazil. The region accounted for 51% of the country’s ecommerce expansion.
Here’s a breakdown of ecommerce sales in 2021 grouped according to categories:
- Electronics – 43.1%
- Appliances and furniture – 28.2 %
- Fashion – 10.3 %
- Health, cosmetics, and wellness – 7%
- Home decor – 5.5%
- Supermarket food and beverage – 3.9%
- Books – 2%.
The surge in ecommerce growth within the country is being fueled by younger generations, notably millennials and Gen Z. After all, they are more at ease with online shopping than older generations.
In addition, the upward trajectory of contactless payment positively influences ecommerce in Brazil. Payment methods such as mobile wallets and contactless cards bring forth convenience, speed, and heightened security for online transactions.
Top Brazilian Ecommerce Sites
Many people are curious – what are the top eCommerce companies in Brazil? Here are the biggest players in terms of market share.
Most Visited Retail Websites in Brazil, June 2023 (source: Semrush)
1. Mercado Livre
This marketplace is the local entity of Argentina-established Mercado Libre and has been present in Brazil since 1999.
If you’re exploring how to sell on Mercado Libre, you’re embarking on a lucrative project with substantial potential for success. After all, it’s the strongest ecommerce company in Latin America.
Selling on Mercado Libre can be a good opportunity for many entrepreneurs. After all, its product categories span wide – from tech and home appliances to vehicles and more.
2. Amazon Brazil
If you’ve seen Amazon vs Mercado Libre posts in seller forums online, it’s because Amazon Brazil is growing its customer base in the region. In fact, it ranked second in June 2023 statistics, with over 163 million visits. Thus, selling on Amazon Brazil is indeed worth the investment.
Does Amazon ship to Brazil? Yes, but there’s a caveat: Unlike Amazon Mexico, Amazon Brazil is not a part of Remote Fulfillment with FBA (Fulfillment by Amazon). This program allows US-based sellers to sell to buyers in Canada and Mexico without sending inventory to those countries.
So, back to the question – does Amazon deliver to Brazil? Yes! But instead of Remote Fulfillment with FBA, you must be an Amazon international seller to enter the Brazilian marketplace.
By partnering with local payment methods, AliExpress climbed up in popularity, as it became a shopping option for locals who didn’t have credit cards enabled for international shopping.
This Dutch company, founded in 2006, has expanded to 45 countries. Aside from usual categories like home goods, fashion, beauty products, and electronics, OLX also spans departments like automobiles and real estate.
5. Magazine Luiza
The only homegrown and proudly Brazilian platform, Magazine Luiza is a prominent retail company that operates a chain of stores selling a wide variety of consumer goods.
The company is now one of the largest retail organizations in Brazil. Magazine Luiza offers products such as electronics, home appliances, furniture, computers, electronics and mobile devices.
Today, the company has grown beyond its brick-and-mortar stores. It has also incorporated digital strategies to expand its online presence, contributing to its continued success in retail.
What are the Challenges of Ecommerce in Brazil?
Ecommerce in Brazil, while promising, comes with several challenges that businesses need to navigate. Here are points to consider during your ecommerce expansion:
Logistics and Infrastructure
Despite the state’s initiatives to improve operations in Santos Port Authority, shipping to Brazil (particularly shipping from the USA to Brazil), can still be demanding. For one, Brazil’s vast size and complex transportation infrastructure can lead to challenges in efficient and timely deliveries.
Poor road conditions, limited access to certain regions, and unreliable postal services could also affect transportation. That said, shipping from the USA to Brazil is faster compared to shipping from other countries.
In fact, Brazil introduced a service platform in 2018 aimed at streamlining the delivery of US products known as Compra Fora. The program is administered by Correios, the national postal service of Brazil, and enables importers to enlist a physical address within the US to receive their purchases, which are subsequently forwarded to Brazil.
Brazil has a complex tax system, particularly for cross-border transactions. Import tax rates can be substantial, with some products facing tariffs as high as 60%. Some products may also incur a state tax known as ICMS, ranging between 17% and 25%.
It’s worth noting, however, that not all parcels are subjected to this tax, and audits are infrequent. In 2020, merely 2.6% of all cross-border postal shipments were audited by federal authorities, yet over 90% of these audited shipments ended up being required to settle taxes.
Complex regulations in Brazil customs clearance can also lead to delays, added costs, and hurdles for cross-border trade. Delays are common during peak shopping seasons or due to higher shipment volumes, which can impact the overall customer experience.
Brazilian customs also require intricate documentation. Incorrect or incomplete paperwork can result in products being held up or returned, leading to additional costs and bad reviews.
Ecommerce in Brazil presents a wealth of opportunities for business growth. The government’s efforts to boost the economy, enhance logistics, and invest in infrastructure further support the potential for success in the e-commerce sector.
However, alongside the prospects lie several challenges to deal with, logistics issues, tax rates, and customs in Brazil present hurdles for cross-border ecommerce.
That said, it’s best to have a knowledgeable local partner to help with remote fulfillment or marketplace expansion.
Local distributor and ecommerce seller GoAvance can offer massive potential for business growth in Latin America. The team offers end-to-end support to help you navigate the region’s challenges and capitalize on its vast opportunities.
Carla Bauto Deña is a journalist and content writer producing stories for traditional and digital media. She believes in empowering small businesses with the help of innovative solutions, such as e-commerce, digital marketing, and data analytics.