Published On: November 13, 2018

U.S. Amazon Isn’t a River

Share This


While the word Amazon conjures images here of the jungle region in northern Brazil along with the mighty river, the second longest in the world, in the US the word Amazon is associated with the online retail company, Not only is the company the largest online seller in the US, but its CEO, Jeff Bezos, is today the richest man in the world.

Founded in 1994 in Seattle, has transformed online shopping. Today the company is launching its massive presence in Brazil. However, despite having a proven business model in the US that has been perfected over the past 25 years, it will not be fast or easy for the company to replicate its US success in Brazil.

Brazil, home to more than 200 million people and the world’s eighth-largest economy, is in many ways an obvious target for Amazon’s next major expansion. Google and Facebook have done well in Brazil, but their digital services — search, social media, and advertising — do not have to overcome the hurdles of selling goods and making deliveries.

Amazon headquarters in Seattle, Washington

Amazon headquarters in Seattle, Washington

The potential for growth — Brazil represents 1.1 percent of global sales in online retail — is expected to attract major investments from Amazon and other companies. Euromonitor International, a global research company, forecasts that the Brazilian market will nearly double over the next five years to U$35 billion, and some competitors will be squeezed out as obstacles to online retail are eliminated.

As a retail behemoth wading into the market, Amazon has found itself playing catch-up with Brazilian rival online companies that know how to navigate Brazil’s distinct challenges – a complicated tax structure, high import costs, and the headache of moving goods across a continent-sized country.

“Brazil is really kind of the natural next country in terms of sheer size,” said Cooper Smith, who was the director of Amazon research at Gartner L2, a business intelligence and research company. “It’s a huge opportunity, and they are laying the groundwork for that today.” In 2019, Cooper says, “Amazon is going to be all about Brazil.” His prediction comes with a caveat: “But it’s no small undertaking.”

New Amazon offices in São Paulo

New Amazon offices in São Paulo

Amazon has been present in Brazil’s online retail market since 2012, but until recently it focused on selling books and its Kindle e-reader. A little over a year ago, Amazon made a splash when it expanded to let third-party brands sell electronics directly to consumers on its marketplace.

Stock market shares in local competitors immediately fell following’s recent decision to expand, but shares later rebounded when it became apparent that Amazon wasn’t ready to roll out the vast array of goods and services that have helped make it the market leader in the United States.

Amazon earns its retail profits in the US from two sources: first-party sales, by which brands supply Amazon with products and Amazon is the retailer; and Amazon’s fulfillment service, which packages and ships products from the company’s warehouses.

Amazon Fulfillment Center

Amazon Fulfillment Center

“Amazon arrived a little late to the game,” said Marcel Motta, the Brazil director of Euromonitor. Established Brazilian companies, he said, “know how to get around the obstacles.” MercadoLibre, for instance, the e-commerce leader that first began in Argentina and modeled itself after eBay, has been in Brazil for 19 years. In Brazil, the company’s name has been translated into Portuguese as Mercado Livre (free market). “We helped build e-commerce in this region,” said Cristina Farjallat, the head of Mercado Livre’s third-party marketplace. “We have portfolios of sellers and portfolios of consumers that no one else has.” She said the company had lured more sellers to its site than any other online retailer by working with vendors to create the tools they need. Mercado Livre has a roster of 12 million vendors and its own fulfillment service, and it’s rolling out a payment service to bypass banks and credit cards.

This year, Amazon has broadened its catalog of products, offering sporting goods, fashion, and home accessories, and signed up some major brands — but all remain independently sold and delivered. As of November 2018, Amazon had just under 1 percent of the market share in Brazil, and was ranked 10th behind online retailers that offer both first- and third-party sales, according to Euromonitor’s research. Mercado Livre had 19 percent of the market share.

Amazon offices in Chicago

Amazon offices in Chicago

Experts say the window for Amazon to establish itself as a major player in Brazil is closing, which is why they expect the company to make a significant push in 2019. The question is whether it’s too late. “CEO Jeff Bezos has always harped on the idea that as Amazon saturates the US market, he can go to emerging markets around the globe,” Cooper said. But in some cases, those expansions have been more challenging than anticipated — for instance, in India and China, where Amazon has struggled to compete with Alibaba, China’s biggest online shopping company. In December 2018, the Indian government dealt Amazon a blow when it barred American companies from selling products supplied by affiliated companies on their Indian shopping sites and from offering exclusive products.

Jeff Bezos, CEO of Amazon

Jeff Bezos, CEO of Amazon

Amazon appears to be moving cautiously in Brazil: It did not attempt a major expansion of its offerings of goods and services in time for the Christmas shopping season in 2018. “Amazon wanted all the pieces of its system in place first,” Cooper said, before expanding as they have now.

One of the major obstacles to Amazon’s expansion in Brazil is transportation. Brazil is larger than the continental United States, and many of its roads are poorly maintained and sometimes flood. Also, the state postal service is often seen as inefficient and unreliable.

In addition to difficult terrain, Amazon will face mountains of bureaucratic regulations. Brazil’s convoluted tax structure can make delivering goods across state borders a costly affair, while high import tariffs have priced many foreign-made goods out of reach for all but the wealthiest Brazilians.

Only time will tell if Amazon will become as mighty as the river and fulfill its dream to become number one in Brazil as it has in the US.

[Research for this article comes from The New York Times.]

Displaying 3 Comments
Have Your Say
  1. I predict the next big move will be another headquarters in China instead of Brazil.

  2. Michael Rubin says:

    Thanks for your comment, David.
    You could be right!

  3. Evandro says:

    I don’t think Amazon is going to have same success as it has in the US, but it might be a good competitor, but who knows? Only time will tell that.

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>