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Free market: How Amazon’s new advance in Brazil impacts you

It was a latent threat and finally materialized. Amazon took another step in Brazil, with the launch of its streaming platform and free shipping service, and its movement shook its e-commerce competitors in the main market in Latin America. Among them, is Mercado Libre, the most valuable company in Argentina, whose shares fell almost 10% so far this week.

This happened because Amazon, the global giant founded in Seattle by Jeff Bezos, launched in Brazil Amazon Prime, its streaming platform that also offers free shipping throughout the country for purchases of products that users make on the platform.

The service was launched at a monthly cost of US $ 2.42 (9.90 reais), an aggressive offer that compares to the cost in the United States. There, the Prime service amounts to US $ 12.99 per month (it would be 53 Brazilian reais, at the current exchange rate).

The company launched its Amazon Prime service in Brazil this week

This Amazon movement, which landed in Brazil with the book sales segment in 2012, seeks to advance the main market in the region. The country has 70% of its population connected to the internet, which represents a universe of 126.9 million people.

Argentina’s Mercado Libre, which according to its official numbers obtains 62% of its turnover in Brazil, today loses 4% and accumulates a setback of around 10% this week. On Monday, the action of the company founded by Marcos Galperin began trading on Wall Street at US $ 608.40 and at the end of this day it was trading at US $ 549.

A similar situation occurred in 2017. At that time, versions of an expansion of Amazon towards the sale of other items beyond the books generated a drop of up to 10% in the value of the shares of Mercado Libre.

Currently, the Argentine company has a market valuation of around US $ 27.1 billion and is below its historical maximum, recorded at the beginning of August this year. After announcing its balance of the first semester, with earnings of US $ 28.1 million in the period, the stock broke its record and the company exceeded US $ 36,000 million valuation.

The real impact

The impact was also felt by other Brazilian firms, such as Magazine Luiza, Lojas Americanas or B2W Digital. According to Reuters, today recorded falls of 4.5%, 4.8% and 5.6%, respectively.

Amazon’s announcement will tighten competition in Brazil, the main market in Latin America. In 2018, according to Statista data, electronic commerce in the country mobilized US $ 28,000 million, while in Argentina it reached $ 229,760 million (US $ 5914 million, at the exchange rate of the last day of last year).

In that country, Mercado Libre operates a distribution center similar to the one that opened a while ago in Villa Madero, which generated a conflict over the union of its workers with the Truckers union, and offers free shipping for purchases on its platform. From now on, it will face the competition of Amazon, which advances on logistics with a similar service, which can be tested for free for 30 days.

Also published on Medium.

Published inE-commerce

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