How Amazon New Project In Brazil Will Impact Us

How Amazon’s New Project In Brazil Will Impact Us

Amazon: It was an expected threat for the competitors and finally materialized. Click To Tweet

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 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).

This Amazon move, 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 7% 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 yesterday they reached US $ 549. Today, papers bounce and recover 3%.

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 valuations.

Amazon will offer free shipping for purchases of products made on its platform in Brazil. 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 Statistic 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 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.

Amazon Prime subscribers will have access to movies, music and books and digital magazines on the Prime platform, to compete with streaming services such as Netflix. Amazon.com Inc. said it will launch its Prime subscription service in Brazil, where it has fought tough competition in Latin America’s largest economy.

The actions of Brazilian retailers plummeted after Amazon announced that it would offer Prime subscribers unlimited free shipments nationwide and maximum delivery time of 48 hours in more than 90 municipalities for products ranging from clothing to electronic products.

The leading e-commerce company is trying to overcome established local rivals such as Magazine Luiza and Mercado Libre. Magazine Luiza shares fell more than 4.5%, while Via Varejo’s papers fell 4.8% and B2W’s shares lost 5.6%.

Amazon Prime subscribers will also have access to movies, music and books and digital magazines on the Prime platform, to compete with streaming services such as Netflix. The launch of Prime represents Amazon’s boldest measure in Brazil, where 2012 came with the sale of books before adding other products to the platform.

The firm has struggled to make progress in the country, where analysts pointed out logistic and fiscal problems among the challenges that the US giant has had to overcome. “We went as fast as possible and as slow as necessary,” Jamil Ghani, vice president of Amazon Prime International, told Reuters.

The Brazilian Prime package will cost 9.90 reais (US $ 2.42) per month or 89 reais per year.

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