Amazon.com Inc is looking to lease a 50,000-square-meter warehouse just outside Sao Paulo, according to people familiar with the matter, as it steps up its push into Latin America’s biggest retail market, Brazil.
The logistics investment, which would be four times the size of its current book-shipping operation in the country, is a sign the online retailer may soon handle distribution of electronics and other goods sold on its Brazilian website.
That would be the first step of its kind for Amazon in Latin America’s largest economy, where it currently relies on third parties to ship their own goods sold on its marketplace, and it underscores the seriousness of the e-commerce giant’s renewed push into Brazil.
Amazon did not respond to questions about leasing a warehouse.
Amazon is currently exploring the possibility of expanding into Brazil, which comprises the largest market in Latin America, according to sources informed about the move (file photo)
While an estimated two-thirds of Brazil’s 209 million people have internet access, online retail was slow to take off at first, amid concerns over security and complications with tax and logistics in the continent-sized country.
E-commerce accounts for around 5 percent of Brazil’s roughly $300billion retail market – about half its share in the US – but it has doubled in the past four years and is forecast to keep growing annually at a double-digit pace.
Now Amazon, which expanded its Brazil business from books to electronics in October, is gearing up to fight rivals such as Latin Ameria’s homegrown e-commerce champion Mercado Libre Inc and B2w Cia Digital, which is indirectly controlled by partners of private equity group 3G Capital.
‘You obviously can’t underestimate a company like Amazon,’ said Pedro Guasti, CEO of Brazilian online consultancy Ebit. ‘It has huge capacity to invest and it’s obviously taking a bigger bite of the cake than it did last year.’
Mercado Libre Inc, B2w and local retailer Magazine Luiza SA have stolen a march on Amazon by storing and shipping goods appearing on their websites even when offered by third-party sellers, to ensure speed and customer satisfaction.
Amazon, by contrast, has been slow to tackle the challenges of shipping in a country where tricky logistics and tax issues have long made online retail an unprofitable venture.
Shares in Mercado Libre were trading down 0.5 percent late on Friday, in a slightly higher US equities market, while the stock of Brazilian rivals slumped.
Two-thirds of Brazil’s population has access to the internet, making them viable customers for Amazon to target. The company has reportedly looked into a warehouse space outside Sao Paulo (file photo)
Appliance retailer Via Varejo SA was down six percent at 23.72 reais, while Magazine Luiza SA shed 5 percent to 72.32 reais. B2W was trading 8.5 percent lower at 20.80 reais.
‘Markets get spooked when they see an investment by Amazon’, a Brazilian trader said. ‘There is fear that the company will become more aggressive with its strategy in Brazil.’
In Mexico, Amazon launched its third-party marketplace coupled with its own shipping service, called ‘Fulfillment by Amazon,’ in 2015.
The contrast has been stark. Nearly 20 percent of reviews on Amazon’s Brazilian marketplace are negative, compared with 10 percent in Mexico and just 4 percent in the United States, according to e-commerce analytics firm Marketplace Pulse.
Complaints in Brazil often focus on delayed or cancelled orders – a problem dramatically reduced in other countries when Amazon itself packs and posts orders of third-party goods stored at its warehouse facilities.
IS AMAZON STARTING ITS OWN DELIVERY SERVICE?
Amazon is reportedly planning a new service called ‘Shipping With Amazon’ that will allow it to pick up packages from businesses and deliver them to consumers.
The service is expected to start in Los Angeles in the coming weeks, before it is rolled out more broadly as soon as this year, according to The Wall Street Journal , which cited anonymous sources.
Shares of shipping companies FedEx and UPS slipped Friday.
Amazon, which has been edging into the delivery business for some time, didn’t deny the report.
Amazon’s next move may be to shake up the shipping industry. The online retailer is reportedly planning a new service called ‘Shipping With Amazon’ that will allow it to pick up packages from businesses and deliver them to consumers. File photo
In an early sign of Amazon’s Brazilian logistics push, the company posted more than a dozen listings for distribution jobs in the country to LinkedIn last year, including ‘Site leader, Fulfillment Center’.
The new warehouse site outside of Sao Paulo, in the municipality of Cajamar, looks to be a step in that direction.
There San Francisco-based logistics company Prologis Inc has offered a 50,000-square-meter space to Amazon in a new industrial park that hosts DHL and Samsung, according to sources, who said adaptation of the warehouse had not begun.
Prologis, which also partnered with Amazon on a mega-warehouse north of Mexico city last year, declined to comment.
The preparations in Brazil come as Luft, the local logistics operator for Amazon’s book business, readies a move into another Prologis site nearby in Cajamar, sources said, leaving its current 12,000-square-meter facility in the city of Barueri.
Amazon registered in October to conduct operations in Cajamar, according to municipal records seen by Reuters.
The new logistics investment could spell trouble for rivals.
Mercado Libre has been a success story among Latin America tech start ups: its shares have nearly tripled since 2014, bringing its market capitalization to more than $15billion.
Magazine Luiza’s stock has risen sixfold in each of the past two years as it shifted its rolled out an ambitious e-commerce strategy built on its brick and mortar stores.