Amazon Steps Up In Brazil With Potential New Warehouse

As Amazon gears up to compete with rivals in Brazil, the eCommerce retailer is reportedly seeking to lease a 50,000-square-meter warehouse near São Paulo. The potential investment indicates that Amazon may soon distribute electronics and other goods sold on its Brazilian website, Reuters reported.

Currently, third parties ship their own goods sold on Amazon’s marketplace in Brazil. But the investment could change that distribution strategy, revealing that Amazon is stepping up its efforts in the Latin American nation. The eCommerce retailer declined to comment to Reuters on its potential warehouse plans.

In Brazil, Amazon faces eCommerce competition from MercadoLibre Inc. and B2w Cia Digital. To better compete, the company expanded its product line in Brazil to include electronics in October.

Even amid the competition, eCommerce retail in Brazil has slowly taken off due to fears over security. Tax and logistics in Brazil can be challenging due to the large size of the country. As a result, only 5 percent of Brazil’s approximately $300 billion retail market represents eCommerce. While that is only about half of eCommerce’s share in the U.S., online shopping has doubled there over the last four years — and it is projected to grow annually in the double digits.

Amazon’s expansion into electronics spooked investors, who sold off shares of MercadoLibre, with stocks dropping by as much as 9 percent in 2017. According to Bloomberg, Brazil represented 54 percent of MercadoLibre’s total revenue last year.

This isn’t the first time reports of Amazon entering a new market resulted in rivals’ shares falling. United Parcel Service (UPS) and FedEx shares were under pressure in October 2017 after news reports revealed that Amazon was testing its own delivery service to reduce congestion in its warehouses and offer more retail products for free two-day shipping.

When investors got wind in February that the service would launch in Los Angeles, shares of both FedEx and UPS slid more than 4 percent. The carriers — and analysts — are downplaying concerns that the experiment is a threat to the business of FedEx and UPS in the near future.