Brazil briefing: Where is the e-commerce market going?

Brazil may be home to the hemisphere’s largest river, but it still doesn’t host its Internet namesake: The world’s largest e-commerce brand has not yet opened retail operations in Brazil. But it is on its way.

The American giant has arrived in Brazil with AWS (Amazon web services) and has announced plans to start selling digital cultural products (music, books, films) and the Kindle later this year. That could be a game-changer in one of the world’s  most promising—and exasperating—ecommerce markets.

Let’s consider some of the basic dynamics. For a start, Internet penetration in Brazil is not exclusive to the wealthier segments of society; it has already reached more than half the country’s 195 million people. Mobile access in particular is growing fast. By 2015, mobile broadband penetration is expected to reach 85 percent of the population. It’s interesting too, that Brazilians are so socially absorbed online; 87 percent of Internet users belong to at least one social network, compared to a global average of 70 percent.

Brazil also has one of the world’s highest penetrations of Twitter. This matters, because in Brazil—maybe more than anywhere else in the world— retailing is increasingly social. About 30 percent of the country’s Internet users “follow” retailers (compared to 12% in Britain) to track special offerings and promotions. As a result, companies like Magazine Luiza— one of Brazil’s largest retailers, both online and off—are leveraging “F-commerce” (doing business via social networks like Facebook) to generate new revenues and build consumer loyalty/advocacy.

The use of e-commerce varies widely. Online spending in such traditional e-commerce categories as travel, books, and consumer electronics is mature. Other categories, like DIY, apparel and housewares, trail world standards but are catching up. There are also wide geographic variances. The southeast (Brazil’s richest region) accounts for more than 58 percent of all e commerce, but the northeast is becoming one of the main drivers of consumption. Right now, the northeast accounts for only 7 percent of e-commerce, but the market is growing eight times as fast as the southeast.