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Mercado Libre and its formula for triumphing in the pandemic

InvestChile - August,26,2020

The company is growing at rates of 300% in Chile and plans to invest US$100 million in the next two years.


If there has been a big winner in this pandemic, amid the disaster for thousands of companies and industries, it is e-commerce and the leader there in Latin America is Mercado Libre. On Tuesday, August 4, the Argentine unicorn, which was founded 21 years ago, became the region’s most valuable company, with a market capitalization of over US$60,000 million.

“I am proud to have achieved this milestone, which is a consequence of the great work done. We continue to look ahead because we still have a lot to do and invest,” acknowledges Stelleo Tolda, vice-president and co-founder of the technology company.

Through its platforms, Mercado Libre, Mercado Pago and Mercado Envíos, it offers solutions through which individuals and companies can buy, sell, advertise, dispatch and pay for goods and services over the internet.

In more good news, the company reported its second-quarter results this week and they are astounding: in e-commerce, its user base increased by 45.2% to 51.5 million while its net income, at US$878.4 million, represented an annual increase of 61.1% and it sold 178.5 million items, up by 101.4%. In the case of its fintech, Mercado Pago, the total volume of payments processed in the last three months was up by 72.1% to US$11,214 million and it carried out 404 million transactions, equivalent to an increase of 123%.

“In the pandemic, many people have shopped online for the first time and many SMEs have also opted for this marketplace,” explains Tolda. “We were prepared for this huge increase in traffic and were able to adapt to our customers’ needs quickly, as we have always done, and offer them a good shopping experience from start to finish,” he says.

Speaking from Sao Paulo, he adds that, out of the 18 countries where Mercado Libre operates, Chile stands out the most. “In June, sales in the marketplace grew by 300% over the same period in 2019 and visits to our platform rose from 50 million in April to more than 72 million in July. Mercado Envíos dispatched a million deliveries in May and 1.5 million in June,” he reports.

Tolda anticipates that, in the next two years, the company will invest US$100 million in Chile to build two distribution centers. The first, with an area of 9,000 square meters in Santiago’s Pudahuel district, is expected to open “soon” while construction of the other will begin in 2021.

“Our bet is on Latin America”

When asked which was the most complex aspect of the pandemic for the company, Tolda does not hesitate: the logistics operation. “The exponential increase in dispatches over the last three months called for investment and we had to move very quickly to maintain adequate service levels; that has been the great challenge,” he reveals.

In order not to run risks, the company opted to use a number of suppliers and thus ensure proper delivery times and boost the technological solutions it has developed. Is ongoing fourfold growth sustainable? Tolda acknowledges that it is very difficult but says that the change the company has seen in consumer behavior shows there is a vast market to conquer. “Many people still haven’t shopped online and much of our future growth lies there, even at a higher rate than traditional commerce,” he anticipates.

Tolda explains that, in Latin America, the penetration of e-commerce, at less than 10%, is still low whereas, in countries like the United States and China, it is above 20%. He also rules out the possibility of broaching new markets: “Our bet is on Latin America.”

The company has a clear strategy for reaching potential customers. In the case of the financial services side, a segment that is growing even more quickly than e-commerce, it plans to offer better payment, loan and investment services and even to distribute insurance. “Bankarization in the region is still very low and that is a great opportunity,” he argues.

On the e-commerce side, the plan is to expand the range of categories and continue to improve the shopping experience. “Electronic articles sell very well, for example, but there are sectors, like fashion, where there is great potential, as well as in supermarket products,” Tolda concludes.

Source: El Mercurio

To find out more about investments in the global services sector in Chile, see this article.

Topics: Foreign Investment- global services- Foreign companies- Mercado Libre



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