Latin America's E-commerce Leader MercadoLibre Expands Free Shipping in Brazil, Aiming for Higher Sales Amid Fierce Competition
MercadoLibre, Latin America's most valuable company by market capitalization, has announced the expansion of its free shipping policy in its main market, Brazil. The move is expected to have a significant financial impact on the company, but it hopes that this will drive sales higher and help it maintain its competitive edge in the highly contested e-commerce space.
MercadoLibre earns more than 50% of its e-commerce revenues in Brazil, where it competes with major players such as Amazon and Sea's Shopee. In recent years, other new entrants have also joined the market, including Temu, which has gained traction among consumers. To stay ahead of the competition and meet customer expectations, MercadoLibre has decided to expand its free shipping policy in Brazil.
New Threshold for Free Shipping Introduced
As part of this expansion, MercadoLibre has introduced a new threshold for free shipping in Brazil. Sales of 19 reais (approximately $3.40) or more are now exempt from shipping fees, down from the previous minimum of 79 reais ($14.15). This means that customers can enjoy free shipping on most items sold on the platform.
According to Fernando Yunes, the head of MercadoLibre's e-commerce operations in Brazil, "Practically the entire site will have free shipping from now on." While this move is expected to have a significant financial impact on the company, Yunes emphasized that the costs would be absorbed by MercadoLibre itself. However, he did not provide an estimate of the scale of these costs.
Shipping Costs for Sellers Reduced
In addition to expanding its free shipping policy, MercadoLibre has also been working to reduce shipping costs for companies and individuals selling on its platform in Brazil. Since late May, the company has cut shipping costs by up to 40%. This move was noted by analysts at Itau BBA, who observed that "The increased shipping discount targets a price range of products close to where Shopee seems to be gaining traction."
Impact on Competition and Consumer Behavior
The expansion of MercadoLibre's free shipping policy in Brazil is expected to have significant implications for the e-commerce market. With more customers enjoying free shipping, online retailers may see an increase in sales as consumers take advantage of this perk. However, this move also raises questions about the sustainability of such a policy and its impact on the company's bottom line.
In response to MercadoLibre's decision, other e-commerce players in Brazil may be forced to revisit their pricing strategies or offer similar promotions to maintain competitiveness. This could lead to further price wars in the market, potentially affecting consumer behavior and preferences.
Conclusion
The expansion of free shipping by MercadoLibre in Brazil is a significant development in the region's e-commerce landscape. While this move is expected to have a financial impact on the company, it aims to drive sales higher and maintain its competitive edge in the market. As the e-commerce space continues to evolve in Latin America, companies like MercadoLibre will need to adapt quickly to changing consumer expectations and stay ahead of their competitors.