Shopee, AliExpress and Shein walk into the same gold rush
There is a saying that if you dig a hole in China and go out through the center of the earth, it will be Latin America. In other words, Latin America is the farthest place on earth from China.
This is a very good market, whether it is the total economic volume, GDP, or local purchasing power is very high. In 2020, the growth rate of e-commerce in Latin America reached 38.3%, exceeding the world average.
There are many “blue oceans” of e-commerce in Latin America, among which the e-commerce market in Mexico is the hottest. Amazingly, Mexico is not the largest e-commerce market or economy in Latin America. Brazil, the largest economy and e-commerce market in Latin America, has far better conditions than Mexico in all aspects, but it has not become the “blue ocean” first choice for sellers in the end.
This is because Brazil is not an easy market to enter due to customs clearance policies. However, a cross-border big seller has successfully entered this market very early, and the annual revenue has even exceeded 100 million. But in Brazil, the big sellers are not destined to be able to do as much as they can in the Amazon and Southeast Asia, because there are too many rules and regulations, and too many big sellers have failed.
In an immature market, sellers can only rely on the platform to survive, and the Brazilian e-commerce market can only rely on the platform to polish it little by little.
Even so, that didn’t stop Shopee, AliExpress, and Shein from going gold.
Brazilian e-commerce, a gradually bustling market
“In 2017, after conducting research on various market platforms, we found that Brazil is not only the top ten economies in the world, but also the largest economy in Latin America. Brazil has a high retail market share, a large market size, and a high Internet penetration rate. It is a Latin American e-commerce market that is worth taking the first step.” A Shenzhen cross-border e-commerce big seller with an annual revenue of billions and stores on major e-commerce platforms around the world recalled the initial entry into Zhixiang.com. The situation in Brazil, after that, it took the initiative to contact Meikeduo, the largest e-commerce platform in Latin America, and finally successfully entered Brazil by means of platform entry.
Yibai, Zhihui Chuangxiang, Banggu, and Tongtuo may be the first batch of big sellers to set foot in the Brazilian market. At that time, the top e-commerce platforms in Brazil were not only Meike, which was listed in the United States in 2007, but also B2W, which occupied the main market in Brazil. “.
However, this is also good for these big sellers. There is less competition pressure, relying on the high cost performance of distribution and Chinese products, as well as the higher unit price of Meikeduo, their income in Brazil is increasing steadily every year.
The industry status of “Buddha” was broken in 2019. In July of this year, Meikeduo entered the Chinese market and set up an office in Shenzhen, from three to five people to more than a dozen people. Today, Meikeduo has an office in China. The number of employees has exceeded 50, and it is still expanding.
Like other e-commerce platforms entering the Chinese market, Meikeduo has taken a fancy to the most active Chinese sellers in the world. Under the vigorous promotion of Meikeduo, a large number of sellers have settled in Meikeduo and entered Latin America, including Brazil. A Meikeduo investment manager told The Passage that according to his estimates, there are more than 10,000 active sellers who have opened stores in Meikeduo in the past few years.
B2W also followed, and a few months later, the first investment promotion meeting was opened in Shenzhen on November 8, 2019. Although it does not invest as much in setting up a Chinese team as Meikeduo, it is also very active. At the same time, the great success of mobile phone Xiaomi and short video platform Kuaishou in Brazil in 2020 has also allowed all parties to see huge opportunities in this fertile soil of Brazil.
By 2020, more players will be eyeing Brazil, and after a short test of the water, Shopee has officially begun to enter Brazil. “Shopee entered the Brazilian market very aggressively, made a lot of advertisements, and the traffic came very fast,” said an e-commerce practitioner. And AliExpress, which entered Brazil very early, has also become active again after a long period of dormancy.
Driven by many platforms, the Brazilian e-commerce market has become lively, and the volume, traffic and popularity have rapidly increased.
After the outbreak of the epidemic, the global e-commerce market unexpectedly grew rapidly, and Brazil was no exception. Latin America’s online spending power has shown a strong trend, and the platform has also given more subsidies to merchants. The volume of the Brazilian e-commerce market is growing rapidly. An industry source quoted data that the Brazilian e-commerce GMV will reach 33 billion US dollars in 2021, an increase of 20% compared to 2020.
Under the agitation of platforms and sellers, the scale of e-commerce in Brazil is getting bigger and bigger.
The platform is the vane of the Brazilian e-commerce market. In the fiercely competitive e-commerce market, the platform has a clear positioning to have a competitive advantage. Like its positioning in Southeast Asia, Shopee wins by quantity and cost-effectiveness, focusing on low unit price, while Latin American native platforms Meikeduo and B2W have higher unit price, which can cover middle and high-end consumers in Brazil. And AliExpress is between Shopee, Meikeduo, and B2W.
At present, most of the distribution-type big sellers are mainly active on platforms such as Shopee, Meikeduo and B2W, followed by Amazon and AliExpress.
The local e-commerce platform has achieved tremendous development in the recent years of full competition, and at the same time has begun to learn from China and the United States, which are the most developed e-commerce companies in the world.
Zhang Zhen, co-founder of MOBOCITY, an overseas live broadcast generation operation platform, told The Passage, “The current development of e-commerce in Brazil is actually at an early stage. Brazil’s e-commerce platform is not blocked. They will look at what happened in the United States and China and learn from China. And the model of the United States. Therefore, Brazilian e-commerce platforms are very aware of the situation in China, especially high-level executives will pay close attention to the situation in China.” For example, seeing the fierce development of China’s live e-commerce in 2021, AliExpress Brazil and Shopee this year It also began to test the waters of live e-commerce. The local e-commerce platform is a little slower, but there are also actions. For example, Meikeduo has recently joined the live broadcast e-commerce army and signed a pilot agreement with Swedish live broadcast service company Bambuser in February this year.
Zhang Zhen is very optimistic about the future prospects of live streaming in Brazil, and has already started in-depth cooperation with the platform. “Brazil has not yet formed an ecosystem like China, but live streaming e-commerce must be the future development trend.”
Tariffs, customs clearance, logistics, the “three mountains” of Brazil’s cross-border e-commerce
Although the competition between multiple e-commerce platforms has tried to expand the Brazilian e-commerce market, the scale of Brazil’s cross-border e-commerce is destined to be small. Brazil’s local industrial base is weak, especially the production of shoes, clothing, leather, textiles, etc., which are related to daily consumption, is shrinking. This means that e-commerce platforms cannot obtain goods directly from the country and must trade across borders, but Brazil has been criticized in this regard.
In the interview with The Passage, we can clearly feel that many sellers are discouraged from the Brazilian market, and they even take the initiative to avoid Brazil and choose Mexico and Chile.
Even the investment manager of a leading e-commerce platform in Latin America said, “If Chinese sellers have just entered Latin America, we will guide them to Mexico.” The merchant platform has an overseas warehouse in Mexico, from which they can deliver goods to all parts of Latin America.
But to build an overseas warehouse in Brazil? That is impossible, because the high local tariffs can completely eliminate the idea of doing overseas warehouses in Brazil.
In addition to the difficulty of building a warehouse, there is also a slow customs clearance. The Brazilian customs has strict customs clearance requirements, the process is cumbersome, incomplete information, no tax ID number, lack of certificates, or more than the number of personal purchases may be the reasons for customs clearance failure.
According to previous reports from Cross-border Eye Observation, in Brazil, the time limit for customs clearance is generally about 7 days, which greatly lengthens the overall time limit of logistics. A small package of goods departs from China, goes through shipping logistics, clears customs, and then enters Brazil. Logistics may take 40–60 days. Long-term delivery not only hurts the consumer experience, but also tests the seller’s capital chain.
In addition to the slow customs clearance, Brazil’s domestic logistics is not open. Brazil’s domestic logistics is monopolized by Brazil Post. At present, the terminal delivery of e-commerce platforms such as Meikeduo and shopee is Brazil Post.
But these are not the most deadly problems of cross-border e-commerce entering Brazil. The most deadly problem is Brazil’s super high tariffs. According to the information from the cross-border eye observation, in recent years, in order to protect the country’s industrial production, the Brazilian government has upgraded the protection policy of taxation of imported goods from abroad: the threshold for cross-border e-commerce products of US$100 has been reduced to US$50. , imported goods valued between US$50 and US$3,000 through Brazilian postal customs clearance are subject to a fixed uniform import tax, which is 60% of the import CIF (cost plus insurance plus freight) price.
For example, if a product exceeds $50, the FOB price is $100, plus insurance and shipping, the local price becomes $115, plus a 60% tariff, the price becomes $184, Then to each state in Brazil, you may have to pay 18%, which is similar to the turnover tax (ICMS) of value-added tax. In the end, it will be a loss if it does not sell to US$217 when it enters the market. Many Chinese goods pass through the entire customs checkpoint, and the original cost-effective advantage gone.
Therefore, the current e-commerce players in Brazil are basically limited to a price range of $50 per customer. When Shopee and Meike multi-platform attract Chinese sellers, they basically only attract sellers with a single product below $50.
You must know that in recent years, many high-quality sellers in China have been taking the route of refinement and branding, and the products have already exceeded 50 US dollars, which means that they can only regretfully abandon the Brazilian market. For consumers, it is a huge loss.
Moreover, Brazil’s tariff policy will not be relaxed in the short term, but it will be tightened. A big seller revealed, “The current tariff threshold is 50 US dollars, and it may be lower in the future, or even lower. Tax on all goods. But there is no official clear answer yet, everyone is watching and waiting for news.”
The platform’s “localization tilt” trend
Although there are various problems in the Brazilian e-commerce market, it must be admitted that Brazil is still a “blue ocean” of e-commerce, especially the shopping enthusiasm and strong purchasing power of Brazilians, which have great allure for e-commerce.
In 2019, Sophie, who operates on behalf of e-commerce, just came to the Brazilian market to operate, and she was deeply impressed by the purchasing power of Brazilians. “A seller in the Xiaomi ecological chain opened a store on B2W through us in early November, and the store began to operate stably. It was Black Friday, and we signed up for a platform event. On Black Friday, the sales volume of Redmi headsets reached More than 30,000 copies!”
The strong purchasing power makes it impossible for players from all walks of life to give up the fertile soil of Brazil. “Join if you can’t get around it.” Since the Brazilian government is strongly supporting local industries, cross-border players simply take the initiative to lean towards Brazil and strengthen their own local labels to deal with Brazil’s trade protection policies.
The most crucial aspect of the localization tilt is the realization of the supply chain in Brazil. Among the many e-commerce brands, Shein took the lead in taking this step.
Brazilian local media revealed that in December 2021, Shein CEO Xu Yangtian went to Brazil to inspect the Brazilian clothing supply chain and meet and communicate with top local clothing suppliers; Shein is evaluating the feasibility of producing clothing products in Brazil, and will discuss with the two companies. The factory signed a non-disclosure agreement.
While negotiating garment production with suppliers, Shein also established a branch in Brazil, employing staff to strengthen the Brazilian business. Shein’s series of operations directly plated itself with “localized” gold edges.
At the same time, Shein also strengthened local offline marketing. On May 18 this year, Shein opened the first pop-up store in Brazil in Rio. The interior decoration and height of the store are combined with the local cultural characteristics. Once the store opened, there was a long queue in front of the store. This move undoubtedly strengthens the presence of the Shein brand in the Brazilian market.
It is reported that in 2021, Shein’s revenue in Brazil will reach 400 million US dollars, and once the localization strategy is implemented, this is only the beginning of Shein’s gold nuggets in Brazil.
In addition to Shein, cross-border platforms are also actively moving closer to the mainland.
Shopee has made a lot of efforts to get rid of its “foreign identity”. Shopee has made it clear that it is not a foreign website and wants to establish a local “local ecosystem” in Brazil to directly connect Brazilian merchants with Brazilian consumers.
According to Felipe Piringer, as of April 2022, the Shopee Brazil site has approximately 2 million local seller stores. As of October 2021, Shopee has about 1 million local seller stores in Brazil. In less than a year, the number of local seller stores has doubled. And, according to Shopee Brazil’s marketing and strategy director, 87% of Shopee’s sales are currently contributed by local companies.
It can be seen that Shopee’s localization strategy is accelerating in all directions.
The localization strategy has become the general trend. AliExpress also announced in August last year that it will build a platform for local Brazilian sellers. Once the localization policy is implemented, whether the seller imports goods or buys from the country, at least the effectiveness is higher, and the localization label will be recognized and protected by the Brazilian government for foreign platforms such as Shopee and AliExpress. excluded from trade protectionism.
