Why Brazil is an Opportunity for Cross-Border Growth

Brazil is not just samba, soccer and beaches – Brazil is opportunity.

With over 200 million people, Brazil is the sixth largest economy in the world and one of the fastest growing ecommerce markets.  It has 110 million Internet users and online sales of  $16 billion USD in 2014 – Brazil is a country on the move in the world of ecommerce.

Brazil is a young and consumption driven population with an average age of 30.   With a growing middle class and an increasing number of consumers buying online, Brazil is driving the economic growth in Latin America.  Today it represents over 60% of B2C ecommerce sales in the region.

Brazil has the strongest cross-border market in Latin America.   Western products are highly desired, with 25% of Brazilians shopping from international websites.  Since the Internet penetration is still relatively low, only 55%, there is enormous potential for growth.

Here are a few key considerations to take in account when looking to expand your business into Brazil.

Why do Brazilians shop online?

There is an increasing amount of cross-border online shopping since the domestic market in Brazil is still developing.   First, products purchased online are often less expensive than buying domestically due to the high local taxes and duties.  Products can be as much as three times the price at a local store compared to the price on an international website.  For example, Brazil has the most expensive iPhone and PlayStation in the world.   Secondly, there is often better availability on international websites because many products have not yet launched locally.

The most frequently purchased products online are apparel and accessories, health and beauty, appliances, electronics, and online games.  The most popular countries to shop from are the U.S. and China.

How do Brazilians pay for online purchases?

Brazil is a cash-based economy, with only one third of Brazilians having access to credit cards.  Although, credit cards are the most widely used payment method, accounting for 54% of online transactions, a growing number of consumers prefer to pay with Boleto Bancário.  It is a financial document issued by a bank that is paid in cash at supermarkets, lottery agents and banks.  In 2014, the usage of Boleto Bancário totaled 20%, which was an increase of 13% from the prior year.

The three main payment methods in Brazil are: Boleto Bancário, domestic bank transfers and credit cards.  In order to reach 100% of the population, it is critical to offer all the payment methods to consumers.

The most popular way to pay in Brazil is payments in installments, accounting for 80% of all credit card transactions.  This payment method allows consumers to divide the cost of the product over a period of time.  For example, a consumer decides to buy a pair of shoes for $200 BRL in 4 installments and his credit card will be charged $50 BRL per month with interest.  This enables consumers to purchase something that they would otherwise not be able to afford and therefore, it can fit into their monthly budget.

How to market to Brazilian consumers

There is a strong appetite for social media in Brazil with 87% of Internet users belonging to a social network.  It is the major driver for consumers to go online and it is a key contributor to the rapid ecommerce growth.  Brazilians like to ‘follow’ merchants to track their current product offerings and sales.   It is crucial to leverage social media in order to build a brand, grow consumer loyalty and generate new demand.

How to enter the Brazilian ecommerce market

The best approach for international merchants to be successful in Brazil is to develop local partnerships.  There are many limitations for international merchants to get started in Brazil such as the legal process, local taxes and cross border payment processing.  It is large financial burden to establish a local entity in Brazil.  For example, it is more efficient for merchants to find a local partner for their payment processing.  This is because the majority of credit cards issued in Brazil are local credit cards and can only be used to make domestic purchases.  With a local payment processing partner, merchants are able to increase authorization rates from 25% to over 75% for credit cards by utilizing local acquiring.  In addition, with a local payment processing partner a merchant can offer the local cash based payment methods, Boleto Bancário and domestic bank transfer, to their consumers.

As a larger percent of Brazilians spend more time online, there is an enormous opportunity for international merchants to grow their business in Latin America.

Nicole Wickswat is Director of International Sales for ebanx

 

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