MercadoLibre leads in LATAM e-commerce market
In an Interview with Third Bridge Forum, the specialist said MercadoLibre will likely remain “resilient” in H2 2022. They said buyer engagement will continue to remain “sticky”, particularly as MercadoLibre continues to expand into other categories and gain greater wallet share. Despite the macroeconomic climate, the specialist said consumers spend more online during these times and that this trend has been a growth driver for e-commerce companies like MercadoLibre.
They also told us that Latin America is still a net beneficiary in the adoption of digital retail and financial services, and as such, this is counterbalancing current macro headwinds. While inflation is an issue, the specialist said it offers the least risk for MercadoLibre because its businesses are “take rate” based.
The specialist said that there is still plenty of TAM potential in LATAM, given cash still represents three-quarters of all transactions. They said the company is well placed to capture more TAM having done a “phenomenal job” on product price and selection, and is one of the few players in South America that can offer a “full suite of solutions on both e-commerce and fintechs” to both merchants and consumers.
We heard that MercadoLibre’s EBIT margins could improve by 10% over the next two years as the company moves beyond its heavy phase of logistic investments. Over the next five years, the specialist expects MercadoLibre to continue to grow in Brazil, Argentina and Mexico. While it faces competition from Amazon and to a lesser extent Shopee in these markets, the specialist said MercadoLibre will likely remain “number one” in LATAM due to its comprehensive logistics network.
However, the specialist warned MercadoLibre’s success could be derailed by poor execution. The company could also face legal action for violating antitrust laws in Brazil, although the specialist believes the grounds for this are “very soft” given e-commerce’s low sales penetration. The company could also face currency risks that are out of its “control”, the specialist said. However, they added that such challenges are part and parcel of doing business in the region.
Click here to access all the human insights in Third Bridge Forum’s “MercadoLibre – LATAM e-commerce dynamics and competitive positioning” Interview.
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