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Country Spotlight: Understanding Consumers and Cross-Border E-Commerce in Brazil

Despite Brazil’s recent economic downturn, the country’s e-commerce market continues to grow. Though not immune to the effects of the economy, Brazil’s 2016 e-commerce market was still the largest in Latin America and since 2014 has been one of the top-10 e-commerce markets in the world.

After hosting the World Cup in 2014 and the Olympics in 2016, the country has invested heavily in their local infrastructure. Today, Brazilians are reaping the benefits of that development in the form of skyrocketing internet and mobile penetration rates. Even with less disposable income to go around, the online retail sector continues to grow 5%+ YoY and remains one of the best opportunities for cross-border e-commerce investment.

Unless otherwise noted, statistics in this article are sourced from:

Brazilian Consumers

Brazil is a country of 210 million residents, with 85% of the population living in urban areas. Nearly half of all Brazilians are between the ages of 25 and 54.

Brazil is a prime market to consider for cross-border e-commerce sellers; 38% of Brazilians purchase goods online from foreign retailers! But to take full advantage of this market, it’s important to tailor your strategy to suit local consumer habits.

Brazilians, as a group, outrank the rest of the world in total time spent on social media at 60% higher than the global average. Brazilian smartphone penetration has doubled since 2014 so this trend is likely to continue as mobile internet usage climbs. The most popular social media platform is Facebook, meaning retailers selling in Brazil should consider investing in Facebook ads as a marketing channel with high ROI potential.

Online consumers in Brazil are slightly older on average than consumers in most e-commerce markets, with more than a third of them over the age of 35. The rise of smart phones and mobile devices in Brazil may help to reverse this trend. When entering the Brazilian e-commerce market, a mobile-friendly website will be critical to reach younger customers, so consider your demographics when updating your website’s design.

The most popular online payment method is credit card, accounting for 57% of e-commerce transactions. Uniquely, paying by instalments is very popular in Brazil – only 4 out of 10 credit card purchases are paid for in a single transaction. The local payment option of Boleto Bancário is also popular, accounting for 23% of all payments.

In the last few years, 59% of Brazilians have experienced a loss in purchasing power. While this hasn’t discouraged them from shopping online, it has made them more cautious. International sellers can take advantage of this because of a component cost known as the “custo Brazil” – a combination of high taxes and duties coupled with a strict labor law – drives up the prices of domestic products. This “Brazil cost” makes it relatively easy for foreign merchants to undercut local competition.

Drivers and Barriers

Driver: Mobile Commerce

For the most part, domestic retailers in Brazil have not yet adapted to the rapid growth of mobile commerce among local consumers. Cellular network coverage in Brazil is at 100%, mobile traffic to e-commerce sites is 32%, and 7% of all online sales are made via mobile devices.

Providing a user-friendly m-commerce experience will give your online business a serious competitive advantage in Brazil.

Barrier: Economic Downturn

Brazilian consumers have less disposable income than they used to and the e-commerce growth rate has contracted significantly as a result. With average family income down, the nation’s retail market decreased by 2.1% in 2016. Though it is likely to remain the largest e-commerce market in Latin America, neighboring markets such as Argentina have experienced much higher growth in recent years.

Driver: New Infrastructure

With high-profile international events, such as the World Cup in 2014 and the Olympics in 2016, Brazil invested heavily in local infrastructure. From new roads and airways to improved internet and cellular networks, Brazilian consumers are more connected than ever, and fulfilment is less of a worry.

Barrier: Regulatory Hurdles

Brazil is a highly regulated market. As a foreign-based retailer, you will be required to pay customs duties, which average almost 11%, and import duties, which can range from 10% to 35%.

While most of these duties will be borne by the customer, you should take care to be highly transparent about any additional costs that may be incurred.

Brazilian E-Commerce Facts

  • The largest e-commerce market in Latin America.
  • 19% of e-commerce sales in 2015 were mobile purchases.
  • Black Friday and Cyber Monday are the largest digital shopping days of the year.
  • 38% of digital buyers in Brazil make cross-border purchases.
  • Credit and debit cards account for 57% of e-commerce payments.
  • The US is the top destination for cross-border e-commerce, but its market share in Brazil is decreasing (71.5%), followed by China (55.1%), Hong Kong (18%), Japan (15%) and Canada (9.5%).
  • The top-5 product categories by order volume are Books (14%), Appliances (13%), Fashion and Accessories (12%), Cosmetics and Personal (12%), and Telephone and Mobile (9%).

When considering any new territory, it is crucial to take the time to understand the local market and consumer habits. Due to the economic downturn, Brazilians continue to shop online but now hold preference for price over speed. Brazilian consumers issue returns much less often than counterparts in other countries, at a rate of 15.6% compared to the global average of 27.5%, so the competitive advantages held by domestic retailers hold less sway.

38% of local consumers already purchase goods online from international merchants and it’s easy to compete on pricing, which should make Brazil a strong contender for your next new market.

Expanding into a new international market is a risky venture, but a very rewarding one if done right. For the latest information about how you can build and maintain a strong e-commerce enterprise and keep it compatible with legislation and buying habits at home and abroad, subscribe to the Payza Blog and follow us on Facebook and Twitter for the latest industry news.