By Paul Galpin, Managing Director, P2P Mailing
Online retailers looking to expand overseas should not overlook Brazil. In 2013 the Latin American powerhouse was ranked the seventh largest internet market globally and the online penetration rate is expected to rise from 44% to 48% by 2016. In this article, I will examine how online retailers can gain a foothold in this lucrative region.
Brazil will take the international stage in 2016 with the anticipated Olympics and Paralympics in Rio. The country is also attracting overseas attention for other reasons. Looking at technology alone, Brazil is is far ahead of its Latin American and Caribbean counterparts with approximately 100 million internet users at the end of 2013 and an estimated 50 million shopping online. Meanwhile 4 out of 10 online shoppers in Brazil purchased on international websites. However, for overseas retailers looking to break into this lucrative market place, there are a whole range of factors to take into consideration.
When targeting this market, overseas retailers should avoid a one size fits all approach. A good understanding of Brazil’s administrative landscape and market demographic is key. There are 26 different administrative states in Brazil, all with their own character, traditions and economic profiles. Around 54.1% of online users in Brazil are aged 15 to 34 years old. However, statistics indicate the online population is gradually aging; in 2011, 18% of users were aged 45 years and over, showing an increase of 4% in two years. There’s no doubt the e-commerce market in Brazil gives businesses an amazing opportunity to expand, but doing so successfully requires planning and research.
Where payment processes are concerned, Brazil differs significantly compared to Western markets where credit and debit cards are widespread. Boletos bancarrios are a popular payment option among Brazillians; accounting for around 75 percent of online payments. Under this process vouchers can be printed from an e-commerce site by a consumer, which are taken to the bank in order to pay for their products. The consumer then goes back online to complete the process. This provides security-conscious consumers an additional payment method through a secure source.
Tax and Compliance
Factors relating to tax compliance are also of key importance for overseas retailers. The market in Brazil is heavily protected with taxes on imported goods of up to 60 percent of the goods’ value. An added complexity is that tax regulations and rates might differ between federal states, and special sales taxes apply for inter-regional transactions. Seeking the advice of a third party expert consultant can save both time and money for online retailers first venturing into this market.
Back Office Processes
Back office’ processes will need to be reviewed to ensure they accommodate the preferences of Brazilian customers. A lot of retailers shipping to customers in Brazil will compress an address into three lines just as they do in the US, which can lead the shipping carrier to deem the address as incorrect. For many online businesses, engaging with a third party delivery provider which offers the local expertise and the relationships with postal operators, is the most fail-safe and cost-effective way of managing distribution in Brazil. An expert consultant should not only be able to negotiate competitive prices on your behalf, but will also be able to advise you on how to ensure that your fulfilment and distribution infrastructure meets the needs of your consumers.
Given the size and scale of the Brazillian ecommerce market, doing business in this region can seem a daunting prospect for overseas retailers. However, the rewards that Brazil has to offer outweigh the challenges. The strategic approach of engaging with a third party expert is key to making this process manageable.