What is the state of play for the ecommerce market in Brazil?
The Brazilian consumer is very keen on discovering new technologies and wishes to be informed on the latest trending topics. Sometimes the local market cannot meet these demands, and consumers look for products and services on international websites offering cross-border transactions. This was uncommon for Brazilian consumers not long ago, due to the lack of language localisation, lack of local payments, and long delivery times, as the main friction points for its consolidation in Brazil.
International ecommerce companies have been putting a lot of effort into making the purchase and the payments experiences for e-shoppers more regional, investing heavily in logistics to mitigate delays on deliveries. AliExpress is one of the success stories in Brazil: on top of a local purchase experience, they have also managed to considerably decrease delivery times, with weekly flights servicing the Chinese ecommerce giant.
The result of such initiatives has been reflected in their numbers. According to the 43rd Webshoppers eBit | Niesen and Bexs Banco report, cross-border ecommerce has experienced a 76% increase in total sales volume in 2020, taking a whopping 21% share of the total volume for ecommerce (BRL 110 million – approximately USD 21.8 million), which is the highest percentage ever recorded. The most popular categories were electronics, fashion and accessories, computing, and houseware. 2021 shows a rock-solid expansion for cross-border ecommerce, with a 15% growth for the first half of the year when compared with the previous year, representing BRL 9.6 billion (approximately USD 1.9 billion).
How about consumer behaviour? How did Brazilians adapt to the current shopping environment?
Year after year, more Brazilians shop via international websites. The Ebit | Nielsen report also mentioned that 71% of active e-shoppers made purchases on foreign websites. This translates into 9.5 million new users making their first cross-border transaction in 2020, accounting for 52% of orders placed. The share for Brazilian ecommerce in the retail sector almost doubled in 2020, but it’s still at around 10%, showing that there is still a lot of room for growth and for new international players to enter the market.
Price, availability, and new releases were the main drivers for e-shoppers to search for products on foreign ecommerce websites in 2020 – and as the competition is getting tighter, it is vital to start thinking about additional ways in which to attract the large Brazilian audience, such as:
localising the site in Portuguese – the vast majority of Brazilians do not know other languages besides their native one, so it is important to adapt the language to ensure high conversion rates;
converted prices – Brazilians are very concerned about unexpected fees and taxes and the high conversion between currencies, so offering the final price in reais generates a greater sense of security regarding carrying out the transaction;
local payment methods – more than 90% of Brazilians only have access to local payment methods, debit and credit cards with instalments, boleto, online bank transfer, and now Pix (instant payment);
ease of shipping – Brazilians love free shipping, and the risk of cart abandonment is very high when the freight has a significant value and/or isn’t free;
customer support – especially when it comes to recurrent transactions, it is essential to provide customer support (in the native language) that meets shoppers’ demands and ensures a good user experience.
With these points as part of the market entry strategy for international players, there is a greater chance for success in the Brazilian market and competition with local players, offering competitive prices and all the innovation that Brazilians love.
Which are the main difficulties faced by local and international players in the current Brazilian cross-border sector?
In addition to the factors already mentioned above about language, prices in local currency, freight cost, and paying attention to the payment methods preferred by Brazilians, there are other important circumstances to be taken into account in cross-border transactions, which can sometimes become bottlenecks, such as:
local entity – as part of an expansion into international markets, it is usually necessary to physically move to the destination, creating a legal entity in the country; this process may require a long time to be completed and bureaucratic procedures that can be very complex, in addition to the burden of taxes, employing the right people, and finding appropriate local premises;
payment settlement – in Brazil, the settlement time of most banks, acquirers, and PSPs for credit and debit cards can take up to 45 days, meaning that it can take this long until the merchant gets paid; to receive the payment in advance, it is necessary to pay additional fees to the payment provider/intermediary;
currency fluctuation – the Brazilian real has suffered strong fluctuations; as such, international transactions can become unpredictable and uncontrollable;
getting all your sales from Brazil exchanged and settled in your local currency is easy with Bexs – when accepting payments in Brazil in local currency, you need an efficient and trustworthy partner to perform the exchange into your own currency in a transparent and cost-efficient way, to make sure your margins are under control.
What are the opportunities that derive from having a local partner who knows how to mitigate these challenges?
One of the advantages of having a local payment partner is the exemption from creating a legal entity in Brazil. In addition, through the technological integration with a payment partner, it is possible to have access to many other benefits, such as:
knowledge of customer behaviour – a local partner knows the market and consumer behaviour (which varies greatly by region), bringing insights that will contribute to enhanced customer experiences and conversion rates as well as invaluable market research data;
offering local payment methods – in Brazil, not offering local payment methods translates into losing about 90% of the market, as the general population does not have access to international cards. Connecting with a local payment provider is essential to be able to access 100% of the market;
compliance/exchange regulation – international transactions are regulated by the Central Bank, and it is the responsibility of the local partner to comply with all the local regulations; the Central Bank of Brazil recently changed the regulation for foreign exchange operations, and it is an advantage to have a partner with expertise and ideally direct contact with the Central Bank to optimise operations and to make sure they follow the guidelines of the regulators;
payments and FX on a single platform – a local partner that offers payments and foreign exchange (FX) on a single platform brings advantages of greater visibility and flexibility of transfers, speed of processes, as well as better rates, as there is no need to pay a third party to carry out FX transactions;
online FX rating for pricing – with a smart hedge tool it is possible to control exchange rates and have a streamlined payments predictability, making sure the desired amount in foreign currency is going to be paid out;
exact amount receipt – the local partner will calculate all fees and possible taxes on transactions paid by the customer in the local currency, and the merchant will receive your payment as per the contracted amounts;
customer support – a local partner will provide support for customers in the local language.
What lies ahead for the Brazilian cross-border market?
We believe that markets and transactions will become more global, borderless. Brazilians will keep increasing their access to international products, and regional behaviours will be traced and better identified with the help of technology and data. A great ally will be Open Banking, which will give more autonomy to the client and will make financial services more decentralised, inclusive, and secure. In Brazil, Open Banking is still being implemented by the Central Bank, and Pix arrived at the end of 2020 as a result of this concept, quickly becoming the main alternative payment method in the country.
Based on the success seen by Pix in record time, it is likely that this movement will expand to other types of transactions, such as international ones. The Central Bank of Brazil is currently studying how to enable the introduction of Pix in FX transactions, and we are part of the analysis committee. In addition, the arrival of the new Brazilian FX regulation led by the Central Bank tends to streamline transactions.
With faster, less bureaucratic transactions and real-time payment settlement, markets become increasingly dynamic, open, and more accessible, both for customers (for products and services) as well as for international merchants, who can access a large market that demands global products.
This interview was first published in our Cross-Border Payments and Ecommerce Report 2021–2022, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.
About Luiz Henrique Didier Jr.
With over 25 years of experience in leading financial institutions in Brazil, Didier’s fields of expertise include innovation in payment processing, marketing, product and business development, and Brazilian foreign exchange regulations. At Bexs Pay, his main challenge is to bring innovation and technology to facilitate, through payment transactions, access to global goods and services for Brazilians and the best Brazilian goods and services for the world.
About Bexs Pay
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