According to comScore’s 2013 Latin America Digital Future in Focus report released last month, Latin America recorded the fastest-growing online population of any region during the previous year. The number of unique Internet visitors in the region grew 12% over the year to more than 147 million as of March of this year. The increased use of the Internet is driving online retail sales. Over the year, the number of online consumers in the region grew 16%. In fact, retailer Walmart’s website reported 11.7 million unique visitors in March, an increase of 163% over the year. It is this increasing online traffic that is attracting other e-tail giants into the region.
But Latin American e-commerce leader, MercadoLibre (NASDAQ:MELI) is managing to give other new entrants a tough competition. The company recently announced their Q1 financials and saw revenues grow 23% over the year to $102.7 million. The analysts were looking for revenues of $97.4 million for the quarter. EPS of $0.53 also managed to record impressive 18% growth over the year, but missed the Street’s projections by a penny.
Among other operating metrics, gross merchandise volume grew 30% to $1.6 billion with number of items sold growing 21% to 18.1 million units. Total payments volume for their payments platform, MercadoPago, increased 62% to $532.1 million partly attributed to the 38% increase in the number of payment transactions to 6.7 million. During the quarter, they grew their registered user base 23% over the year by adding 4.2 million new users.
MercadoLibre’s Expansion Plans
To further expand their market presence, MercadoLibre is focusing on improving their shipping solutions. After successfully adding sellers and items in Brazil to their shipping offering, they tied up with OCA, one of Argentina’s largest parcel couriers. Through the courier tie-up, they expect an improvement in customer buying experience which will help build loyalty and additional trading volume in the region.
MercadoLibre is focusing on building vertical platforms for their sellers, with positive results. Apparel is one of their important verticals, and during the last quarter, they saw nearly a quarter of their apparel listings moving into the vertical format and accounting for more than 75% of the gross merchandise volume of sales in apparel. MercadoLibre believes that as more and more sellers shift to this vertical-focused platform, conversion rates of sales will continue to improve.
MercadoLibre’s stock is trading at $114.62 with a market capitalization of $5.06 billion. It touched a 52-week high of $128.46 last month.
Mercado’s Growing Competition
The Latin American opportunity is attracting e-commerce giants like Amazon into the region. Amazon plans to enter the market through sales of their Kindle products. Over the last few months, Amazon has launched Amazon.com.br, a Brazil-focused website that will sell books in the region. They also opened another online Kindle Store for the region. They have yet to sell the Kindle Fire in the market as their movement into the region has been delayed by infrastructure issues such as a complex tax system, labor costs and the opposition being posed by local Brazilian bookstores to Amazon’s online model. For now, Amazon may not be a threat to MercadoLibre, but it shouldn’t be long before Amazon makes a wider presence in the region. MercadoLibre will need to continue to improve their platform and offerings to ensure they maintain the strong lead that they already have in the market.