According to a recent report, the Brazilian e-Commerce segment grew 7.4% last year to $13.4 billion. The market is projected to grow to $15.1 billion this year. The growth in the industry is driven by a 22% increase in the number of consumers making at least one virtual purchase last year. Brazil is the largest Internet market in Latin America and the fourth largest Internet market in the world in terms of the number Internet users. Analysts estimate it had nearly 122 million Internet users as of last year. Currently, Brazil is going through a crisis – both economic and political. Despite the crisis, some companies, like MadeiraMadeira, are doing robust business.
Curitiba, Parana-based MadeiraMadeira was founded in 2009 by solo entrepreneur, Daniel Scandian, and his brother, Marcelo Scandian. The company is a pioneer and leader in the sale of construction and finishing material e-commerce in Brazil. It is focused on building the Biggest Home Center Internet in the region by offering a marketplace for national and international brands.
The company was initially set up to sell specialty flooring through the Internet. Since Daniel had very little money at the time of setting up the company, he began by implementing a drop-shipping model. The model allowed him to buy the product only upon a sale, thus avoiding inventory and earning revenues in the form of a sales commission. It relied on GoogleAdWords to generate sales and gradually began to diversify to other products.
Within a year, the company was exploring the option of expanding into windows and doors and other house products. By 2013, MadeiraMadeira had expanded to furniture and other home décor items. It had raised funding in 2012, which it invested in the development of technology, logistics and the website. The company aspires “to offer everything that is best for your home, without leaving home!”
MadeiraMadeira has done well financially since inception. It recorded $4.5 million in revenues in the first year and last year generated $65 million. It is targeting revenues of $150 million this year and plans to build a billion dollar company in the next few years.
MadeiraMadeira was bootstrapped for the first three years. Daniel invested $100,000 to start the business and then when the business needed more money, he sold his apartment to fund it. It raised funding three years into operations and since then, has raised $12 million so far. Its investors include Flybridge Capital Partners, Kaszek Ventures and Monashees.
MadeiraMadeira has made a name of its own in the Brazilian market. But competition in the country is heating up. Recent reports reveal that Wal-Mart is looking to invest $320 million over the next three years in Brazil. So far Wal-Mart has struggled to establish itself in the region. While Wal-Mart has physical stores in the country, it will also invest some of those funds in the development of its online portal for the country.
Or, quite possibly, Wal-Mart will make a set of acquisitions, and Madeira-Madeira can well be one of those. The company boasts of a robust logistics infrastructure powered by technology that brings together numerous small merchants on its platform. It has managed to organize a relatively unorganized sector in a highly differentiated way. And it has done so with a very small amount of capital investment.
Excellent execution thus far.