Describes what a company needs to know to take advantage of e-commerce in the local market and covers prominent B2B websites.
The 2019 yearly average conversion rate was 1 to (R)$3.94 Brazilian Reais (Hey-EYES).
According to the 2020 eEbit Webshoppers report, eCommerce in Brazil grew by 16 percent in 2019 compared to 2018, closing the year with revenue of $15.7 billion – ten times higher than in the beginning of the decade. This growth is driven by the increase in number of orders (20.1 percent in 2019 when compared to the previous year) while the average order value decreased 4.7 percent in the same period. 61.8 million consumers made at least one virtual purchase in Brazil in 2019, representing 29.4 percent of the country’s population and an increase of 6 percent compared to 2018 - making eCommerce a viable sales channel worth exploring. While too early to estimate the long-term impact of COVID on ecommerce, between March 17 and April 27, 2020 eCommerce revenues registered growth of 48.3 percent comparing to the same period in 2019.
The self-service segment (entertainment, tourism, durables, non-durables, and perishables) registered the highest growth in number of orders and revenues (61 and 63 percent, respectively). The average growth of all segments was 25 percent for number of orders and 17 percent for revenues. However, department stores still are the primary segment for eCommerce sales, representing 50 percent in number of orders and 67 percent in revenues. Second in number of orders is clothing & footwear (14 percent), followed by sports (8 percent), perfume stores (5 percent), and the self-service segment (5 percent), which represents any online transaction (from purchase to delivery) that is completed without another person’s assistance. Regarding revenues, self-service and clothing & footwear occupy second place (7 percent), followed by sports (4 percent), and computing (3 percent).
According to PwC’s Global Consumer Insights 2019, 53 percent of Brazilians use their smartphones to research products, 45 percent compare prices in different vendors using their mobile devices, and 32 percent use online payments to purchase goods. In November 2019, mobile sales exceeded desktop sales, a historic moment for the m-commerce (mobile commerce) market in Brazil. M-commerce represented 41.8 of market share in eCommerce and over 68 million orders – up 60 percent over 2018.
Despite continued growth, the eCommerce market in Brazil can be difficult for U.S. companies to navigate without a local presence due to challenges involving customs, taxes, shipping and payments for cross-border sales, in addition to the application of local consumer laws to any purchase completed in Brazilian territory.
U.S. B2C firms targeting consumers online from outside Brazil should proceed with caution. Brazil is a price-sensitive market with high import taxes. Direct sales from foreign countries, including the United States, are subject to customs and duties regulations. Although Brazil has made substantial progress reducing traditional border trade barriers (tariffs, import licensing, etc.), rates in many areas remain high and favor locally produced products.
Brazil is on the U.S. Trade Representative (USTR) Special 301 Watch List. This designation reflects the agency’s concerns with respect to high levels of counterfeiting and piracy in Brazil, including internet piracy and use of unlicensed software. It is important to be aware of this when buying or selling content online. Businesses that locate online content infringing on their rights can contact the Internet Service Providers (ISPs) hosting said content to attempt to resolve their concerns. Businesses can also contact Brazilian enforcement authorities to explore potential criminal action. With respect to potential civil actions, businesses should be generally aware that ISPs will not be found civilly liable for damages resulting from content generated by third parties. Therefore, companies should be aware that their civil actions against an ISP, based on online sales of counterfeit goods, may not be successful. On the other hand, ISPs that host content infringing on copyrights or neighboring rights may be found civilly liable if the ISP does not remove content in a timely matter after notice has been given by the rights holder. The legislation in this area is still developing in Brazil, so companies may wish to consult local counsel if they have concerns. The criminal division of the U.S. Department of Justice has an Internet Computer Hacking Intellectual Property Officer (ICHIP) posted at the U.S. Consulate in Sao Paulo. Please contact us for more information.
Businesses seeking to market in Brazil also may wish to consider registering their trademark(s) as domain name(s) ending in “.br,” the country-code top-level domain (TLD) for Brazil. Registering trademarks as domain names in country-code TLDs may be helpful in establishing a local market presence. Defensively registering trademarks as domain names also helps guard against “cybersquatters,” i.e., bad actors who register others’ trademarks as domain names in bad faith. Domain names typically can be registered for future use, thus preserving the company’s options for expansion. The .br TLD, unlike some country-code TLDs, has an administrative dispute resolution policy for addressing cybersquatting. Court litigation also remains an option for instances of cybersquatting. For more information on eCommerce IPR, please visit the World Intellectual Property Organization website and the 2019 Review of Notorious Markets for Counterfeiting and Piracy published by the Office of the United States Representative.
In 2018, the Government of Brazil launched a service platform that facilitates purchase of U.S. goods from foreign websites. The program, named Pre-Clearance for Americans and “Compra Fora,” for Brazilians is run by Correios, the GOB’s postal service, and allows importers to register a physical address in the U.S. where their purchases will be delivered and then routed to Brazil. For more information about this program, please contact our team.
The Impact of COVID-19 in eCommerce
According to eBit, there are six key stages related to consumption behavior during the COVID-19 pandemic and Brazil is in phase 5, when there is limited shopping trips and heightened concern over price increases. The next phase would be the “new normal,” when people resume their daily routines but are overly cautious about their health. Between March 17 and April 27 (when COVID-19 hit the Brazilian society) eCommerce revenues registered growth of 48.3 percent compared to the same period in 2019. Growth was mainly driven by the number of orders in the following categories: electronics, home & decoration, computing, and fast-moving consumer goods. Easter-related categories stood out, registering 1,040 percent growth in revenue compared to 2019. 20 percent of consumers in the period declared to be new to eCommerce and were focused mainly in pharma and self-services products.
Throughout the same period, the industry has registered a remarkable surge of new online marketplaces and online sales equaled offline sales. This trend is expected to endure after the COVID-19 scenario.
Brazilians often pay in installments for high-value eCommerce purchases, while preferring to pay in one payment for low-value purchases. In 2018, more than half (54.2 percent) of eCommerce sales were made in one payment, the remaining 45.8 percent were made in installments. U.S. vendors should be aware of this important trend when selling to consumers locally.
Security continues to be a concern, particularly regarding online fraud. Most Brazilians do not carry international credit cards, so international transactions can be challenging for both residents and visitors. While visitors have relatively few problems using credit cards at hotels and tourist venues, the same is not true for online purchases. Those wishing to pay for services such as food delivery or movie tickets online often encounter barriers, as many Brazilian websites do not accommodate international credit cards. The most accepted cards in Brazil are Visa and MasterCard with chip and PIN technologies adopted to avoid misuse of physical cards.
Major Buying Holidays
Brazil has five holidays where retail sales increase: Christmas, Mother’s Day (the second Sunday in May), Valentine’s Day (June 12), Father’s Day (the second Sunday in August) and Easter. There are also five other major seasonal dates that affect retail: Children’s Day (October 12), Brazil Week, Consumer’s Day, Black Friday, and Cyber Monday (in line with the U.S.).