With Amazon’s incredible growth trajectory now in the rearview mirror, investors are on the lookout for the next e-commerce giant. Enter MercadoLibre, often referred to as “the Amazon of Latin America.” This article explores why MercadoLibre has the potential to replicate Amazon’s success and become the dominant player in the region’s growing e-commerce market.
MercadoLibre’s target market is undergoing a major evolution:
MercadoLibre is solely focused on building its e-commerce business in Latin America, where there is yet to be an overwhelming market leader. The company’s diverse portfolio includes a digital payments platform, logistics, digital advertising, and point-of-sale equipment. With South America’s growing access to broadband and mobile connectivity, MercadoLibre is well-positioned to capitalize on the region’s e-commerce boom.
The growth of broadband and mobile connectivity in Latin America:
Latin America’s access to at-home broadband has increased from 30% to 50% in the past decade, mirroring the growth seen in the United States ten years ago. This proliferation of high-speed connectivity is expected to drive the growth of e-commerce in the region. Additionally, mobile phone penetration in Latin America is on the rise, with 69% of the continent’s residents owning mobile phones. This growing mobile crowd is likely to embrace mobile shopping and mobile wallets, further fueling the e-commerce market.
MercadoLibre leading the charge:
MercadoLibre is not only benefiting from the tailwinds of increased connectivity but is also capturing a significant share of the market. The company currently holds a market-leading 21% share of Latin America’s e-commerce market, after three years of consistent growth. While this share may seem modest compared to Amazon’s dominance in the U.S., it is similar to where Amazon stood in the U.S. market around 2014.
Impressive financial results and future growth:
MercadoLibre’s growing share of a growing market is translating into impressive financial results. Last quarter, the company reported a 32% year-over-year increase in gross merchandise volume and a 40% growth in revenue. Analysts expect MercadoLibre to deliver revenue growth of around 23% next year, driving per-share earnings up significantly by 2024. This strong sales growth is projected to continue through 2027.
Expanding payment technology’s reach:
MercadoLibre is expanding its payment technology’s reach, with its mobile payment and banking app experiencing a 47% year-over-year increase in total payment volume. While the app currently handles only about 5% of the region’s digital payments, the addition of credit cards and new payment features sets the stage for strong growth. By integrating its e-commerce platform with its payment platform, MercadoLibre is positioning itself as a one-stop-shop for consumers, reducing the likelihood of competition from rival mobile wallets.
Conclusion:
While investing always carries risks, the parallels between Amazon’s growth trajectory and MercadoLibre’s current position in Latin America’s e-commerce market are hard to ignore. With a growing market, impressive financial results, and an expanding payment technology reach, MercadoLibre has the potential to become the next Amazon in Latin America. Investors should keep a close eye on this emerging e-commerce giant as it continues to seize opportunities in the region.
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