The Brazilian eCommerce Market Part 1: Walmart’s Decision to Exit

 In Shopping

In early June, Walmart—the world’s largest retailer—announced that it would be pulling out of Brazil’s growing market, selling off $4.5 billion worth of their Brazilian operation to private-equity firm Advent International.

The Brazilian market for eCommerce is fairly crowded, with numerous Latin American retailers holding their own behind the dominant mercadolivre.com.br, and Amazon’s growing Brazilian operation, amazon.com.br.

Throughout 2017, Walmart battled for its sixth-place spot in purchases behind mercadolivre.com.br, amazon.com.br, americanas.com.br, netshoes.com.br, and magazineluiza.com.br.

Walmart also faced competition from yet more retail domains extra.com.br, ricardoeletro.com.br and shoptime.com.br—companies familiar with doing business with a Latin American customer base but definitely not retail heavyweights like Walmart.

The Bigger Picture

At first glance, this decision appears drastic on the part of Walmart. Their retail performance is much closer to Amazon’s than it is in the U.S., and they’re competitive with a range of players. But unlike Amazon, Walmart has been in Brazil for more than two decades, and their stake in the country includes a lot more than eCommerce. Plus, it’s been a rough ride since 1995. From the start, they struggled to connect with customers, something they excelled at in America.  

A “one-stop, everyday low-price” shopping approach flourishes in places like, say, Brazil, Indiana. But in the nation of Brazil? It has struggled in a market where the minimum monthly wage of $275 gets stretched across several shops and markets.

And don’t forget that as recently as 2011 Walmart took its first steps to transform its U.S. digital retail activity in order to compete with Amazon.

Walmart.com.br Funnel Metrics

Looking at stats from Jumpshot’s Insights platform, we can see that Walmart was attracting a lot of traffic—walmart.com.br gained twice as many unique visits as amazon.com.br from January 1,  2017 to May 2018. But they weren’t successful in converting those visitors at the same rate.

In this time period, amazon.com.br cranked out 40% more total conversions than walmart.com.br with only half the site visits.

Mercadolivre.com.br definitively dominates digital eCommerce in Brazil, with more total conversions than walmart.com.br (around 95% more) and amazon.com.br (around 90% more).

Given these numbers, the good news for Amazon is that only 2.2% of visits to mercadolivre.com.br end in conversions. Over at amazon.com.br, a solid 3.7% of customer journeys ended in conversion.

Walmart lagged behind both, with just 1.0% of visits leading to a purchase. And of the 4 million walmart.com.br customers who started check-out, only 2.1 million converted (Where did that other 50% go? More on that later.).

With almost 40% of traffic to walmart.com.br originating from paid search (amazon.com.br posts similar numbers), their comparatively weak conversion rates indicate steep costs for acquisition.

These numbers reflect that, of these three players, Amazon’s site proves the most efficient at getting customers to buy, indicating that Amazon’s recent efforts to play catch-up in an emerging market have been paying off, though they still have a long way to go to match their U.S. dominance. (mercadolivre.com.br, incidentally, draws almost 84% of their traffic organically, which is an even higher rate than Amazon produces in the U.S.)

These efforts include working to duplicate a model that has worked internationally and in the U.S.: letting third-party sellers distribute goods. They’ve also been partnering with beauty companies to tap the massive Brazilian cosmetics market. If they can make gains in acquiring traffic, they’d have fertile ground for growth.

Cross-shopping Metrics

So, let’s get back to those customers falling off right at check-out on walmart.br.com.

Using cross-shopping metrics we might have the other part of the story, comparing the net loss or gain of conversions between any two sites by tracking users who interacted with products but did not convert on one site, but did end up converting on another. It’s not that online shoppers weren’t looking to buy. They continued to shop elsewhere.

The data shows that mercadolivre.com.br wins a huge amount of conversions from Walmart shoppers. From January 1st, 2017 through May 2018 they won 771,617 more conversions than they lost from customers who interacted with both walmart.com.br and mercadolivre.com.br.

This number represents 1.5% of all mercadolivre.com.br conversions and a startling 35.1% of all walmart.com.br’s conversions in the time period!

What makes this meaningful is that this high percentage could explain what happened when potential Walmart customers started but didn’t complete check-out.

For Amazon and Walmart’s sites in Brazil, the cross-shopping numbers are pretty small.  Walmart earns slightly more conversions than they lose. Amazon also lost conversions to MercadoLivre like this, but just 69,258, the equivalent of a mere 1.8% of amazon.com.br’s conversions. Again, we see Amazon delineating itself from the established eCommerce world in Brazil, something Walmart was never able to do.

What’s Next for Walmart?

Walmart is not just scaling back big time in Brazil but also in the UK. This comes as part of larger international expansion strategy that will reshape their global footprint. They’re looking for fresh turf on which to compete with Amazon, and they’ve had their eye on India and are making moves.  

Stay tuned with The Digital Consumer for more on Brazilian eCommerce and more on Walmart’s venture with Flipkart.

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