In the past ten years, the stock of Free market (WKN: A0MYNP) Returns to investors 16 times the invested capital. So that’s it S&P 500, the standard benchmark for market performance, beaten by a wide margin.
What is the secret of this incredible success? Let’s dive into five strategies that have made this Latin American e-commerce specialist the market leader in the region. This is how we find out how they give the company a solid foundation for further growth in the coming years.
1. Concentrating on a large market
In 1999 MercadoLibre started its e-commerce activities in Argentina, Brazil, Mexico and Uruguay. Since then, the company has expanded to 18 countries across Latin America. The original IPO application gives an insight into the reasons why this region was ready for e-commerce. In 2007, the region counted 557 million people and over 100 million Internet users. Cellular technology and high-speed Internet increased in the region. This contributed to an annual 31% increase in Internet use between 2000 and 2007. The combination of a large population base, technological advances and fast-growing Internet use has created a huge market for potential online buyers.
Today, the region is even better equipped for electronic commerce. Of the 638 million people, more than half are internet users with 200 million online shoppers.
2. Build a robust e-commerce website
The company knew from the start that its success depended on an easy-to-use platform for buyers and sellers. Features such as robust search and product ratings have been built into the website. Each country had its own website to facilitate transactions and shipping for local users and to make the products more relevant. The marketplace was originally an online shop in the eBayStyle in which buyers could buy goods from individual sellers. In 2006, the company enabled gross merchandise volume of just over $ 1 billion on its platform.
Since then, it has expanded well beyond simply enabling consumer-to-consumer (C2C) relationships. Last year, C2C sales contributed only 7% of the $ 14 billion in goods sold on the platform.
3. Easy payment for buyers
By 2003, the company realized that its growth depended on helping buyers pay for goods electronically. It set up Mercado Pago, which acted as an escrow service, where the seller received payment only when the buyer confirmed that they had received the purchased item.
This service was very popular and grew even faster than its marketplace business. Today, Mercado Pago users can also pay for goods and services outside of the market place. Last year, the company made over 28 billion dollars in payments through Mercado Pago, more than half of it outside of its platform.
4. Make it easy for sellers to place orders
As MercadoLibre’s e-commerce business grew, smooth processing became a distinguishing feature to bring buyers to the MercadoLibre website. In 2013, Mercado Envios started with warehouse and logistics services for its sellers. Storing the seller’s goods and consolidating shipping volume gave buyers a seamless experience and merchants access to fast and affordable delivery.
Today, 88% of the goods sold on the platform use MercadoLibre’s shipping services, and 46% go through warehousing or other logistics services. As a result, customers in the top five markets, which make up over 95% of the company’s total volume, enjoy free shipping.
5. Support it with a comprehensive ecosystem of services
Over the years, the company has expanded its e-commerce business to include additional services. MercadoCredito offers loans and cash advances for sellers and loans for buyers. He also has a classified ad service where buyers can sell products such as cars and real estate, as well as services, for a fee. Sellers can advertise with the company or open Mercado Shops, i.e. brand shops within the MercadoLibre marketplace.
Over the past two decades, the company has built a robust ecosystem of offerings that work together to offer buyers and sellers a great online experience. This complete package has driven the growth of the company and made its e-commerce and payment platform the leading service in the region.
But the company is not yet at the end of its growth. The possibilities are enormous, as less than 5% of all retail purchases in the region were made online last year and the majority of the population has no or too little bank balance. Based on its solid foundation, MercadoLibre can continue to grow in the coming decades. It is not too late for investors to become part of this story.
The post 5 Keys to MercadoLibre’s success appeared first on The Motley Fool Germany.
Brian Withers owns shares in eBay and MercadoLibre. The Motley Fool owns shares of and recommends MercadoLibre. The Motley Fool recommends eBay and recommends the following options: Long January 2021 $ 18 calls on eBay and Short January 2021 $ 37 calls on eBay.
Brian Withers on July 26th, 2020 on Fool.com released. It has been translated so that our German readers can take part in the discussion.
Motley Fool Deutschland 2020