What to expect from MercadoLibre

MercadoLibre expects to focus on logistics, microcredit, direct sales and payments to expand its Latin America business and leverage growing digitization stemming from the pandemic, according to executives.

Latin America’s leading e-commerce company and one of the region’s most valuable brands retained solid gains in online shopping and digital payments in Q3, even with the reopening of brick and mortar stores in the last months.

Revenues surged 85% year-over-year, to US$1.12bn, exceeding analysts’ expectations. The group reported net income of US$15mn, compared with a net loss of US$146mn in the same period in 2019.

MercadoLibre reported 76.1mn active users at end-September, up 92.2%, and gross merchandise volume (GMV) of US$5.9bn, up 62.1% in US$ terms and 117% on an FX neutral basis. Nearly 206mn items were sold through MercadoLibre, growing around 110% year-over-year.

“MercadoLibre recorded another strong quarter, driven by high demand for e-commerce and fintech services. Brazil, Chile and Colombia delivered very strong results in both e-commerce and fintech, while our Mexican operation is still experiencing robust growth despite slight deceleration,” CFO Pedro Arnt said in the company's earnings call with analysts.

According to the executive, after four years of aggressive capex spend in Mexico, the company will continue to invest in the country but more focused and in areas that can generate long-term value, such as logistics. Arnt also said that the Mexican operations doubled year on year.

Overall, MercadoLibre invested US65mn in Q3 and almost US$167mn year-to-September, compared to US$101mn and US$$29.4mn, respectively, in the year-ago periods.

Arnt said countries in the Andean region again exceeded expectations, citing Chile, but also Colombia. 

In marketing, the company is still investing less than outlined in its pre-coronavirus plan because of the continuing trend of increasing online commerce "and because we are still generating robust organic traffic growth," he said.

In Chile and Colombia, though, the company reinforced branding and invested in special date and performance marketing campaigns.

“I feel more comfortable recapping how Q4 plays out once we've actually gone through the quarter and anticipate how competitors might play and what might happen. I think we're focused on our own Q4 execution. I feel that we are better equipped to participate aggressively in those promotional activities, and let's see how it plays out.”

MOBILE WALLET

On the financial front, the company’s mobile wallet MercadoPago recorded US$3.2bn in transactions on a consolidated basis, growing nearly 381% year-over-year on an FX neutral basis. 

The wallet’s consumer base grew by 125%, reaching 13.7mn unique payers, with total payments volume in Argentina, Brazil and Mexico growing by triple digits.

According to Arnt, peer-to-peer payments continue to gain participation within the wallet which the group plans to focus more on.

“This trend was evident across the region. The large pickup in peer-to-peer during the quarter was not only driven by quarantines and shift to digital but also by the launch of a new product experience and new free pricing for all transfers made with account money and debit card for P2P transactions,” he said.

LOGISTICS

In Brazil, MercadoLibre has acquired a fleet of four airplanes for delivering orders in the country.

The partnerships were with commercial airlines Azul, Total, Sideral and Latam, which operate the services for the company. The planes take off and land in Salvador, Manaus, Recife, Porto Alegre and Fortaleza, as well as in the states of Goiás and Espírito Santo. 

The goal is to reduce delivery times of the products that the company has stored in its distribution centers in São Paulo and Bahia as competition with Magazine Luiza, B2W and Amazon intensifies.

MercadoLibre expects to invest in Brazil in 2021 more than its forecast investment of US$716mn for this year.