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Exclusive: Amazon eyes new warehouse in Brazil e-commerce push - sources

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02/09/2018 | 11:13pm CEST
The Amazon logo is seen at the Young Entrepreneurs fair in Paris

SAO PAULO (Reuters) - Amazon.com Inc (>> Amazon.com) is looking to lease a 50,000-square-meter warehouse just outside Sao Paulo, people familiar with the matter told Reuters, as it steps up its push into Latin America's biggest retail market, Brazil.

SAO PAULO (Reuters) - Amazon.com Inc (>> Amazon.com) is looking to lease a 50,000-square-meter warehouse just outside Sao Paulo, people familiar with the matter told Reuters, as it steps up its push into Latin America's biggest retail market, Brazil.

The logistics investment, which would be four times the size of its current book-shipping operation in the country, is a sign the online retailer may soon handle distribution of electronics and other goods sold on its Brazilian website.

That would be the first step of its kind for Amazon in Latin America's largest economy, where it currently relies on third parties to ship their own goods sold on its marketplace, and it underscores the seriousness of the e-commerce giant's renewed push into Brazil.

Amazon declined to comment on the possible warehouse lease.

While an estimated two-thirds of Brazil's 209 million people have internet access, online retail was slow to take off at first, amid concerns over security and complications with tax and logistics in the continent-sized country.

E-commerce accounts for around 5 percent of Brazil's roughly $300 billion retail market — about half its share in the United States — but it has doubled in the past four years and is forecast to keep growing annually at a double-digit pace.

Now Amazon, which expanded its Brazil business from books to electronics in October, is gearing up to fight rivals such as Latin Ameria's homegrown e-commerce champion Mercado Libre Inc (>> MercadoLibre) and B2w Cia Digital, (>> B2W Companhia Digital) which is indirectly controlled by partners of private equity group 3G Capital.

"You obviously can't underestimate a company like Amazon," said Pedro Guasti, CEO of Brazilian online consultancy Ebit. "It has huge capacity to invest and it's obviously taking a bigger bite of the cake than it did last year."

Mercado Libre Inc, B2w and local retailer Magazine Luiza SA (>> Magazine Luiza SA) have gotten the jump on Amazon by storing and shipping goods appearing on their websites even when offered by third-party sellers, to ensure speed and customer satisfaction.

Amazon, by contrast, has been slow to tackle the challenges of shipping in a country where tricky logistics and tax issues have long made online retail an unprofitable venture.

After the Reuters report that Amazon was eyeing the new Brazilian warehouse space, shares of Mercado Libre plunged as much as 7 percent, while Magazine Luiza dropped 5 percent and rival Via Varejo SA (>> Via Varejo SA) shed up to 6 percent. All three stocks closed the day about 3 percent lower.

B2W lost as much as 8.5 percent and closed 7 percent lower.

"Markets get spooked when they see an investment by Amazon," a Brazilian trader said. "There is fear that the company will become more aggressive with its strategy in Brazil."

MEXICAN CONTRAST

In Mexico, Amazon has already taken a more aggressive approach, launching its third-party marketplace coupled with its own shipping service, called "Fulfillment by Amazon," in 2015.

The contrast has been stark. Nearly 20 percent of reviews on Amazon's Brazilian marketplace are negative, compared with 10 percent in Mexico and just 4 percent in the United States, according to e-commerce analytics firm Marketplace Pulse.

Complaints in Brazil often focus on delayed or cancelled orders - a problem dramatically reduced in other countries when Amazon itself packs and posts orders of third-party goods stored at its warehouse facilities.

In an early sign of Amazon's Brazilian logistics push, the company posted more than a dozen listings for distribution jobs in the country to LinkedIn last year, including "Site leader, Fulfillment Center".

The new warehouse site outside of Sao Paulo, in the municipality of Cajamar, looks to be a step in that direction.

There San Francisco-based logistics company Prologis Inc (>> Prologis Inc) has offered a 50,000-square-meter space to Amazon in a new industrial park that hosts DHL and Samsung, according to sources, who said adaptation of the warehouse had not begun.

Prologis, which also partnered with Amazon on a mega-warehouse north of Mexico city last year, declined to comment.

The preparations in Brazil come as Luft, the local logistics operator for Amazon's book business, readies a move into another Prologis site nearby in Cajamar, sources said, leaving its current 12,000-square-meter facility in the city of Barueri.

Amazon registered in October to conduct operations in Cajamar, according to municipal records seen by Reuters.

(Reporting by Gabriela Mello; Additional reporting by Paula Laier and Brad Haynes; Writing by Brad Haynes; Editing by Daniel Flynn and Alistair Bell)

By Gabriela Mello

Stocks mentioned in the article
ChangeLast1st jan.
B2W COMPANHIA DIGITAL 0.00% 25.3 End-of-day quote.23.41%
MAGAZINE LUIZA SA 0.00% 112 End-of-day quote.40.00%
MERCADOLIBRE -0.07% 314.7 Delayed Quote.0.01%
PROLOGIS INC -0.11% 64.41 Delayed Quote.-0.16%
VIA VAREJO SA 0.00% 23.9 End-of-day quote.-2.21%
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Financials ($)
Sales 2018 237 B
EBIT 2018 8 305 M
Net income 2018 6 200 M
Finance 2018 11 308 M
Yield 2018 -
P/E ratio 2018 130,58
P/E ratio 2019 85,34
EV / Sales 2018 3,24x
EV / Sales 2019 2,60x
Capitalization 781 B
Chart AMAZON.COM
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Amazon.com Technical Analysis Chart | AMZN | US0231351067 | 4-Traders
Technical analysis trends AMAZON.COM
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 50
Average target price 1 808 $
Spread / Average Target 12%
EPS Revisions
Managers
NameTitle
Jeffrey P. Bezos Chairman, President & Chief Executive Officer
Brian T. Olsavsky Chief Financial Officer & Senior Vice President
John Seely Brown Independent Director
Patricia Q. Stonesifer Independent Director
Tom A. Alberg Independent Director
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