Amazon’s LATAM’s Focus Sets Off Mercadolibre Alarm Bells

Companies like MercadoLibre of Brazil, were under pressure in trading on Thursday (Oct. 12) after a news report surfaced that Amazon is gearing up to expand its eCommerce presence in Brazil.

According to Valor, a Brazilian newspaper, Amazon will begin selling retail products beyond books in the country as soon as next week. The first eCommerce products to be offered will be electronics, which are in high demand in Brazil. The list of online shopping items Amazon sells in the South American country is expected to expand by the end of the year, noted the unsourced report.

Valor’s story is spooking investors, who sold off shares of MercadoLibre, an eCommerce competitor to Amazon, with stocks dropping by as much as 9 percent. According to Bloomberg, Brazil represented 54 percent of MercadoLibre’s total revenue last year.

This isn’t the first time reports of Amazon entering a new market resulted in rivals’ shares falling. Earlier this month, United Parcel Service (UPS) and FedEx stocks were under pressure after news reports revealed that Amazon was testing its own delivery service to reduce congestion in its warehouses and offer more retail products for free two-day shipping.

First reported by Bloomberg, citing people familiar with the plan, the delivery service is being called Seller Flex, which was initially launched by Amazon in 2015 in India. The company has now started to offer the service to U.S. merchants as part of a slow rollout. According to the Bloomberg news report, the eCommerce giant has been testing the service on the West Coast this year and plans to expand to more states in 2018.

Under the program, Amazon will pick up third-party merchants’ packages from warehouses and handle delivery to customers, something that UPS and FedEx have been doing for Amazon. The company could still use UPS and FedEx, but with the new service, Amazon has more control over how third-party merchants handle shipping and packaging. Amazon will also be able to reduce overcrowding in warehouses by keeping products on merchants’ premises, while also cutting costs.