Mercado Libre Free Shipping Converts Monthly Shoppers Into Daily Active Users

A year after lowering the threshold for free shipping in Brazil, Mercado Libre has seen the offering drive “a structural change in behavior,” the eCommerce and FinTech company said in a Wednesday (Aug. 5) press release reporting its second-quarter earnings results.

Since Mercado Libre made the change, daily active users have grown faster than monthly active users in every quarter, new buyers are purchasing more, across more categories, and those new buyers are showing higher retention than those who came before the change, according to the release.

Overall, among all buyers in Brazil, items per buyer have grown 19% in the year since the company lowered its free shipping threshold in the country, Mercado Libre Chief Financial Officer Martín de los Santos said during a Wednesday earnings call.

“That’s a sign of changed behavior, not just a bigger audience,” de los Santos said. “It shows existing users engaging more deeply with us, not simply more people showing up.”

Across its entire business, which includes operations in Brazil, Argentina, Mexico and 15 other countries, Mercado Libre saw its revenue increase 50% year over year to $10.2 billion in the second quarter. The revenue of the company’s Commerce business grew 50% year over year to $5.8 billion, while that of its FinTech business, Mercado Pago, rose 49% to $4.4 billion, according to the release.

Mercado Libre’s margins have compressed over the past year. The company’s income from operations margin saw a year-over-year decline in the second quarter from 12.2% to 6.7%, while its net income margin dropped from 7.7% to 4.6%, according to a presentation released Wednesday.

The company attributed the margin compression to “deliberate investments to strengthen engagement and long-term growth,” per the presentation.

Those investments include higher shipping costs, initiatives on its marketplace in Brazil to improve price competitiveness, investment in user acquisition and higher point-of-sale (POS) device costs that reflect the increase in memory chip prices, Mercado Libre said in a letter to shareholders released Wednesday.

During the earnings call, de los Santos said the decline in margin was “the result of a deliberate choice to continue prioritizing investment in long-term engagement, growth and scale over near-term profitability.”