Brazil

Country Guide 2018

Cross-Border Trading Report
A report researched and compiled by IMRG, supported by

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 The Brazil Country Guide 2018 is the latest publication in a
series of cross-border trading guides produced by IMRG for
a variety of key ecommerce destinations around the globe.
The full set of current country guides are available for download from:
[Link]
The information in the country guides also form a central element of
the Ecommerce Worldwide theatre at the Ecommerce Expo conference
that takes place every September in London. IMRG are a lead partner of
the conference.

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CONTENTS EXECUTIVE SUMMARY
A samba in gold boots
Executive Summary 5
Brazil is not for the half-hearted. There’s an exciting ecommerce opportunity out
Foreword 7
there. The country is successfully emerging from a nasty recession in 2015-2016,
About Brazil 8 with ecommerce in double-digit growth again already in 2017-18. Interesting cross-
Retail in Brazil 14 border categories, such as Fashion, Health & Beauty, and Homewares, already the
Brazilians as Online Shoppers 18 fastest growing offline, have reached that critical tipping point where ecommerce
Competitive Landscape 24
acceleration really takes off.
Marketing to Brazilians Online 28 It has the fourth largest population of internet users to overcome. Those gold boots look great when you
in the world, over 100 million over the age of ten, and dance, but they’re awfully heavy.
Payment 32 already two thirds of them are online shoppers. These
For many “easy” things it’s pretty difficult without a
Logistics 36 potential customers are generally educated, urban
local presence; even registering a Brazilian domain-
middle classes, often well-travelled and attracted to
name needs a local company registration, for example.
Legal 42 foreign brands. As a comparison, the online shopping-
And Brazil is one of the slowest and most bureaucratic
Reflections 46 power of Brazilians is roughly the same as the whole
countries in the world to register a company in. For
of the former iron-curtain countries now inside the EU
more complex things, it’s even harder without local
About IMRG 48 (Poland, Czech, Hungary, …), except that you only need
support. For example, the “simple” option for cross-
to localise once instead of 10 times.
About VTEX 49 border shipping customs duties imposes a 60% tax on
The marketing landscape is reassuring familiar. All the fully-landed cost of each parcel. Finding a local
Sponsors 50
your usual tools will work, and all your experience parcel-carrier who can successfully deliver that parcel
About the Author 51 is still relevant – it’s a Facebook- and Google-led is then a whole further challenge.
country, with other familiar names all there in the mix.
Being tentative about Brazil is likely to lead to self-
There’s no painful learning how to tackle strange social
fulfilling failure. If you’re going to go for it – and it’s an
networks such as WeChat or Mixi. PPC is pleasantly
exciting opportunity potentially on the cusp of very
cheap too. Brazilians are famously social, and social
strong online growth in key categories – you need to
networkers, and so with a single language barrier to
really go for it. A flexible approach will be needed, with
overcome, you can speak to a huge number of potential
a willingness to work with local partners. Amazon
customers in a familiar and affordable way. UI/UX
have tried taking their rather rigid and self-contained
standards are similar to back home; you can shop a
approach to Brazil and pretty much failed so far (good
Brazilian site without getting lost, and Brazilians can
news of course if you view it as a strong competitor
shop yours.
taken out of the picture) while Apple have succeeded
Taking your proposition online to Brazilians could online by being pragmatic.
be a samba in a golden costume, all excitement and
A samba in gold boots is a dance you can only perform
sparkle… and rapid sales growth. However there is
with plenty of support for lifting your feet.
another side to Brazil: it’s not an easy place to do
business in or into, with some stultifying bureaucracy

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 FOREWORD
By VTEX

Trading into Brazil online, much like into any new territory, comes with specific
challenges. But the correct preparation will allow you to reap the great rewards
offered by the country’s ecommerce market.
The retail ground is fertile for cross-border trade. Just as it’s important to understand what the law
expects of you, so you’ll need a good idea of what
• The economy has recovered well from its
shoppers are accustomed to. This country guide
2015-16 recession
explains the levels and types of service you’ll need
• Urban Brazilians are avid internet users, and to offer. Yet again, there are two sides to the story. As
retail ranks among the main activities of the mentioned above, shoppers in Brazil very often expect
online population free delivery, but more good news is that they are far
• Around 10% of ecommerce in Brazil is cross-border less demanding when it comes to returns, which will no
doubt be music to retailers’ ears.
• The online retail market is worth around £18bn,
and it’s enjoying double-digit growth VTEX is pleased to be sponsoring IMRG’s Brazil
Country Guide 2018, which will help to prepare
• Brazilians are growing more and more familiar retailers for a potentially lucrative entry into one of
with foreign and global brands, as major players the most exciting growing online economies. We’d
enter the market be very pleased to share our local knowledge, and
While the presence of international brands obviously discuss further how to take the right first steps into the
means existing competition for a new entrant to Brazilian market.
the market, it also demonstrates Brazil’s viability for
international trade, and has familiarised Brazilian
Mariano Gomide founded VTEX in 2000 alongside Geraldo
online shoppers with the idea of buying from overseas. Thomaz. He’s currently the company’s co-CEO, being responsible
The market is established enough not to present an for Europe and Asia Markets. Graduated in Mechanical
unreasonable challenge, but new enough for a retailer Engineering at Universidade Federal do Rio de Janeiro (UFRJ),
to establish themselves as the name in their niche. Gomide started his career in the financial market, working for
companies like Senso and Banco Icatu.
Yes, you’ll encounter local bureaucracy, but just as
Mariano is a trend setter for the global market, where
with any market, understanding those hurdles will
collaborated as a teacher and speaker in many major events
go a long way to overcoming them. For example, a like eCommerce Day, Internet Retailer, eShow, and UNCTAD
marketplace presence and a local domain both legally eCommerce Week. He’s also a counselor of business4etrade.
require a physical presence in the country. Obviously, org, organization bound to UNCTAD/UN which promotes
there are a number of costs associated with opening e-commerce in a global scale.
a local office, and you’ll decide whether the cost and
red tape is worth it for your brand and proposition.
Take free delivery, which is something shoppers are
accustomed to; a presence in the country may afford
better protection for your margins, should you decide
to offer free delivery. What is best for you will of course
very much depend on what you sell and to whom.
On the other side of the bureaucratic coin, Brazilian
regulations are less strict than you’re likely used to. So
if your behaviour is acceptable to UK regulators, you’ll For more information about VTEX visit:
probably be compliant with Brazilian laws. [Link]

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 Economics
Average-type statistics are rather deceptive when considering Brazil. As an average, GDP per head is
approximately £7,7004, or around 25% of the same figure for the UK. However, wealth is more skewed in Brazil.
Approximately 60% of total wealth lies in the hands of less than 1% of the population5.
Nevertheless there is a sizeable, and ecommerce-addressable middle-class: approximately 50% of the population
lives in a household with an income of £1,000 per month or more6. Moreover, income distribution is skewed
towards areas of the country you are likely to be targeting: São Paulo urban region has more than triple the
average income of remote and rural (well, jungle really) Maranhão.7

Seasonality
You probably knew that Brazil is hot. São Paulo’s coldest month is June, which clocks in at a chilly 19 Celsius
average. The overall picture is relatively uniform across all areas which are plausible ecommerce targets: it is hot
and wet during what we in the UK would think of as the winter months of October to March, slightly less hot and
much drier from April to September. Average annual rainfall in São Paulo is roughly 2.5-times that of London.
Obviously, therefore, if you are intending to sell fashion items to Brazilians, fur coats are not likely to be a great
category in December.
Peak online trading times are Christmas plus Black Friday, and then a set of family-driven dates:
•  Mother’s Day, 2nd Sunday in May
•  Father’s Day, 2nd Sunday in August
•  Children’s Day, October 12th
•  Valentine’s Day, which in Brazil is on 12th June

Internet usage in Brazil

Brazilian Domain Names
Local commercial domains have the extension .[Link] . Almost 4 million Brazilian domain names were registered
at March 2018. 8
However you need a Brazilian tax ID (CPF/CNPJ) to register a Brazilian domain, either individual or corporate9.
There are alternatives available for non-Brazilian entities, but in practice they boil down to the same restriction:
ABOUT BRAZIL you need a Brazilian agent or agency to facilitate it.10
This theme – Brazil is much easier to access via boots-on-the-ground local partnerships – is one that we will see
recurring throughout this paper.
Brazil Overview

Demographics
The first thing you need to know about Brazil is that it is BIG. Your schoolchild’s atlas was deceptive: take a look
at a modern equal-area-projection map instead. Brazil has thirty-five times the land area of the UK. With 207
million inhabitants1, it has slightly more than triple the UK’s population, or alternatively about two-thirds of the
population of the USA. Oddly, the population is slightly skewed by gender: 51.48% female2.
The second thing to do is forget your stereotypes of beaches, slums and jungles. Of course these are all present in
some abundance, but none of them are very relevant to considering Brazil as a potential cross-border ecommerce
target. Your potential customers won’t live in a jungle or a slum and most likely won’t spend that much time on a 4  Throughout this document, exchange rates of GBP:USD = 1.4 (lots of Brazilian statistics tend to be quoted in US Dollars) and
beach. Where they probably will live is a town or city: 84.7% of the population is defined as urban3. A great deal of GBP:BRL = 4.66 have been used, which were correct at the time of writing. Obviously exchange rates can fluctuate quite a lot in
fairly short time frames.
that huge land-area is very sparsely populated. 5  [Link] 2014
6  World Bank 2014.
7  Instituto Brasileiro de Geografia e Estatística (IBGE), 2016
1  Instituto Brasileiro de Geografia e Estatística (IBGE), 2017 8 [Link]
2  National Research by Household Sample (PNAD), 2015 9  See, for example, [Link] n
3 ibid 10 [Link]

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Access Moreover, as might be expected, internet usage is also strongly skewed towards wealthier consumers (Figure 3):
More than 100 million potential Brazilian consumers have access to the internet (Figure 1):

Internet Users by Income Group

Brazil Internet Users
100%

140 70% 90%

80%
120 60%

% of population aged 10 or over

70%
100 50%
60%
Millions of users

80 40% 50%

40%
60 30%
30%
40 20%
20%
20 10% 10%

0 0 0%
<£200 £200-400 £400-600 £600-1000 £1000-2000 £2000+
2011 2012 2013 2014 2015 2016
Monthly household income
Users % of population aged 10+

Figure 3 - Internet Usage by Income Group13

Figure 1 - Brazilian Internet Users11
There is a corresponding bias towards the better educated: 95% of those with a degree are internet users,
This makes Brazil the country with the fourth largest number of active internet users in the world. compared with only 46% of those who did not finish school. However interestingly, unlike many apparently
similar countries, internet usage shows no gender bias.
Demographics of internet access Overall the picture emerges of a younger, urban middle-class who are frequent and comfortable users of
Internet access is strongly skewed towards younger demographics, although in practice this skew extends the internet. If your proposition is targeted at such consumers, there is fertile ground to explore. However
towards the age of about 40, so many brands targeting Brazil will find plenty of potential online shoppers brands targeting older or rural shoppers might be best advised to look elsewhere for cross-border expansion
(Figure 2). opportunities, although this is changing quite rapidly: internet usage amongst the retired population has more
than quadrupled in the last 7 years.14

Internet Users by Age

% who accessed the internet in last 90 days

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
10-15 16-24 25-34 35-44 45-59 60+

Age range

Figure 2 - use of internet by age range12

11  sources: [Link] and TIC Domicilios 13 ibid

12  IBGE 2015 14 ibid

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Usage Brazilians as online consumers
Happily for those considering Brazilians as potential online shoppers, retail has a high penetration: a majority of Purchasing power
users have at least looked at retail sites, even if they haven’t necessarily translated this into a purchase (Figure 4):
The general household purchasing power of Brazilians is significantly lower than the UK, even after filtering out
those who are irrelevant to any decision to target Brazil online because they lack internet access (Figure 5):
Top uses of the internet Annual household income of internet users

7%
Retail 9%

9% 38%
News & Information

11%
Social media

25%
Entertainment

<£5k £5k-£10k £10k-£15k £15k-£20k £20k-£30k >£30k

Services
Figure 5 - Annual Household Income, Internet Users Only18
By way of comparison, almost exactly 50% of internet-using households in the UK have a household income less
0% 20% 40% 60% 80% 100%
than £25k. In Brazil this figure is approximately 85%. Realistically you are most likely to be targeting those with
incomes of at least £10k, little more than a third of the total.
Figure 4 – penetration of internet usage by primary purpose15
This helps to put Brazil in proper perspective: the real addressable online market for most cross-border retail
Although, as we will see later, there are certain barriers to translating purchasing intent into actual buying, it isn’t possibilities is very approximately similar in size and wealth to the whole of the once iron-curtain Eastern
because Brazilians don’t want to shop online. European countries which are now inside the EU, but with one language to cope with instead of ten. Portuguese
is the dominant language and others are irrelevant for ecommerce purposes.
Devices
As might be expected, Brazil is predominantly a mobile country, although this is less marked than in significantly
less developed countries such as India – there is still a significant level of desktop usage. Access to the internet SUMMARY
via smartphone is at comparable levels to the UK, but desktop usage is only half of UK levels.16
Quite a lot of internet access takes place from the office17, in an economy with a significant bias towards services, •  Overall, you could realistically picture targeting Brazil as being equivalent to targeting all the former “iron-
which inevitably sustains desktop usage. curtain” countries of Eastern Europe now in the EU together, except that you only need to localise once (hands
up if you have a Bulgarian localised site?)
Tablets are irrelevant (<20% of UK levels of penetration): don’t waste your time worrying about optimising your •  GDP per head is about a quarter of that in the UK, although with wide variations and wealth more concentrated
offer for tablet users. in the rich few
•  Brazil has the fourth highest number of internet users in the world, so it’s certainly not an internet desert.
Neither is it an internet jungle, despite some stereotypes – as might realistically be expected, internet users are
concentrated in the towns and cities
•  Online retail is one of the main activities of all those users
•  Your target consumers are almost certainly the educated urban middle-classes. “Middle-class” starts at a lower
affluence level in Brazil than back home, so don’t discount mid-price propositions as plausible for Brazil.
•  A Brazilian domain name is possible, but is the first-mentioned amongst a rather long list of bureaucratic
challenges to entering Brazil without local support: you will need a Brazilian tax registration to obtain one.
15  comScore Brazil Digital Future in Focus, 2015
16  Google Consumer Barometer, 2016
17  IBGE 2015 18  Microsoft, Global State of Multichannel Customer Service, 2015

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 Overall retail in Brazil is a market worth approximately £400 bn21 . Existing retail coverage is fairly good: there are
14,500 convenience stores and 8,300 supermarkets22, for example, which is about half the density per shopper
you might be used to at home. As a consequence ecommerce is taking a somewhat different trajectory to other
BRICS such as China or India: Brazil is a more mixed environment, with multichannel retailing in the form
familiar to most UK retailers and brands taking its place alongside marketplaces, built on the foundations of a
pre-existing brick-and-mortar retail environment.
Shoppers are typically more attracted to trusted brands than might be the case in other emerging ecommerce
markets,23 both retailer-brand and product-brand (Brazil is a top 3 market for Unilever, for example).

Size of likely focus categories

Any category-based figures need to bear in mind the above caveats: category level data is at best questionable in
its accuracy. The most likely category you might attempt for cross-border into Brazil is probably fashion/apparel
which is estimated to be roughly a £30bn category, of which about a third is baby/childrenswear.24
Indicatively, the category split of retailing in Brazil looks like this (Figure 6):

Brazilian Retail “Category” Split

3% 3%
4%

9%

Speciality & Others

Fast food and convenience stores

11% DIY & Building materials
49% Health & beauty

Fashion & sports

Consumer electronics & furniture

RETAIL IN BRAZIL 21%

Supermarkets, hypermarkets
and cash & carry

Categories and category growth

Figure 6 - Brazilian Retail “Statistical Category” Percentages by Value25
General economic data As is clear, half of retail is described as “Super, Hiper e Atacado [the latter word means small wholesale similar to
Booker]” which in reality includes a wide variety of categories, not just food, but in practice might be regarded as
The Brazilian economy as a whole has not had a particularly happy time recently, and has been in recession
predominantly food – in most countries retail is split approximately 50:50 between food and non-food and Brazil
during much of 2015 and 2016. Published data is often skewed by being quoted in US Dollars which, given
appears to be no different.
changes in exchange rate, amplifies the challenges Brazil has faced – taken at face value some data implies a 10%
drop in GDP from 2014 to 201619. Even removing the effect of exchange rates, there was a significant drop, and it
is estimated that retail sales dropped by 11% in the same period20. Category growth
A modest recovery is now underway, and although full year statistics for 2017 were not available at the time of The fastest growing categories are good news for overseas brands considering Brazil as an online retail
writing, it is generally believed that retail grew by 1-2% during 2017 with better prospects for 2018. destination: Fashion and Sports grew by c9% YoY between 2016 and 2017, while Health & Beauty grew c8% and
Homewares by c4.5%, against a general background rate of just under 2%.26
Category data
Meaningful category-level data for Brazil as a whole (not purely online) is exasperatingly difficult to source: the
government statistics service publishes many indices but rather little on volumes, and this lack of published data
seems to impact most other sources too: there is endless commentary about whether particular sectors shrank 21  In theory this is about double the size of retail in the UK. In practice, comparing national statistics is very difficult, because every
or grew but remarkably little about the overall size of particular categories. Neither is the granularity of the data country takes a different approach to categories such as petrol or takeaway food (both excluded from UK figures; somewhat less clear for
particularly helpful: for example one officially-captured classification is “hypermarkets” which obviously could Brazil) or car tyres
22  PwC, The Retail and Consumer industry in Brazil, Nov 2015
cover a rather wide variety of actual categories.
23  United Nations Industrial Development Organisation, National Report on eCommerce in Brazil, 2017
24  Euromonitor 2014
19  World Bank, 2017 25  Instituto Brasileiro de Executivos de Varejo e Mercado de Consumo (IBEVAR), 2015
20 IBGE 26  IBGE 2017, although this is from mid-year YoY data, not complete 2017 figures which were not available at time of writing

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Retail landscape International brands presence
Top local retailers As noted above, Brazilian shoppers like brands, and like brands they can trust. This has led to plenty of
international brand-names trying their luck in the Brazilian retail market. Recent entries include: H&M; Gap;
Brazil has long been an interesting target for international retailers, due to its size and reasonable basic wealth. Forever 21; Desigual; Cotton On; Top Shop plus the cosmetics brands: Sephora; L´Occitane Au Bresil; Yves Rocher
As a consequence, top local retailers are a mixture of both familiar and unfamiliar names (Figure 7): and Lush.29 Moreover, Body Shop announced plans to open 500 stores in Brazil by 201930: Health & Beauty
appears to be a category where prospects for international brands are particularly strong.
Company Revenue in 2016
(USD bn) Incidentally, it’s unlikely you’ll get much joy shipping branded CPG products to Brazil – the big CPGs, such as
Carrefour 15.2 Unilever, P&G etc, are already there in strength.
Pão de Açúcar 13.9
Walmart Brasil 9.1
Via Varejo 6.9
Lojas Americanas 6.6
Raia Drogasil 3.7
Grupo Boticário 3.5
Magazine Luiza 3.5
Cencosoud Brasil 2.8
Lojas Renner 2.6
Figure 7 - top retailers in Brazil27
Some of these apparently purely Brazilian players are in practice partially owned by more familiar names: for
example the French retailer Casino has a significant stake in Pão de Açúcar.
Fashion, in particular, is somewhat more fragmented, which makes it a potentially easier target for cross-border.
You probably won’t be familiar with most of the top 10, and their sales are (relatively) small:
Retailer Revenues
(approx. £bn)
Casas Pernambucanas 1.4
C&A 1.2
Loja da Renner 1.2
Brands: Renner, Camicado e Youcom
Grupo Guararapes 1.1
Brands: Riachuelo
Lojas Marisa 0.8
Havan 0.5
Grupo SBF 0.4 SUMMARY
Brands: Centauro, [Link] e By Tennis
Cia Hering 0.4 •  After a biting recession in 2015-16 Brazilian retail is in recovery.
Brands: Hering Stores, Hering Kids, PUC e •  Although category data is not too easy to source, interesting categories for potential cross-border ecommerce
Dzarm propositions are now the fastest growing, including fashion, H&B, and homewares
Leader 0.3 •  Retail in Brazil is more “familiar” than in many developing markets: big global groups such as Carrefour and
Arezzo&CO 0.3 Walmart are present in strength
Brands: Arezzo, Schutz, Anacapri e •  As a consequence, online retail is following a more familiar “multichannel” trajectory than in places without a
Alexandre Birman strong traditional retail heritage (e.g. India or China)
Figure 8 - top fashion retailers in Brazil28 •  Brazil is an attractive retail market
•  Various international brands in fast-growing categories are finding it so attractive they are setting about
developing significant presence there

29  See for example [Link]

27  IBEVAR 2016 html
28  IBEVAR 2015 30  pwc: The Retail Industry in Brazil, 2015

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 The two logos say “A best-loved shop 2016/17” and “First diamond-rated petshop”. An online retailer qualifies
for these badges in much the same way as such schemes operate elsewhere in the world, although E-bit are
exceptionally active in following up online-purchases directly with the consumer to check that their experience
was satisfactory: should you decide to venture as far into Brazil as to have a Brazilian site, you’ll want the logo
which means you need to provide a good service!

E-bit as data collector

The second element of the scheme is data collection and sharing. E-bit collates consumer-feedback from
questionnaires, click-throughs, order-follow-ups and panels, and given the scheme’s broad penetration into
Brazilian ecommerce, it is able to use these to generate overall data about Brazilian ecommerce into a report
called “Webshoppers”. If you study the methodology used, you might just possibly wonder about potential skews
and biases in the results, but for practical purposes it is the main (or possibly sole!) source of data regarding
ecommerce in Brazil, is exceptionally rich, and on close examination appears to be the primary source for all
other secondary-sourced reports you might find after more diligent searching. This report has therefore followed
suit and used it as the main source for the next section.

Brazilians as online shoppers

BRAZILIANS AS ONLINE SHOPPERS
Demographics
Unusually, there is no gender bias in overall online Brazilian shoppers: the split is almost exactly 50:50.
The E-bit initiative However, there is apparently a strong bias towards older shoppers (Figure 10):
Unlike the situation for the wider retail landscape for which data-sourcing is somewhat challenging, there is
remarkably rich data available regarding specifically online retail in Brazil. The reason is the existence (since Ages of online shoppers
January 2000! – someone was exceptionally farsighted about the potential of eCommerce in Brazil) of the E-bit
/ Webshoppers initiative, which publishes very detailed bi-annual reports. It helps if you can read Portuguese if
you want the most fully up-to-date versions, but many editions are also available in English translations31.
8%
E-bit as trusted shop
E-bit basically operates in two complementary spaces. First of all, it performs the role that schemes such as 31%
Trusted Shops fill in the UK. Examine the home-page of most Brazilian retail sites, and you will find the logo and 23%
link to the E-bit scheme somewhere on the page. Here for example, is a screenshot from the footer of the online
pet store [Link].br32 (Figure 9):

38%

24 or younger 25-34 35-49 50+

Figure 10 - age distribution of online shoppers34

Given what we already saw earlier about the general age distribution of internet users, then what this is
telling us is that if an older shopper is an online shopper they are probably an enthusiastic online shopper:
Figure 9 - Trusted Shopping logos on a typical Brazilian retail website33 the age ranges available in the different data-sets don’t quite match up exactly enough to make a true mapping
but broadly an older internet user is about 25x more likely to make an online retail purchase(!), assuming they are
an internet user at all.

31  Author’s note: the translation is sometimes a bit eccentric. It’s worth having the Portuguese source version side-by-side for
cross-reference
32  Author’s note: one of my clients is the CPG Mars, whose brands include pet-food names such as Pedigree and Whiskas and who
therefore have an obvious interest in the activities of the leading online pet retailer in Brazil, [Link]. I have used the Petlove site
occasionally as a source of screenshots for this report.
33 [Link] 34  Webshoppers, 1H 2017 (in Portuguese only at the time of writing)

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The reality is that there is almost certainly some implicit bias in the data: low-ticket sites more accessible to What they bought
younger consumers are less likely to be part of the E-bit scheme, and other data tends to imply that purchases
are often “made by” the older members of the household (possibly because they have access to payment methods Overall growth of ecommerce
accepted online) even if the actual end-consumer is younger. It’s worth being rather wary of published data about the size of the overall retail ecommerce market in Brazil.
Incidentally Brazil is rather unusual for its exceptionally early retirement age (the average retirement age for Older data points are generally credible, but a surprisingly large number of published statistics seem to be
public sector employees is 54) and rather generous retirement benefits - reforming this is currently the source of “estimates” for more recent years predicated on strong growth even during the sharp recession years of 2015-16.
considerable political strife. 35 Below is an illustrative example (Figure 12):

Purchasing power Size/Growth of Retail eCommerce

Being again cognisant of potential biases in the data towards older, wealthier consumers, here is the split of
monthly income (Figure 11):
30 30

Monthly income of online shoppers Figure 11 - monthly income mix of

online shoppers 36 25 25
The overall tax burden in Brazil is rather

Millions of Unique Shoppers

comparable to that in the UK37, and so it’s not 20 20
24.5% unreasonable to make direct comparisons.

US$ Billions
33.4% 15 15

10 10

5 5

18.3%
0 0

23.7%
US$ (Bn) Unique Shoppers (Mn)

<£650 £650-1075 £1075-1700 £1700+ Figure 12 - Size and growth of retail ecommerce, contrasting sources38
In 2015 in particular, the recession was painful enough to cause all consumers to reduce spending, online or no,
and even ecommerce is thought to have contracted by around -2%. Despite these reservations, the overall size
35  See for example and trend is fairly clear: Brazil is roughly an £18bn online market, and is now growing well again: the E-bit data
[Link] estimates it grew by around 10% between 1H 2016 and 1H 2017.
36 Webshoppers
37  Imposto de Renda da Possoa Fisica, University of Brasilia 2014, which claims 35.8% in Brazil vs 35.3% in the UK, although the tax
burden in Brazil rose somewhat in the subsequent recession 38  US$ values from eMarketer (estimates), Consumer numbers from Webshoppers 2017 (actuals)

20 21
Category data Why Brazilians buy online
Category data tends to illustrate the current maturity of online retailing in Brazil (Figure 13). In almost all Once again, the category data provides the clue: online offers a broader choice and is cheaper – consumer
countries, initial growth is driven first by online travel, and then for retail by the accessibility (and cheaper prices) electronics is particularly well fitted to such expectations. Moreover Brazilians have been historically led towards
of a broader range of consumer electronics. Other categories follow in varying sequences: fashion take-up, for an expectation of free shipping (Figure 14).
example, is dependent on local cultural expectations of returns which take some while to re-establish online.

% of orders with free shipping

% share by category of online retail
50%

25% 45%

40%
20%
35%
15%
30%
10% 25%

5% 20%

15%
0%
10%
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1 2 3 4 5 6 7 8 9 10
Value Orders
% of overall eCommerce % from top retailers
Figure 13 - online retail category split by value and volume39
Figure 14 - orders with free shipping43
Brazil is no exception to this general trend. The good news for those considering Brazil as a cross-border target is
that it appears to be just beyond the tipping-point where non-electronics categories begin to grow online in a big Larger, trusted stores are setting about the challenging task of weaning customers off this (in a country the size
way. Fashion, H&B and Homewares all have interesting shares of the overall market, for example. of Brazil shipping is by no means cheap – although see the logistics sections below), but it remains a strong
expectation. Obviously this is by no means helpful for a prospective cross-border proposition.

How they bought it

Average order values
Average order values are somewhat skewed by the high penetration of large ticket electronics items such as large SUMMARY
domestic appliances and probably also mobile phones. The average order value in 1H 2017 was just over £9240.
•  eCommerce in Brazil is an attractive prospect. There is an approximately £18 billion market out there to address
Reverse engineering (always a dubious process) the category data above implies an average transaction value in •  Having stagnated somewhat during the 2015-16 recession, online retailing is now once again demonstrating
fashion and H&B of around £25, and somewhat higher in Homewares. double-digit growth
A strange-looking secondary data point might also account for some of the surprisingly high ATV: Brazil was the •  The E-bit initiative means that surprisingly rich and detailed data is available to help make a decision
most expensive place in the world to buy an iPhone 6, 56% more expensive than in the USA41 . As we will see to target Brazil
below, unfortunately this isn’t necessarily simply due to a highly value currency and the possibility of making •  Interesting categories for those considering Brazil as a cross-border ecommerce target, including fashion/
exceptionally good margins. apparel/footwear, H&B and homewares are now growing strongly online in Brazil – the tipping point where
consumers are comfortable purchasing in such categories online has apparently just been reached. Future
Devices growth could potentially go through a phase of strong acceleration
Mobile is growing rapidly, although actual transactions have not quite reached a majority yet: 35.9% of •  There is an annoying dependence on free shipping. However (as we will see below), there is an expectation that
transactions took place on mobile in 1H 2017.42 purchasing from non-Brazilian sites may not include it as standard
•  ATV is relatively high, although overall Brazilian online consumers are less wealthy than your domestic market
Interestingly, mobile is already the dominant channel once consumer electronics are removed from the picture.
Top categories purchased on mobile are Fashion, Homewares and H&B in that order. Ticket values appear to be
higher too.

39  Webshoppers, 1H 2017 (in Portuguese only at the time of writing)

40 ibid
41  Deutsche Bank
42  Webshoppers, 1H 2017 43 ibid

22 23
 The competition
Unfortunately, other people got there before you did, most especially the Chinese. Ali Express, the export
extension of China’s super-dominant Alibaba (or you might know it as TMall/Taobao) was the biggest cross-
border presence in 2016, with 45% of cross-border shoppers having used it.46 However there are some comforting
things about Ali Express when you give its Brazilian presence a closer look, most obviously shipping times, which
are often very long, 21 to 48 days for example. If Brazilian consumers are prepared to tolerate that kind of wait,
they must be really keen on what they can buy there – which is typically what they can’t buy domestically.
There is also a local Amazon presence. Before you simply give up and move on to consider a different country,
this isn’t the dominant aggressive Amazon you might be used to back home. Amazon has clearly found Brazil
hard going, and basically its presence there is limited mostly to digital/media products plus its marketplace
concept in certain categories such as consumer electronics. There are media reports of it planning to extend into
additional categories, but it’s all a bit vague.47,48 It doesn’t stock its own products in Brazil, and the implications
are that even Amazon has discovered that the regulatory and logistics environment in Brazil is exceptionally
challenging. Of course you might take the view that if Amazon has found it hard, then so will you, but in practice
Amazon is generally rather unwilling to compromise on its model or work with local partners – taking a more
flexible approach might bring you different results. Apple have an online store in Brazil, for example, and they are
apparently doing fine with it.

COMPETITIVE LANDSCAPE Local benchmarks

As noted above, Brazil is a more multichannel retail country than is the case in markets whose brick-and-mortar
retailing sector was less developed when ecommerce got going (e.g. China or India) i.e. rather closer to what you
Buying from overseas are used to back home. However a particular peculiarity of Brazilian ecommerce is that many of the top local
websites follow the model shaped by Walmart in the US: they are partially a “retailer own-site” but then have a
The cross-border opportunity marketplace stirred into the mix.
The educated urban middle-classes who represent the core of any prospective target audience for cross-border
ecommerce into Brazil are well-aware of the world beyond Brazil, having spent US$17.4bn overseas in 2017.44 Using the mixed marketplace sites
They are therefore well aware of international brands and find them desirable. Walmart Brasil is in anyway one of the top 10 sites in Brazil, and follows the model of its US parent. If you want
This has translated into a strong-market for cross-border ecommerce (Figure 15): to become a seller on Walmart Brazil, or in fact on any of the local marketplaces, you are going to face a familiar
challenge: you need a local presence. Here is a screenshot from part of the registration page for sellers (Figure 16):
Cross-border Retail eCommerce into Brazil
2.5

1.5
US$ Billions

0.5

0
2013 2014 2015 2016 Figure 16 - registering as a Walmart seller in Brazil (translated via Google Chrome)
Figure 15 - growth of cross-border ecommerce into Brazil45 The CNPJ is the registration number of your Brazilian company, which is kind of checkmate for aspirations to use
this route-to-market directly for cross-border. Other marketplaces have similar barriers for non-Brazilians.
Cross-border transactions represented almost 10% by value of total retail ecommerce in Brazil in 2016, growing
steadily at a very healthy 16-17% per annum, and by some estimates more than half of Brazilian ecommerce
buyers have made a purchase from a non-Brazilian website.
46 ibid
44  Central Bank of Brazil, data for Jan-Nov 47  Googling for “Amazon Brazil” from Google UK gives a single sponsored result, followed by a lot of information about rainforests
45  E-bit Webshoppers, 2016, English translation 48 [Link]

24 25
Local benchmarks: style International benchmarks
The quality of many local sites is high; this is not some ecommerce backwater (such as for example Canada or There’s a lack of UK retailer sites to use as a benchmark for localising into Brazil. Many familiar names who
Australia several years ago) where the latest trends in UI/UX design haven’t yet penetrated. Most top sites are are usually keen on cross-border, such as Asos, haven’t attempted it. Some, such as Next, have localised in a
fully responsive, and are enriched by a variety of standard techniques such as personalisation, although often half-hearted way: there is currency-translation of the UK site but rather little else.
supported by local technology rather than familiar European or US names. Neither have many international brands who usually take a cross-border approach (e.g. Zara or H&M) attacked
For example take a look at Netshoes Brasil – which is another top 10 site locally. In a more niche space, visit Brazil directly. Apple, as you might expect, do have a fully localised site, but they also have a major brick-and-
[Link] (the top local online pet pureplay): even if you don’t read Portuguese and without the aid mortar presence in the country.
of Chrome translation, you’ll probably find it perfectly comfortable to use with a familiar user journey to follow. While this lack of pre-existing benchmarks probably does reflect some of the challenges of ecommerce into
The general overall experience is a US/European one: clean sites, white backgrounds, a continuous journey from Brazil, it does also represent an opportunity. Brazil once formed part of the “unofficial British Empire” – countries
one page to the next and not endless windows (unlike China or some other Asian countries), simple pages (unlike which were wholly independent but whose economies were heavily built on British money – and so there’s
say Japan). a surprisingly strong legacy cultural affinity with the UK, especially in regions such as Minas Gerais (literally
Looked at the other way around, a Brazilian shopper on your own site is also likely to find it a familiar, non- “general mines”) which includes the major city of Belo Horizonte. Obviously this doesn’t match the strength
confusing, experience. As we will see below, the devil is in the detail: localisation challenges are bureaucratic of impact of US or Portuguese influence, but it’s a starting point, and adds basic credibly and kudos to British
rather than stylistic. brands.

Local benchmarks – top local sites Into Brazil

In the next sections, we’ll consider how to approach the Brazilian market, both opportunities and challenges. As
As noted above, top local sites are a slightly confusing mixture of marketplaces and semi-marketplaces,
outlined in the Executive Summary, Brazil represents a significant potential opportunity for British brands to
complicated further by various international retail groups having some stake in them (Figure 17). This list isn’t
expand into via cross-border ecommerce, but you can’t simply clone your inside-the-EU Portuguese website into
fully exhaustive, but does provide a very good cross-section of categories to use as benchmarks:
an outside-the-EU Brazilian one, and there are some tricky barriers to tackle.
Mercado Livre Pure marketplace. eBay is an investor
Via Varejo Multichannel extension of retailers Extra, Casas Bahia
and Ponto Frio
B2W Marketplace Owns various ecommerce platforms including
Submarino, Americanas and Shoptime. The French
supermarket group Casino has a stake.
GFG Websites for Dafiti, Kanui and Tricae
Walmart Brasil See [Link] . US readers will find this an
extremely familiar experience.
Netshoes If you are considering selling a fashion brand
into Brazil via cross-border, this is probably the
user-experience to benchmark against.
Privalia Rather similar to Vente Privee in France or Belgium.
Private sale sites haven’t caught on quite the same
extent in the UK as they have in some markets, but SUMMARY
Secret Sales is a similar experience for UK readers
•  There’s no lack of appetite from Brazilian consumers for cross-border ecommerce: around 10% of all ecommerce
Máquina de Vendas Multichannel Consumer Electronics is currently cross-border
(660 physical stores)
•  This is fuelled by a well-travelled urban middle-class with a keen appetite for overseas brand names
Fast Shop Multichannel Consumer Electronics
(98 physical stores) •  Local competition is pretty strong: the top sites are modern, well designed and supported by good tools
Dell A familiar name, with a successful local website •  There are strong local marketplace sites. However, as with registering your own Brazilian domain name, you’ll
need a local presence in order to access them. If you do so, they probably won’t be terribly kind of your brand:
Figure 17 - top local ecommerce players they’re very much places to sell products first and foremost
Notably, the absence of Amazon systematically crushing the life out of its usual categories such as consumer •  Many of the top local sites follow the Walmart model: an “own” site extended by a marketplace
electronics has left breathing space for more local retailers to compete. Consumer electronics, in particular, hasn’t •  Overseas competition, however, is not strong, with the exception of the Chinese; in general however what
been whittled down to essentially an Amazon vs BestBuy (US – OK maybe vs Walmart too) or Amazon vs Currys Brazilians can buy from AliExpress is not likely to represent true competition to your offer.
(UK) battle. While mainline commodity consumer electronics probably isn’t a category you are likely to enter •  At last, a country where you don’t have to fight with Amazon
Brazil with, this does give considerable hope for more niche sub-categories that might be impossible to attempt –
other than via Amazon marketplace with its usual pros and cons – elsewhere in the world. •  Potentially a big first-mover opportunity in your category, especially if you have a strong niche to occupy… but
be aware that the first-mover opportunity has not already been taken by a competitor for a reason. As we’ll see
One thing the marketplaces or semi-marketplaces really don’t offer is too much in the way of dedicated brand later in this report, you’ll need to have a flexible mindset to take advantage of it — be a pragmatic Apple not a
areas: you should picture eBay rather than, for example, China’s TMall in terms of opportunity to showcase your rigid Amazon
brand and its values.

26 27
MARKETING TO BRAZILIANS ONLINE Better educated Brazilians, who are wealthier and have higher propensity to shop online, do generally have higher
proficiency in English53 : the right proposition might be able to avoid tackling translation, but you will be missing
out on a big segment of the market – probably only a worthwhile approach if your brand is so strong they will
come and find you rather than the other way around.
One area where there aren’t really any such tricky barriers is marketing. The general landscape is extremely
familiar, with no “unusual” local tools requiring specialist local expertise. Your existing skillset is going to do the Social Networking
job apart, obviously, from…
Reach & key sites
Language
The social networking landscape is extremely familiar. Penetration of various social networks looks like this
Portuguese (Figure 18):

Portuguese is the official language of Brazil and effectively the only language you need to worry about for any
ecommerce presence there. Brazilian Portuguese has a similar relationship to Portuguese as US English does to Penetration of Social Networks
UK English: when localising, make sure you are localising into Brazilian Portuguese. Some quite common words
that might be rather relevant to your proposition are different: for example “brown” is “marrom” in Brazilian 0% 10% 20% 30% 40% 50% 60% 70%

Portuguese but “castanho” in the European version.49 Youtube

There are some significant minorities for whom Portuguese isn’t necessarily the first language – German, Facebook
Japanese and Italian in particular50 – but you can safely work on the assumption that all online consumers are Whatsapp
fluent in Portuguese. Facebook Messenger
Obviously this uniformity means you can address the whole Brazilian online market through a single Instagram
communication language – a big advantage compared to tackling fragmented European markets. Google Plus

Twitter
Use of English LinkedIn
You are however, going to have to use Portuguese. Despite the proximity of the US, Brazilian proficiency in Skype
English is rather low51, ranking behind countries such as Bulgaria, South Korea, Russia and Indonesia that you Pinterest
might not immediately associate with English language skills. The British council claims that only 5% of Brazilians
Snapchat
have English language proficiency.52
Tumblr

49  Brazilian Census data

Figure 18 - social network penetration in Brazil54
50 ibid
51  EF EPI, 2017 53  EF EPI, 2015
52  British Council Brazil, May 2015 54  WeAreSocial, 4Q 2016

28 29
Once-upon-a-time Orkut was the social site in Brazil, and although those days are long gone55, it has left the Other marketing routes
slight anomaly of higher than typical penetration of Google Plus. One consequence of this is a somewhat higher
prevalence of ecommerce sites offering login via Google (Figure 19):
Price Comparison Sites
Figure 19 - Facebook or Google login to an
ecommerce site56 As with all markets, price comparison engines have taken a hammering from Google Shopping. The
Brazilian E-bit “trusted shops” mark mentioned earlier is largely owned by Buscape, which at one happy point
It certainly isn’t something you need to emulate, but if you in January 2014 was the world’s largest price comparison engine.62 Buscape is hastily and probably rather
are determined on an authentically localised experience, optimistically repositioning itself as a marketplace site; meanwhile Google Shopping is in clover in a market
it’s something to bear in mind. with almost no competition.
As in other markets, Facebook users are getting older:
35% of Facebook users are aged over 3557. The average Affiliate networks
social media user in Brazil is still younger than in more There are some large local players. Market share information is rather elusive, and networks have different
mature markets. Fastest growing social network is specialisations, but a few to check out include Afilio, Confilio, Lomadee (which is another arm of Buscape,
currently WhatsApp. the E-bit owner), or the regional player Soicos (originally from Argentina but now a big player in Brazil).
Incidentally, although there is the expected shift towards Various globally familiar names also have presences in Brazil e.g. Tradedoubler or Zanox.
mobile access, social media is still used quite a lot via
desktop in Brazil, especially on channels such as Pinterest Email and SMS
where desktop remains the preferred device.58
If you are behaving properly at home, you’ll almost certainly be behaving properly in Brazil. Email marketing (and
Social influencer marketing is as powerful in Brazil as SMS marketing if you really must) is as effective in Brazil as anywhere else. There is a consumer protection code,
elsewhere. Local knowledge obviously helps here, but and Data Protection Regulations, but they certainly don’t have the force or scope of the EU’s GDPR or Canada’s
since you are quite likely to engage an agency in the usual CASL. In a country not noted for light-touch regulation this comes as something of a relief (see the legal section
way, it’s not critical knowledge for you to possess yourself: below). However basic legal protections are in place, so don’t expect to be able to buy up a dodgy email database,
the important point is that any agency will be using behave like a 2002 spam cowboy, and get away with it. A browse of local commentary on this topic63 suggests that
familiar techniques on familiar social networks. Brazil will tighten up legislation in this area, but the law isn’t moving quite as fast as internet-driven change, a not
unfamiliar situation worldwide and hardly confined to Brazil.
Use of Adblockers Culturally, by the way, Brazilian Portuguese has remained rather more formal than its European equivalent, and
17% of users use an Adblocker in Brazil (compared to 28% in Germany growing fast, 22% in the UK, this is reflected into communication styles in emails. As an example, use of the informal second person “tu” is
and 23% in the US). 59 less prevalent and the formal “você” used more.

Search SUMMARY
Search engines So far so good. Online marketing to Brazilians is familiar, affordable and accessible, and as we’ve already seen,
There’s only one. Google has a 96-98% market share. Forget the rest.60 It may not be an ideal situation, and there’s there are lots of them online to market to.
obviously no opportunity to sneak in some cheaper SEM under the radar with a secondary search engine
•  You’ll need to market in (Brazilian) Portuguese. English isn’t going to cut it: general proficiency
(as you sometimes can with Bing for example in the US and some European markets) but at least it is familiar.
is surprisingly low.
•  The social network landscape is very familiar, and on some measures Brazilians are the most social
SEM/PPC – relative costs people in the world, reflected into their enthusiasm for social networking.
Comparing SEM costs between markets is a tricky task. It’s just about possible to make some headway by •  This is reflected even in details: Facebook users are growing older, younger social users are
comparing the costs for leading brand names with global presence (e.g. Coca Cola) and also the cost for commonly taking up Whatsapp and Snapchat – it should all be rather familiar. Your existing skillsets
used category terms relevant to retail such as “ladies shoes”.61 will be more than sufficient in partnership with a local agency.
The rough conclusion is apparently good news on the surface: PPC costs in Brazil for specific terms are typically •  The once dominant Orkut has left a legacy of Google Plus use by many consumers who are not Google
only about 20% of those in the UK or other leading online retail countries where Google is dominant, such as the employees; many sites offer both Facebook and Google as log in options.
US or Germany. Unfortunately the market is always right: this is not unconnected with online search frequency •  Google is the only search engine. Forget the rest. SEM/PPC costs are relatively cheap, although you can expect
for retail terms being around 20% of that back home, although this is growing quite quickly as ecommerce grows these to grow as ecommerce grows further.
in Brazil. •  Other standard techniques are available: there are reputable affiliate networks for example
•  Data protection legislation is present but not onerous. It certainly doesn’t present the challenges of GDPR,
but it isn’t non-existent either. If you are behaving at home, you will be behaving in Brazil.
55  For the nostalgic, here’s the link to the 2012 BBC news story defining when Facebook surpassed Orkut in Brazil: [Link]
news/technology-16611554
56  Screenshot from [Link]
57  Facebook, Jan 2017
58  eMarketer, 2016 62  See [Link]
59  Reuters Institute, Digital News Report, 2017 html
60  Different sources give slightly different figures for Google’s share, but they are all 96%+ e.g. Webcertain 2015, Statcounter 2017 63  See for example [Link]
61  Studies by the author, published by eCommerceWorldwide in 2015 vendas-internet/

30 31
PAYMENT Section sponsored by: More than three quarters of online payments take place via cards, predominantly in the Visa or Mastercard
schemes. In fact other data suggests this might be even higher specifically for retail, perhaps over 80%65.
ELO is a local card scheme targeted at less wealthy consumer-segments. Given its low penetration into
ecommerce you could ignore it without losing sales. The local payment method Boleto Bancário is a bit
The landscape more complex (see below), but it’s not like, for example, Ideal in the Netherlands where if you aren’t accepting
At first sight, the overall online payment landscape is the locally preferred method you aren’t in the game: penetration of Boleto Bancário is significant, and is
reasonably familiar (Figure 20). particularly relevant for shoppers who can’t get access to credit cards, but once again you could ignore
it without killing your market.
So far, so familiar, with no apparently alarming challenges. Unfortunately, things aren’t quite so simple.
Online payment methods in Brazil Local challenges

The cross-border tax

3% 3%
Firstly, Brazil levies a 6.38% charge, known as IOF (Imposto sobre Operações Financeiras), on all cross-border
purchases made outside Brazil. This charge is applied directly to the account-holder i.e. your website doesn’t have
to do this(!), so at least it isn’t operationally difficult to manage. Nevertheless it’s a basic barrier to purchase: a
Brazilian shopper purchasing from a website outside Brazil is either expecting a higher price than the ticket or is
15% in for a nasty surprise.

3% Credit cards disabled for international transactions

38%
Secondly – and for similar protectionist reasons – a majority of Brazilian credit cards are blocked from making
purchases outside of Brazil. Estimates of the actual percentage vary, but the consensus figure is around two thirds
of cards blocked66 .

Capturing the CPF

38% OK, so if you don’t want to charge IOF and don’t want two thirds of shoppers otherwise obstructed from buying,
you could use a local payment gateway and ensure the transaction takes place in Brazil and is priced in Brazilian
Reals (approximately pronounced “ray-ice” by the way, not “reels”). There are several reasons why this might be a
good idea, but here is part of step 2 of the checkout on the Apple store in Brazil (Figure 21), where you enter your
Others ELO Boleto Bancario Amex Visa Mastercard personal details…

Figure 20 - Online payment methods in Brazil64

65  The E-bit reports show a bizarrely fluctuating penetration of the local Boleto Bancário scheme; an annual reported penetration from 7%
up to 20% and then back to 9% seems a bit volatile even by eCommerce standards.
64  Adyen Brazil, 2015 66  Adyen 2015 state a figure of 70%.

32 33
 Boleto Bancário
Finally, although not mandatorily, there is Boleto Bancário. In itself, this is a nice idea, and is one of the better
ways globally of getting websites to accept cash. The basic process is that when you go through the website
checkout, you get given a “ticket” (the literal translation of the word boleto), which is basically a bank slip with
a barcode (Figure 23):
• 

Figure 21- entering your personal data on a Brazilian checkout page67

The CEP is a postcode field, so no problem there – there are local postcode lookup services you can use too.
However CPF / CNPJ is a requirement to provide either your personal number (think social security number) or
your company registration number. If you want to offer a fully localised checkout this is mandatory even for B2C
transactions, and appropriate documentation subsequently retained for the tax authorities. Figure 23 - Boleto Bancário standard layout as defined by Brazilian Banking Federation69
Armed with this slip, you present yourself at your bank and pay it directly from your account, and the payment
Payment in instalments gateway is then informed that the transaction is complete and notifies the original website. In actual practice,
Brazilians are enthusiastic users of credit. They don’t just use their credit cards for credit: retail websites most online banking services in Brazil include a barcode scanner enabling shoppers to pay without actually
themselves offer them payment by instalment as standard. So in fact they have credit from the retailer on credit visiting a physical bank and the majority of ecommerce transactions are unsurprisingly completed in this way
from the card, pretty much as standard – the majority of online purchases are made by installment payments (there are slight variations between desktop and mobile but it doesn’t affect the overall process).
(Figure 22): It’s all straightforward, but it does require three things you may not have today: 1) a local payment gateway
connected to the Boleto Bancário processing network; 2) an order lifecycle solution that can cope with “pending”
Installment Payments payments coming from the checkout prior to releasing the order for shipment; 3) probably — as a consequence
of point 1 — a Brazilian bank account denominated in BRL, although this is a point to discuss with the
payment gateway.

33.4%
42.4% SUMMARY
There’s a reasonably familiar payment landscape at first glance but…
•  While 75%+ of online retail payments are made by credit card, two thirds of Brazilian credit cards are blocked
for international purchases
24.5% •  All cross-border purchases, i.e. not using a local acquirer and priced in Reals, incur a 6.38% tax, charged directly
to the consumer’s card (i.e. not part of your checkout)
•  Any checkout using a local acquirer needs to capture the shopper’s CPF details (or equivalent company details)
Single payment 2-3 installments 4-12 installments
•  Brazilians expect to pay in installments, even when using credit cards i.e. get credit on credit.
Figure 22 - majority of online purchases paid by installment •  If you aren’t offering this, you can expect a 50% reduction in conversion
As a retailer you aren’t actually lending direct to the shopper, it’s still the credit card provider doing that. However •  If you are offering it you have a choice of high merchant fees to receive the money now, or lower fees but
if you want all your money at the time of purchase from a shopper who wants to pay in installments, you’ll receiving the money at the same rate the shopper pays
be paying fairly hefty merchant fees for the privilege; the alternative is lower fees but receiving payment by •  The local method Boleto Bancário is not as mandatory as e.g. Ideal in Netherlands, especially for cross-border.
instalments yourself. It is suggested you explain this to your finance team before implementation… •  A local payment gateway, a local bank account, and therefore a local presence, is pretty much a
Expected conversion rates drop by 50% if you aren’t offering instalments. 68 mandatory prerequisite.

67  See [Link]

68  Adyen Brazil 2015 69  Public domain image taken from Wikipedia

34 35
 In essence there are four different taxes to apply:
•  Import Duties, known as II. Typically this is around 20%, but it varies by category, so you need to know the HST
code for your goods
•  Imposto sobre Produtos Industrializado, a tax on industrialised products known as IPI, which optimistically
may not in fact apply at all for your category, but is more likely to be around the 25% mark and if you guess
wrong could be up to 300%(!); again, it varies by category
•  Two linked social taxes, PIS and COFINS, which together will add roughly another 8-10%
•  VAT (ICMS)
The first three of these are customs/duties and apply to the value of the goods including freight and insurance
(known together as CIF, effectively the landed-goods price). In the case of PIS and COFINS, they actually apply to
an extended version of the CIF known as ICMS, which includes various additional items such clearance fees to
enter Brazil, calculated on the following basis (Figure 24):

(CIF * ( 1 + ICMS * (II + IPI * (1 + II)))) / ((1 – PIS – COFINS) * (1 – ICMS))

Figure 24 – “the calculation of import duties is not difficult”

To be fair, there is a simpler alternative if you ship single parcels to individuals valued at less than US$500:
60% of the CIF i.e. the invoice price plus shipping and insurance, under a scheme referred to as RTS (Simplified
Taxation Regime71). Generally this is slightly disadvantageous pricewise… but an awful lot easier to calculate!
Finally, VAT rates vary by state. The average is 17%, but as we’ll see in the next section, your most likely targets
are urban south-eastern states such as São Paulo where the rate is 18% or Rio de Janeiro where it 19%.72 There
is a plan to consolidate some of this lot into a single more uniform tax, but these plans were only announced in
September 2017.
There’s no escape by the way: there is no applicable de minimis for ecommerce parcels.
LOGISTICS
Implications
There are three key implications arising from all this.
Customs & Duties
Firstly, simply opening up your existing checkout for shipment to Brazil under a non-DDP regime (i.e. without the
shopper paying the duties up-front on the website) is likely to be unpalatable. Some experimentation with one
Background of the shipment-plus-duty calculating websites73 on a £100 fashion item such as a men’s shirt or women’s skirt
OK, so now your customers can pay, possibly with an irritating surcharge of 6.38% which you don’t see but they product generated combined fees around the £135 mark i.e. more than doubling the listed price of the product
do. How much will they actually pay? (plus that extra 6.38% the poor consumer in Brazil is going to pay).

It is at this point in this report that the more challenging side of Brazilian ecommerce starts to kick in at full force. Secondly, what this means, of course, is that it is pretty difficult to just test-the-waters into Brazil by adding a
We’ve already seen a number of areas where a local presence is helpful, such as setting up a domain or integrating Brazil delivery option; you won’t see a genuine response from Brazilian shoppers who are likely to be well aware
with a local payment gateway. When it comes to actually getting your stuff to Brazilian consumers, however, it’s of these pitfalls. Alternatively you can add a DDP (delivery and duty paid) option to your checkout – if you
almost essential. can find a service that can calculate correctly for Brazil – but again, the extremely inflated prices will probably
preclude an effective test of the interest of Brazilian customers. 74% of Brazilian shoppers opt for DDP
Two less attractive aspects of Brazil (at least from the perspective of non-Brazilians attempting cross-border when it is offered.74
ecommerce) conspire together at this point: it is both protectionist and bureaucratic.
Thirdly, sending individual items priced at retail plus single-parcel shipping costs attracts an awful lot of extra
duties and taxes. If you’re going to go for it in Brazil at any scale, you probably want to export wholesale, and then
The basic structure use a local partner for order fulfilment. This becomes even more true when you consider the next issue…
Author’s note: as I write this I am sitting in front of an article which commences with the words: “The
calculation of Import Duties and Taxes to Brazil is not difficult…”70 . You can be the judge of this after reading
this subsection. As a pre-judgment hint, the same article observes that “the Import tax calculator provided by
the Federal Revenue Service in Brazil does NOT calculate the import duties and taxes correctly in a real
importation situation.”

71  US Trade office, [Link]

72 [Link]
70  In the interests of naming the guilty, here is the URL: [Link] 73  Try for example [Link]
and-taxes 74  Borderfree, 2015

36 37
Delivery So what do the local sites do?
Background Local sites respond in one of two ways. Firstly, they may choose not to ship at all outside the urban south eastern
region where infrastructure is decent and there is a wide choice of smaller local shipping partners (Figure 26).
Brazil’s infrastructure as a whole is unimpressive, and further complicated by actual customs barriers
between different states in certain circumstances. Brazil is very roughly the same size as the USA, and yet has
fewer highways in 2017 than the USA had in 1955 i.e. before the initiation of the interstate highway project by
President Eisenhower75.
% of total eCommerce parcels by state

National parcel service coverage 9%

Brazil’s national postal service, Correios, is effectively the only parcel carrier with full national coverage. It doesn’t
enjoy the greatest of reputations amongst its business customers, as the following survey implies (Figure 25): 31% 9%

National State Parcel Carrier Correios:

Business Customer Survey Results 14%

Delivery delays

Lost parcels

Delayed price negotiations

21% 17%
Neglect

Expensive
General poor service
Theft
Parana Rio Grande do Sul Minas Gerais Rio de Janeiro Sao Paulo Others
System offline
Figure 26 – concentration of eCommerce in the 5 southeastern states
Long Queues
Two thirds of Brazilian ecommerce is concentrated in 5 of the 2777 states adjacent to each other in the southeast
Uncompensated lost goods
of the country. As these are also mostly the richest states (excluding only the capital district) it’s therefore
0% 10% 20% 30% 40% 50% 60% 70% 80% perfectly practical to consider a sort of “mini-Brazil”, two thirds the scale of the full market, but much easier to
access. Many local sites choose to do this. Even for this area, they probably don’t use Correios, but instead engage
a local parcel-shipping partner. The biggest local players are Copercarga, Veloce, Mandaê and of course Correios
Figure 25 – Correios Customer Survey76
plus DHL and Fedex78.
Before you sign up with anyone proposing to ship your parcels to Brazil, you might just want to verify if the
Those with wider ambitions build an ecosystem of parcel carriers specialising in certain regions. (Author’s note:
partner at the other end of the line is Correios.
one midsize player I spoke to based out of São Paulo city used seven different parcel carriers). Establishing such
Obviously, the usual premium point-to-point shippers such as Fedex, DHL or UPS are always a possible, if an ecosystem almost certainly requires local contacts and knowledge. There’s no nice technical integrator similar
expensive, option. Using them offers a much better chance of your stuff arriving on time, or indeed at all, but do to Metapack, although since it’s quite likely your parcel volumes to remote regions will be pretty small, manual
remember those customs duties not only on the value of the item but on the value of the shipping too. management will probably be sufficient.

75 DNIT 77  Strictly 26 plus the federal capital district which sits outside the state system in the same way as Washington DC or Canberra
76  ABComm, Brazil Panels, 2015 78  ILOS 2016

38 39
Returns policies
Generally returns policies reflect the physical difficult of achieving a return. Free returns is certainly not a
standard expectation, even for fashion/apparel categories. Nevertheless, the top local sites do their best to at
least make returns as straightforward as possible within the constraints of the local environment: [Link]
[Link]/institucional/cancelamentos79 is a reasonable benchmark example. Legally, unopened returns
sent back within 7 days should theoretically be free.
Cross-border sites typically just seem to regard Brazil as too difficult. Even Asos, normally a paragon of
frictionless returns, simply provides a pre-printed – but very definitely not pre-paid – postage label back to their
returns centre in Barnsley, with advice to take the parcel to your local post-office. It’s a long journey back from
Belem to Barnsley.

Customer Service
The top local sites typically offer local customer service by phone on a 6 x 11 or 6 x 12 basis (there’s little
expectation of service on a Sunday) plus of course an email option.

SUMMARY
•  Customs duties are unpleasant. Even the “simplified” regime imposes a flat duty-rate of 60%, which is payable
not only on the ticket-price of the goods but also on shipping and insurance (effectively on the full landed-cost)
•  The more complex alternative, which might save you a few percentage points but is unlikely to be game-
changing, is so complex that even the government-provided calculator doesn’t actually get the sums correct
•  VAT varies by state, but is normally in the 17%-19% range
•  There are therefore real attractions to shipping wholesale to Brazil and then using local shippers
•  However, parcel logistics is anyway challenging. The state postal carrier with national coverage, Correios,
enjoys a variable reputation
•  Effectively there is a two-tier shipping geography: the contiguous south-eastern states of São Paulo, Rio de
Janeiro, Minas Gerais, Parana and Rio Grande do Sul comprise two thirds of all ecommerce deliveries in Brazil
and many sites, even locals, choose to confine their activities to these
•  For wider coverage, you may need to assemble an eco-system of local specialist carriers; this probably requires
local support

79  [Link] is generally quite a good benchmark site to use for anybody considering doing fashion categories into Brazil

40 41
 Key topics
The key applicable sections of the law are:
Area Law
Data protection Currently Article 7 of the Internet Civil Code covers
this. There’s also an expected strengthening of
these regulations coming up, to more closely
resemble the stronger codes elsewhere in the world
such as EU or Canada.80
Broadly, if you are compliant at home, you will be
compliant in Brazil today.
Data across borders It’s legal to store Brazilian consumer data outside of
Brazil, provided it is appropriately protected.81
Consumer protection The broad equivalent of the Sale of Goods Act is the
Codigo de Defesa do Consumidor.82 It is considered to
be one of the most comprehensive codes in the world.
It has been extended to cover ecommerce, in decree
Decree 7,962 of March 15th, 2013 known as the
“eCommerce Act”; there’s a general view that this
could do with an update.
It doesn’t say anything unexpected, other than making
it mandatory to respond to a customer’s queries within
5 days, not exactly an onerous service standard.
Distance Selling There is a 7-day mandatory cooling-off period,
during which the shopper has the right to cancel their
purchase at no cost, provided it is unopened. Legally
the retailer should bear the shipping costs of the return
LEGAL in this situation.83
There are also 30 day and 90 day periods, respectively
for non-durable and durable goods, during which
DISCLAIMER returns must be accepted if the goods are faulty.
This document is provided for general information purposes only and does not constitute legal, investment or other professional advice on Once again, nothing especially unexpected, and
any individual matter. Whereas every effort has been made to ensure that the information given in this document is accurate, IMRG accepts
probably quite close to your current policies.
no liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any
individual, firm, company or other organisation mentioned. Publication as well as commercial and non-commercial transmission to a third Cookies Formally there is no specific legislation resembling
party is prohibited unless prior permission is obtained from IMRG. The views expressed in this publication do not necessarily reflect the views EU Cookie law for example. In practice however,
of IMRG. most leading local sites have recognisable the Cookie
message that has become the standard interpretation
of Cookie law in the UK. It’s probably best to follow
Key legal topics this practice.
Merchandising There are no strange regulations around
Background merchandising (and certainly nothing resembling the
complexities of merchandising in France for example).
As an introduction to this brief section, it’s worth reflecting that this is a country where foreigners need to show
their passport in order to visit a dentist: Brazil does not have a light-touch approach to bureaucracy, as you may There is a code of practice around advertising and
have already gathered. describing offers and products in general; nothing in it
is unusual.84
Having said that, legal controls impacting ecommerce are in fact relatively straightforward, and with the
exceptions already called out (especially the expectation of capturing the customer’s CPF number during
checkout), no more challenging than elsewhere. The general impression is that they have been based around
precedents from the US rather than the more onerous codes of Canada or the EU.
80  See [Link]/news/mj-apresenta-nova-versao-do-anteprojeto-de-lei-de-protecao-de-dados-pessoais/[Link]
81 See [Link]
para-os-usuarios
82  See [Link]
83 [Link]
84 [Link]

42 43
 Registering a company in Brazil
There have been several references in this document to the need for a local presence. An obvious way to do this
would be to establish a local subsidiary. Unfortunately Brazil is not the easiest place to do this. It currently ranks
176 out of 190 countries on the World Bank ease of doing business index85 for “starting a business” (behind Libya,
the Palestinian West Bank, Sudan or India for example), requiring no less than 13 different registration steps to be
completed with various different authorities, and an expected elapsed time of around 6 months if you really go
for it. Unlike other poorly ranked countries this is less about (blatant) corruption and more about bureaucracy.
In short, you’ll probably need local help, both to navigate and to, err, speed things up a bit.

SUMMARY
•  Although regulation in Brazil is generally cumbersome, the ecommerce regime is somewhat less burdensome
•  Consumers enjoy strong protection, but not unreasonable protection
•  The online regime most closely resembles that of the US (i.e. weaker than Europe or Canada). Nevertheless
there is still strong data protection, distance selling regulations, and sale of goods regulation
•  There’s a mandatory 7-day “no fault” cooling off period for any online transaction, plus 30/90 day “at fault”
returns; in these situations, returns should be free
•  There are no weird restrictions on merchandising
•  Otherwise, returns expectations are not high (as noted earlier in the report, Brazilians have been trained to
enjoy free shipping, and the top sites are now trying to un-train them, an up-hill struggle)
•  Consumer data can be stored outside Brazil
•  A local presence is really helpful for many aspects of ecommerce in Brazil. However, registering a local
company is more difficult than in 92% of the other countries of the world, and a reasonable expectation is that it
will take 6 months and involve a LOT of forms to fill in

85 [Link]/rankings

44 45
REFLECTIONS Jumping in the deep end
Strategically, for the right proposition, Brazil will fall into the upper half of this quadrant diagram (Figure 28) –
high potential size of prize:
Go hard or go home
Try before you buy?
The challenge of addressing Brazil via cross-border ecommerce is that a gradual dip-your-toes-in-the water
approach is exceptionally awkward to follow. The standard approach to cross-border ecommerce is to start
simple, and, if a country starts to work for you, begin to move up the complexity ladder (Figure 27): Marketplace
Localise

High
Logistics Localisation Marketing and/or

Potential size of prize

Outsourcing
Local fulfillment centre Local payment methods Local trading

Localised website on Local marketing team with

Local returns
local domain local calendar and events Ship to

Low
(Maybe add local Forget it
marketing)
local Facebook
Local customer service Local content
Local SEM/PPC

Low High
Localised communication
Integrated DDP shipping Translation
and database
Operational difficulty
Figure 28 - considering a country for cross-border87
Ship to English-only Single marketing However, low operational difficulty routes-to-market are harder to do in Brazil without local support. The
marketplace approach (done directly yourself) is blocked because you need a local entity to sell from. Full
localisation is also blocked because once again you need local entities (even for something as simple as registering
a domain). In short, you’ll find yourself driven towards outsourcing.
Figure 27 - roadmap to cross-border: crossing the golden-barriers for Brazil? 86
In summary cross-border into Brazil is a high risk high reward destination: the trick then, obviously, is to find
A typical approach elsewhere would be to start offering decent shipping options, combined with a bit of local partners who will help reduce the risk and enable you to move rung-wise up the localisation ladder without
marketing. The challenge with Brazil is that offering decent shipping options — given that a DDP approach with a over-committing to a heavy cost-base before seeing evidence that the rewards will be commensurate. There’s a
credible parcel carrier is likely to increase the cost of your products by 80-130+% — is a bit of a non-starter. There big opportunity, but not one you can tackle in a half-hearted way. A doctrinaire approach isn’t going to work (ask
are some “golden-barriers” into Brazil which lie at inconveniently low rungs on this ladder. Basically, they all lie at Amazon): flexibility is key, together with a willingness to work through partners. A samba in gold boots is a dance
the point where you really some sort of local boots-on-the-ground presence. you can only perform with support for lifting your feet.
In short, a Home Alone approach is unlikely to be effective; reaching customers in São Paulo from a seated
position in an office in St Paul’s simply won’t work for Brazil. You’ll end up with the self-fulfilling view that Brazil
isn’t worth it, because there aren’t enough customers. And yet the reason there won’t be enough shoppers is not
that they aren’t there, it’s because they will be finding it too difficult to shop.

86  Adapted from A Nation of Shopkeepers, eCommerce Worldwide, 2015 87  The Multichannel Retail Handbook 2016

46 47
ABOUT IMRG ABOUT VTEX
IMRG is the UK’s online retail association – a Our membership community is comprised of VTEX is the only multi-tenant True Cloud Companies running the VTEX platform have seen a
membership community offering neutral and businesses of all sizes – multichannel and pureplay Commerce™ platform in the digital commerce market 54% increase in conversion rates and a significantly
unique resources for online retailers. retailers, multinationals, SMEs and micro retailers, as with an auto-scaling elastic cloud infrastructure low rate of cart abandonment. VTEX platform serves
well as a wide range of solution providers to industry. that leads to higher conversion rates, lower TCO more than 2,300 online stores in 25 countries and is
We help our members understand and improve their and builds customer loyalty. Utilizing our exclusive currently trusted by top brands worldwide including
online retail performance through a busy programme For more information please visit patent-pending Smart Checkout technology, a secure, Sony, Walmart, Danone, Whirlpool, Coca-Cola,
of performance benchmarking, data analysis, insight, [Link] intuitive and easy password-free process, VTEX Lancôme, Pandora, Avon and LEGO. VTEX is now
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We have been tracking online sales since 2000 commerce with a comprehensive, fully-adaptable and Commerce 2017
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For more information please visit:
series of indexes, providing in-depth intelligence on customer expectations.
[Link]
online and mobile sales, delivery trends, marketing
ROI and channel performance.

48 49
About Adyen About SYNAPCOM ABOUT THE AUTHOR
Adyen’s founding team called the business Adyen – Synapcom is a reference in full outsourcing provider,
Surinamese for “Start over again” – and focused on a one stop solution for e-commerce in different
building a modern infrastructure directly connected to types of businesses and segments through exclusive Chris Jones is a leading freelance specialist in
card networks and local payment methods across the services. The company has a 100% own and integrated multichannel and e-commerce, with extensive
world, allowing for unified commerce and providing structure. Its portfolio consists of more than 60 clients. senior-level experience as both consultant and
shopper data insights to merchants. The Adyen hands-on interim.
We work with some of the largest players in the
platform enables merchants to accept payments in His clients have included: the very big - 3 of the top
industry, consumer goods, cosmetics, fashion,
a single system, enabling revenue growth online, on 10 retailers in the world at Tesco, Target and Metro,
etc. Updated with key trends in the digital
mobile devices and at the point of sale. and the global logistics giant Kuehne + Nagel; the
Market, Synapcom manages projects for the most
For more information please visit diverse business models: B2C, B2B, marketplace, very famous – Mars, and the global brand Dr Martens
[Link] omnichannel, cross boarder and subscription. where he was interim Global eCommerce Director;
and the very niche – a VC-backed start-up in India, a
For more information please visit B2B website in Romania, and a consumer electronics
[Link] retailer in Belarus.
He has worked extensively in both B2B and B2C
sectors, and has client engagement experience in You can find him at:
About bluefoot 16 countries. He is the author of “The Multichannel [Link]/in/redsock or at
Retail Handbook 2016 – a guide to planning, [Link]
BLUEFOOT Agency optimize solutions for digital
commerce focused on results through the pillars of
experience, technology and performance. This makes
About Total Express implementation, operation and enhancement”
(ISBN 978-1-326-47257-3).
Bluefoot one of the best performance agencies in Founded in 1993, Total Express belongs to Grupo
Brazil, elected for the third consecutive year by the ​ Abril and is the e-commerce logistics private company
Associação Brasileira de Comércio Eletrônico​award. which has got the widest reach in Brazil.
Its operational capability has the size of your
Through their expertise in the e-commerce universe, e-commerce needs, be it a small entrepreneur or a big
they act with strategic services, using data and macro international player.
market analysis to understand client needs and
designing a sustainable growth. Specialized in B2C segment, with a strongly
technological set of tools and a full portfolio of
For more information please visit services, Total Express is focused on delivering smart
[Link] and innovative solutions to more than 500 clients
supported by a recurrent gathering.
RESEARCH ASSISTANT
For more information please visit
[Link] - TATIANA DIAS
About PayPal As a final year PhD student in Sustainable Chemistry,
Tatiana has worked on the development of synthetic
Fueled by a fundamental belief that having sustainable methodologies. In parallel with her
access to financial services creates opportunity, studies, she worked as a Research Assistant to support
PayPal (Nasdaq: PYPL) is committed to democratizing in researching this paper on eCommerce in Brazil.
financial services and empowering people and She has also delivered and managed Social Media
businesses to join and thrive in the global economy. accounts and content for the RAF100 event as an
Our open digital payments platform gives PayPal’s Associate Director in Social Media Communications.
237 million active account holders the confidence She has an interest in an array of sustainability
to connect and transact in new and powerful ways, related areas, ranging from food, energy and water
whether they are online, on a mobile device, to alternate feedstocks and materials and her career
in an app, or in person. plans are focused on the areas of Sustainability,
For more information please visit Project and Business Management, and Technology.
[Link]

50 51
Brazil Country Guide 2018
Cross-Border Trading Report
IMRG
2 Ching Court, 49-53 Monmouth Street,
Covent Garden, London, WC2H 9 EY.
T +44(0) 203 696 0980
E membership@[Link]
Published June 2018

[Link]
52