Sometimes it feels like Amazon is taking over the world—or, at the very least, the world of retail. In providing fast, free shipping, operating from a customer-centric philosophy and swallowing up specialized retailers, Amazon has, by some estimates, put itself on track to capture 49 percent of the U.S. ecommerce market this year.
But Amazon’s seemingly airtight strategy doesn’t always translate overseas. The same is true of its nearest competitor, Walmart, which is America’s biggest physical retailer. In some markets, it’s local players rather than these two retail behemoths that have the advantage, due to factors ranging from cultural nuances to the lack of credit card use.
Magazine Luiza, or Magalu, is a 61-year-old retailer based in São Paulo, Brazil, that began as a purveyor of color TVs and has since expanded to sectors like furniture, smartphones, housewares, tools and toys. In 2000, Magalu launched its ecommerce business. According to analytics firm comScore, it was Brazil’s sixth most visited retail site in August 2018. Amazon, which didn’t arrive in Brazil until 2012, ranked No. 7—and Prime still isn’t available.
As smartphone adoption grows in Brazil, so too does Magalu’s ecommerce business—it had $4 billion in 2017 revenue and ecommerce accounted for about one-third. That’s up from 24 percent in 2016.
Magalu succeeded in part by developing its own delivery network—out of sheer necessity. “When you look at Brazil, we don’t have anything as well developed as UPS or FedEx. Even Brazilian mail is not as good as the United States Postal Service,” explains Frederico Trajano, chief executive of Magalu. “It’s complex and expensive and [doesn’t have] reliable delivery.”
This past May, in a move straight out of Amazon’s playbook, Magalu bought logistics service platform Logbee to cut down delivery times from a week or more.
Like Magalu, Jumia in Lagos, Nigeria, is thriving because it’s solved delivery issues specific to its customers. Sacha Poignonnec, co-founder and co-CEO of Jumia, says the postal system is underdeveloped in many countries in Africa and there is almost no address system. So Jumia created a logistics platform that works with local companies familiar with its customers’ cities, streets and neighborhoods.
The ecommerce marketplace, which launched in 2012 in Nigeria, Morocco, South Africa and Egypt, today sells 6 million products in categories like fashion, electronics and beauty from more than 50,000 brands in 14 African countries.
Jumia also has 500 pickup stations where customers can retrieve products. When the company found consumers arrived expecting to shop, Jumia began experimenting with adding physical retail to pickup stations in cities like Accra, Lagos and Nairobi.
“Obviously, for a lot of consumers, it is reassuring to see a physical presence,” Poignonnec says.
The payment process is another factor giving local ecommerce players an edge over Amazon and Walmart. While one- or no-click payments may be the norm for American consumers, that isn’t the case in other parts of the world.
Credit card usage has historically been lower in Brazil than the U.S., says Trajano, prompting Magalu to establish its own credit card. There are now 4 million Luiza cardholders—and the company issues 200,000 new cards a month.
“In order to buy a smart TV or a big appliance, [Brazilian consumers] generally need to buy on installments,” Trajano says. “It’s important to have your own credit card so you make it available for low-income [shoppers] to pursue their dreams. Fifty percent of everything we sell, we sell on credit.”
Poignonnec says Jumia allows customers to transact and settle in cash, as many consumers in Africa don’t have bank accounts or credit/debit cards—or, if they do, they don’t want to use them online.
In 2018, Jumia launched a payment platform in Nigeria called JumiaPay, which is now in the Ivory Coast and Ghana as well—and coming to Egypt and Morocco.
Poignonnec likens JumiaPay to online payment system PayPal and says consumers who use it are able to access additional services. Since the vast majority of mobile accounts in Africa are prepaid, for example, JumiaPay enables users to buy airtime digitally rather than relying on scratch cards. (While Poignonnec calls JumiaPay “extremely successful,” he did not disclose usage figures.)
Sometimes it’s a matter of pride that inspires customers to choose local ecommerce options. Utrecht-based consultancy IG&H found consumers in the Netherlands were more likely to recommend Dutch ecommerce site Bol.com than Amazon or Alibaba’s ecommerce platform AliExpress.