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Amazon's (AMZN) Direct Sales Move to Boost Presence in Brazil

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Amazon (AMZN - Free Report) is finally moving ahead with its plans for Brazil after a lot of delay.

Reportedly, the company is initiating direct sales of merchandise by establishing in-house fulfilment and delivery network in Brazil.

With this initiative, Amazon’s long-awaited quest to expand footprint in Brazilian e-commerce space gets a kick-start. Notably, the plans of Amazon in Brazil have been plagued with a plethora of issues like complex tax, logistics system and weak vendor relationships.

Per the latest move, the company will offer various products whose count currently stands at 320,000 which include 200,000 books, via its direct sales platform. Moreover, the merchandise will be offered under 11 categories from more than 800 sellers.

Notably, this wide array of product offerings will strengthen Amazon’s e-commerce sales in Brazil. Additionally, the initiative bodes well for the company’s strong focus toward bolstering presence in Latin America.

Initiative to Aid Growth

The latest initiative of Amazon is likely to benefit it in a country like Brazil where the Internet usage is rapidly increasing.

Given this, a latest report from Statista suggests that revenues in the e-commerce market of Brazil is expected to reach $15.9 billion in 2019. Further, revenues are anticipated to hit $17.3 billion by 2023.

Additionally, user penetration in this particular market for 2019 is pegged at 57.3% which is projected to reach 61.4% by 2023.

We believe Amazon is well poised to rapidly penetrate this potential market on the back of its vast product availability on its direct sales platform. Further, its advanced fulfillment and delivery network will help in enhancing the shopping experience of the customers, which in turn will aid growth to its customer base.

Strengthening Competition

We believe Amazon’s latest move is likely to strengthen its competitive position against the likes of MercadoLibre (MELI - Free Report) , Alibaba (BABA - Free Report) and Walmart (WMT - Free Report) which are also putting their best foot forward to bolster presence in the e-commerce space of Brazil.

Nevertheless, Amazon’s growing initiatives in Brazil are likely to intensify the competition for the above-mentioned companies. Apart from its latest move, the company has already leased a 47,000 square-meter warehouse outside of Sao Paulo in order to strengthen its fulfillment program.

Further, the company has already started selling fashion and athletic apparel in Brazil via its Brazilian marketplace since mid-2018. Further, the company is gearing up to enhance product offerings by bringing a wide variety of fashion apparels and active sportswear ranging from designer Reinaldo Lourenco’s collection to Alpargatas’ Havaianas flip flops to Levi’s Jeans.

We note that Amazon’s rising investments, strengthening partnerships with fulfilment operators and last-mile carriers are likely to aid market share growth.

Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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