As the coronavirus pandemic accelerates the worldwide e-commerce boom, Argentine giant Mercado Libre has seen profits soar.
The company, founded in 1999 by Marcos Galperín, has doubled its sales (in volume and invoicing alike) during the second quarter this year, as the pandemic swept through the region and most countries decreed quarantines and lockdowns. According to Buenos Aires Times
, the company’s stock exchange valuation now stands at around US $55 billion, placing it alongside Brazil’s Vale, the leading Latin American company.
Buenos Aires Times
reports that Mercado Libre’s Wall Street shares, which started the year at US $610.19, were priced at an impressive US $1,111.64 last week, in response to investor demand for e-commerce.
Employing a similar business model to platforms like Amazon and eBay, Mercado Libre operates in 18 countries, and ranks seventh among fellow global e-commerce giants.
“In Latin America there are many opportunities. Digital transformation is estimated to have accelerated between three and five times in recent months,” Sean Summers
, the company’s Marketing Vice-President, told AFP.
Despite Latin American economies’ battle with poverty and rising unemployment, Mercado Libre has seen the number of users climb by 45.2%, reaching 51.5 million users, according to the latest balance sheet. The company’s net income increased from US $545 million in the second quarter of 2019 to US $878 million in the last quarter, as gross profits rose from US $272 million to US $427 million in the same period. The net profit after paying tax was US $55.9 million in the last quarter or US $1.11 per share (Buenos Aires Times
“In our marketplace there were 16 purchases and 425 visits per second and the total volume of payments processed during the quarter by [electronic payment platform] Mercado Pago (…) was US $11.2143 billion, a year-on-year increase of 72.1 percent,” Summers stated.
The global pandemic has boosted sales and virtual payments: the key pillars of the Mercado Libre’s business model. The company’s comprehensive credit system- available in several countries- has also been highly beneficial for company earnings.
“For the state, producers and consumers there is no other option than to click on or succumb…Before COVID-19 a third of all payments in developing economies were channelled physically – mail, cheques or cash.” Ignacio Carballo, the director of the Ecosistema de Programas Fintech at the Catholic University of Argentina (UCA) said.
But during the pandemic, “companies adapted and invested in their digital sales channels. It remains to be seen how much will remain of this forced digital inclusion of the consumer and if the changes of habit will be permanent,” Carballo added.
In Argentina alone, online sales have grown 84% since March, according to the Chamber of E-Commerce.
By the end of the second quarter, Mercado Libre had added 17 million new users with a daily 3.3 million transactions via Mercado Pago, granting US $172 million in loans in Mexico, Brazil and Argentina (Buenos Aires Times
In Latin America, “over half the population is outside the traditional financial system, or underbanked. Including that portion of society within financial services is an enormous revolution which still remains to be consolidated,” said Summers.
With a payroll of 12,200 employees throughout the region, Mercado Libre announced that it will be hiring 5,000 more employees this year, mostly in its distribution centers.
“Perhaps this is the definitive triumph of the data economy: less retail and more online catalogue, less supermarket trolleys and more delivery, less operations in branches and more online banking,” concludes Javier Minsky, CEO of Virtualmind consultants.