It looks like Amazon could be about to launch a full online store in Brazil - but a tough retail climate might make it 'uncomfortable'
- Amazon appears to be preparing to open a full online store in Brazil, according to analysts based in the country.
- Brazil is a promising market, as it is one of the largest developing economies in the world and the largest in Latin America.
- Still, it has historically been difficult for foreign retailers to do business there.
- Amazon has taken a slightly different - and slower - approach to entering Brazil than it has with its other international forays.
Amazon in Brazil could be about to take on a whole new meaning beyond the name of the enormous rainforest that runs through the country.
It's looking increasingly likely that the American e-commerce giant is about to become a bigger player in Brazil's shopping ecosystem.
Amazon has sold books and some digital services in Brazil since 2014. But according to analysts at the Brazil-based firm BTG Pactual, which cited talks with suppliers and partners, Amazon could be planning to open a full, direct online store selling various other items - toys, baby products, electronics, computers, and appliances, for example - as soon as this month.
It's a move that has been brewing for a while. Brazil offers good prospects for foreign investment, as it is one of the largest developing economies in the world and the largest in Latin America.
Reuters reported in February that Amazon was in talks with suppliers, had opened a warehouse for distributing goods, and had entered into talks with a freight airline. Bloomberg also reported this month that Amazon had entered into a pilot agreement with CargoX, a Brazilian trucking startup that focuses on moving cargo around the country.
Amazon declined to comment on the speculation.
Amazon is also hiring direct retail positions in São Paulo, Brazil, according to its job website. The advertised jobs include responsibilities like managing inventory (Senior Instock Manager) and managing relationships with vendors (Senior Vendor Manager Retail), which could indicate a ramping up of inventory. Amazon is hiring for 23 new positions on its retail team in São Paulo for Amazon.com.br.
Amazon has been looming over Brazil for a while. It has operated a marketplace - facilitating sales between third parties - for books, electronics, and home appliances since 2017.
But it has moved slowly in creating the same direct retail experience that it offers in the other global markets where it operates.
"They are uncomfortable in not being able to deliver a top-notch user experience," Fabio Monteiro, a retail research analyst at BTG Pactual, told Business Insider. "Brazil is one of the most complex countries to operate. If you are a foreign retailer, it's really complex."
There are many reasons for that, Monteiro said, including a complex tax structure that varies from state to state, and a logistics system that relies on traversing sometimes-dangerous roads due to a lack of rail and navigable waterways.
Payment systems are also different in Brazil. Many Brazilian customers expect retailers to offer payment plans, especially for high-ticket items, which involve the retailer taking on some credit risk that wouldn't normally be involved in a direct sale.
Brazil is also exiting a recession and weathering a political crisis, which could make selling there more risky than it might otherwise be.
There are many stories of foreign retailers pulling out of Brazil, either after experiencing the difficult retail climate for themselves or further evaluating the country and deciding not to start operating there. In June, Walmart announced it was pulling out of Brazil and selling its assets in the country to a local player. The deal was valued at next to nothing, and Reuters reported that Walmart owed $3 billion in back taxes to various state governments in Brazil.
Opening a full online store wouldn't change Amazon's pace of entry into the market, however. Amazon's relatively slow place is in contrast with the volume of its investment in other countries like India.
"They are not in a hurry in Brazil," Monteiro said. "The opportunity they are seeing in other places like India is greater."
It remains to be seen whether Amazon will ramp up its investment to become a dominant player in Brazil like it has done in other markets like the UK and Germany. If Amazon has any advantage over the country's incumbents, it would be in the technology they're bringing, Monteiro said. But that might not be enough to overcome the structural challenges.
"The problem is some of the processes that Amazon has that are kind of black boxes that they usually don't adapt when they enter a new country," Monteiro said. "In Brazil they are being forced to adapt this system. This is really a big nightmare for any technology company."
Have an Amazon news tip? Email this reporter at dgreen@businessinsider.com.