Daily Insights

Amazon’s Newest Market Could Be a Gold Mine

By: Lakshmi Kalluri | Jan 31, 2019

Despite the media hype, Amazon is far from world domination. In India, the online giant is the second-largest e-commerce site behind Flipkart, which is owned in part by Walmart and is better optimized for mobile users. Similarly, Amazon is facing an uphill battle in China as Alibaba and a host of other regional e-tailers are better optimized for local needs. In addition to fierce competition and slow traction, Amazon faces counterfeiting issues in China, leading to diminished trust among consumers.

In search of new markets, Amazon has set its sights on Brazil. Given its massive size and risky terrain, Brazil is a logistically challenging marketplace for e-commerce companies. However, logistics is Amazon’s strength and the digital giant has doubled down on infrastructure investments from the onset. Early in 2018, Amazon rented a 50,000-square-foot warehouse outside São Paulo and partnered with local airline Azul for shipping support. As of last May, Amazon only offered 10 departments in Brazil, staying true to its core categories that perform well online, like electronics, books, and household items. The firm appears to be cautiously optimistic about performance, and is expanding to include activewear. Despite predominantly third-party distribution, brands like ASICS, Garmin, Levi’s, and Under Armour are available on site, according to Gartner L2’s Amazon Intelligence Year In Review report.

Considering this is Amazon’s first foray into South America, brands looking to expand into the region could use this opportunity to launch in a new market. Shares at competing companies dropped when Amazon first announced its launch in Brazil. However, they recovered fairly quickly following the discovery that Amazon wouldn’t be going in with the services (such as FBA and first-party distribution) that made it a giant in the US. Launching these services in Brazil sooner rather than later would prove to be a strong move for Amazon. The heavy investment in logistics and infrastructure point to Amazon’s intentions, and brands, specifically those in the apparel space, must account for South America in their 2019 retail strategy.

In recent news, Amazon announced plans to launch in the Middle East. After purchasing souq.com, a Dubai based e-tailer, in 2017, the company remained relatively inactive in the region. A launch in the Middle East would help Amazon capitalize on one of the wealthiest regions in the world. E-commerce is a relatively nascent market in the Middle East, and could prove to be a gold mine for Amazon

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