The coronavirus pandemic has accelerated the e-commerce boom throughout the world and it's sent the profits of Mercado Libre, the Argentine platform heading the Latin American field, soaring through the roof.
Created in 1999 by Marcos Galperín, Mercado Libre 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.
The firm's stock exchange valuation now stands at around US$55 billion, which places it right up there alongside Brazil’s Vale, the leading Latin American company. Starting the year at US$610.19, Mercado Libre's Wall Street shares were priced at US$1,111.64 last week, due to investor appetites with e-commerce the main option for a confined consumer.
Employing a similar business model to Amazon or eBay, Mercado Libre is present in 18 countries, ranking seventh among 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.
While Latin American economies slide with poverty and unemployment on the rise, Mercado Libre has seen the number of users of its platform climb by 45.2 percent to reach 51.5 million people, according to the latest balance sheet.
Its net income increased from US$545 million in the second quarter of 2019 to US$878 million in the last quarter while gross profits rose from US$272 million to US$427 million in the same length of time. Meanwhile, the net profit after paying tax was US$55.9 million in the last quarter or US$1.11 per share.
"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," reports Summers.
'Click on or succumb'
The pandemic boosted sales and virtual payments, pillars of the Mercado Libre business model, a circle closed by its credit system available in several countries.
"For the state, producers and consumers there is no other option than to click on or succumb," Ignacio Carballo, the director of the Ecosistema de Programas Fintech at the Catholic University of Argentina (UCA), told AFP.
"Before Covid-19 a third of all payments in developing economies were channelled physically – mail, cheques or cash," indicated Carballo.
But in 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," he added.
Just in Argentina, online sales have risen 84 percent since March, according to the Chamber of E-Commerce, in line with the preventive isolation and fear of contagion, while this phenomenon seems to be replicated elsewhere in the region.
At the end of the second quarter Mercado Libre had thus 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.
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," says Summers.
With a payroll of 12,200 employees in the region, Mercado Libre has announced that it will be incorporating 5,000 more this year, mostly in its distribution centres.
The company with the handshake on its yellow logo has over the years piled up hundreds of complaints filed with the consumer protection agencies in Argentina, sometimes with adverse rulings.
There have also been rows with local union leaders, especially with the powerful Moyano family, with blockades of distribution sites last month.
Labour law specialists like former lawmaker Héctor Recalde object to the company’s collective bargaining agreement in Argentina, maintaining that it violates the limits on working hours without overtime while restricting the right to strike.
Furthermore, the banks complained when in 2017 the group began to grant credits without submitting to Central Bank regulations, considering this "unfair competition."
But the e-commerce boom during the pandemic seems to boost its business model.
"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.