Mercado Libre is as Argentinian business that operates an online marketplace. It has operations in most countries in Latin America. Argentina has become the second market, after Mexico, in which it has launched the Supermercado Libre service.
Founder and CEO Marcos Galperín, previously announced plans to launch the service in mid-2020 but has brought this forward due to unprecedented demand for online purchases as a result of the pandemic.
What is Supermercado Libre?
Supermercado Libre allows customers to buy basic products, non-perishable food, beverages, personal hygiene and cleaning products, online and have them delivered. Features, such as product category filters, have been added to the website so it functions like a regular online supermarket. It also features a Care Pricing plan, which uses an algorithm to verify sellers’ prices of the most in-demand items, so they do not increase quickly. Customers can add several items to one digital shopping cart from different sellers and pay for just one shipment.
Heavy promotions and free delivery
To promote the new service Mercado Libre is offering aggressive discounts of up to 40% on key products, such as coffee, shampoo, soap, and wine. In addition, it is offering free shipping for purchases over AR$2,500 (US$38) (about half of the average ticket in traditional supermarkets) if all products are bought from the same seller or if they are classified as ‘Full’ (products sent directly from Mercado Libre’s own distribution centre).
Opportunity for Mercado Libre to capitalise on issues faced by major retailers
As a result of the coronavirus lockdown, many Argentinian consumers have moved their grocery shopping online. This was much more prominent in Argentina than in other Latin American markets. The major grocery retailers have seen a huge influx of traffic to their websites, with three-to-four times more sales than usual, causing most websites to collapse. According to Kantar, 30% of these buyers were new users of ecommerce.
In turn, the proportion of people using ecommerce platforms increased from 44% to 61%. Typically, online sales accounts for 2.5-3% of the market, but over the last month this has increased to around 30%. The increase in demand also caused significant delays in deliveries, with some delivery times exceeding a week.
At the start of quarantine Walmart offered free delivery, in two days sales on its website grew by 30% and in five days this increased to 70%. Despite having twice as many delivery trucks, Walmart has been unable to maintain its usual delivery service. Coto, Argentina’s online market leader saw online orders triple, causing delays to deliveries by three to five days. An influx of website traffic of between 5,000-7,000 users per hour also caused its website to crash.
This presents a sizable opportunity for Mercado Libre. Argentinian consumers were already turning to third party delivery apps for smaller deliveries and this provides an alternative for ambient food and cleaning products.
Competitive advantage of offering fast delivery
Customers ordering products from Mercado Libre’s ‘Full’ range will receive their orders in a shorter time.
Full products are sent from Mercado Libre’s logistics centre directly to customers’ homes. Its 65,000 sq. m logistics centre can process 14,000 packages using artificial intelligence and geolocation technologies.
Phase two of the launch progressing quickly
Phase one of the launch is now complete, which saw the introduction of a microsite that made it easier for customers to search and buy products for mass consumption. The second phase aims to incorporate wholesalers into the sellers on its marketplace.
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