Brazil is the largest retail eCommerce market in Latin America, representing one-third of market share according to eMarketer. In addition, 36.1% of the country’s population with ages 14 and over have purchased online at least once in 2018, and 23.1 million Brazilians are cross-border digital buyers.
Needless to say, this data shows how lucrative this market is for eCommerce stores that are selling into Brazil. However, like any other country, Brazil has its own barriers that businesses should be aware of if they wish to thrive in LATAMs largest market.
Main hurdles to overcome when selling cross-border into Brazil
There are a few obstacles businesses should overcome to succeed in the Brazilian eCommerce market. Understand the main difficulties when selling to Brazil – and know how to face them!
Whether you are selling digital or physical goods, how you get paid for products or services is a crucial part of your digital commerce operation. In Brazil, domestic payment methods account for 90% of all cross-border purchases. The boleto bancário, for instance, is the second most used payment method in the country, representing 19% of eCommerce purchases, according to the 40th edition of Ebit|Nielsen Webshoppers report. This scenario is due to a number of factors: one of them is the 45 million adults in Brazil who do not have a bank account. This does not mean, however, that the unbanked population is not economically active: Locomotiva Institute found that Brazilians transaction over BRL 800 billion in cash annually, and many are also e-shoppers.
Furthermore, access to credit cards is limited, meaning those who do have a bank account don’t necessarily have credit cards. In addition, most cards issued in Brazil do not have credit functions: J.P Morgan shows that debit card penetration per capital is 1.52 for debit cards against 0.71 for credit cards.
Finally, most credit cards issued in Brazil, even Visa, and Mastercard, are limited to domestic transactions only, preventing consumers from making cross-border payments. Over 75% of Brazilians also pay for many of their purchases with credit cards in installments, an option only available when working with a local payment processor.
Besides being able to have your payments processed, you also need to think about cart conversion rates and authorization rates, both being directly and strongly impacted by offering local payment methods for online purchases.
In addition, when settling for a payment processor in Brazil, merchants should be aware of the currency rate applied. Some providers work on a hidden fee model and use the “tourism dollar”, an outdated rate created in the late 80s in an attempt to regulate currency exchange transactions carried out in the black market. Today, even though it is no longer an official currency rate, the tourism dollar is still used for exchange operations related to buying and selling currency for international travel. Some payment processors apply an inflated spread to the official exchange rate and generate a hidden profit margin camouflaged by the term “tourism dollar”, which may increase the spread by 7 to 10%.
Taxes and fees
Other important barriers are high taxes and fees. Imported goods over the total value of US$50 are subject to taxation, adding 60% to the purchase price – along with an additional state tax in some cases.
Furthermore, a 6.38% tax for international financial transactions is applied on purchases completed with international credit cards – which makes domestic payments such an important component for increasing conversion rates.
Another pain point for selling into Brazil is the local legislation. Like any other country, some products are forbidden inside national territory, while others are restricted. Pharmaceuticals, food and supplements and telecommunications products are a few examples that need special licenses to enter Brazil. For instance: smartphones and drones not certified by the National Telecommunications Agency (ANATEL) are not allowed in Brazil.
Logistics for physical goods
You’ve sorted out your payment processing, you comply with taxation regulation, you’ve got your special licenses (where applicable), and if you are selling physical goods, you need to take care of logistics. In fact, one of the main pain points when selling cross-border into Brazil is the logistical difficulties. After a parcel has arrived in Brazil, it is sent to the Brazilian post’s logistics centers in either Rio de Janeiro, São Paulo or Curitiba for examination and customs clearing.
Most import goods are sent to the Curitiba logistics center, which receives all small packages of up to 2 kg which are labeled with tracking codes starting with “L” and “R”. This accounts for approximately 300,000 parcels daily, according to Brazil’s national postal service Correios. Usually, within 24 hours all parcels are x-rayed and examined for compliance with Brazilian laws and import regulations. After that, if all is in order, it resumes the delivery process.
However, in some cases, the customer must also pay for the despacho postal, a handling fee charged by Correios. If the buyer does not pay for this extra charge, the delivery process will not be resumed, meaning the parcels will be returned to the sender – in this case, the online store. Furthermore, if the address is incorrect, the procedure can be prolonged significantly.
In addition, while larger cities in Brazil receive deliveries within just a few days, recipients in remote areas may have to wait for 40 business days or more to receive their products. The large distances between cities, along with elements such as shipment thefts and poor road infrastructure are the main influencing factors.
Unfortunately, Brazil is one of the leading countries when it comes to fraud. In fact, the Brazilian Federation of Banks – Febraban – registered BRL 450 million in frauds annually. Recent data also shows that 12 million Brazilians were the victim of online fraud of some sort.
In this scenario, both merchants and customers are a target for criminal practices. However, there is one particular online felony that harms eCommerce businesses: stock abduction.
Let’s say your eCommerce store launches a big sale with attractive discounts. A malicious competitor may purchase a large number of products using boleto bancário, but not pay for the invoice. As the traditional boleto takes a few business days to expire and the payment may take another two to three business days to confirm, the transaction is not completed, and the stock remains retained.
The Brazilian legislation determines that merchants have to reserve a product until a boleto is paid or expires, remaining unavailable for other potential customers. Meanwhile, your competitor may benefit from this situation by selling the same products to your target audience.
How to be successful in Brazil
If you read up to this point, you might be questioning if overcoming these barriers is worth the hassle.
It definitely is! Businesses that prepare their eCommerce for a better customer experience from beginning-to-end can count on a huge number of loyal e-shoppers on the long run. Studies show that 36% of Brazilians are faithful to certain brands, and this has a direct relation with their perception of customer support: 70% said they give relative or high importance to customer support, and 68% are willing to pay more for a qualified customer experience.
In order to succeed in the Brazilian e-commerce market, every decision should be customer-focused. And this includes adopting a series of strategic actions that improve the overall shopping experience.
Work with a local payment processor
Partnering with a local payment processor is crucial for a great checkout experience and it usually increases conversion rates two-fold.
A local company will provide eCommerce businesses a wide range of payment solutions, such as boleto bancário – which will also allow cash payments for online purchases – debit cards, domestic credit cards, and bank transfers. Domestic processing will allow payments in Brazilian currency – Brazilian Real – and in installments. Furthermore, a local payment company may also provide integration with important tools that guarantee the product is correctly delivered, such as address verification at checkout.
Assure your products can enter Brazil
As we mentioned above, some products need special licenses to enter Brazil, and each category is issued by a specific organ. To assure the product may enter national territory, merchants should access the Receita Federal website, where they will see a list of products that are forbidden or restricted in Brazil and the respective organ they must consult.
Partner with a local logistics company
A local logistics company will be able to provide your customers with a tracking code so they can follow-up with the delivery process. In addition, a domestic company may also assist your buyers in Brazilian Portuguese with their needs regarding the parcel’s delivery status. This reduces communication conflicts, and customers can rest assured that their products will be delivered to the final destination – even if they do take longer than expected to arrive.
Furthermore, a local partner also allows businesses to import larger amounts to distribution centers in Brazil, which may reduce overall cost and provides a faster delivery process.
Offer customer support in Brazilian Portuguese
Providing support in Brazil’s native language is crucial for customer experience and will help guide buyers through all the process. This includes not only a thorough translation on online channels but also phone support, as Brazilians appreciate this service.
Merchants should ensure the client is provided with a step-by-step guide about the order status and inform all additional fees that are charged before the buyer proceeds to checkout. It is recommendable not to surprise customers with additional costs displayed only at the final stage of the purchase because many will not hesitate to abandon the cart and seek an opportunity at a competitors’ website.
Shield your ecommerce against frauds
To prevent fraud attempts, working with an antifraud solution is critical. Some software products are able to detect suspicious activities, which can prevent fraudulent credit card purchases and situations such as stock abduction.
Furthermore, merchants working with boleto bancário may also set a shorter or longer expiration date according to their needs, as well as fast payment confirmation. PagBrasil’s Boleto Flash® not only allows eCommerce stores to define how many days they can wait for a boleto to be paid, but also confirms payment in less than one hour on business days. This practice will reduce the risk of stock abduction.
Every country has its barriers, and, in Brazil, it is no different. However, as the largest eCommerce market in LATAM, the country is a great opportunity for cross-border businesses. In fact, Ebit|Nielsen forecasts approximately BRL 61.2 billion in eCommerce transactions by the end of the year. So why would any eCommerce want to miss out on that?
About Paula Martins
Paula Martins is a Content Producer at PagBrasil. She has a bachelor’s degree in journalism from Pontifícia Universidade do Rio Grande do Sul and specializes in digital marketing.
PagBrasil is a leading Brazilian fintech company processing payments in Brazil for multinational ecommerce businesses. With a focus on innovation, we have created the best infrastructure for the Brazilian market. By providing an outstanding service and innovative products, such as Boleto Flash® and PEC Flash®, we create unique value for our clients and their customers.
Our comprehensive online payments platform is the result of more than 20 years’ experience in the segment and relies on innovative resources, designed specifically for the Brazilian market. Local and international merchants gain access to the most advanced portfolio of products and services, which help them boost their sales immediately.
Photo by Raphael Nogueira on Unsplash