E-commerce powerhouses betting big on LatAm warehouses

Major e-commerce groups are pouring investments into warehouses, logistics networks and distribution centers across Latin America to meet rising demand in e-commerce, while pushing to achieve faster deliveries.

Latin America’s biggest online marketplace, MercadoLibre, plans to invest 23bn reais (US$4.62bn) in Brazil this year, up 21% from 2023, when the company’s capex for its largest market grew 11.5%.

The bulk of resources will go to expanding storage and delivery capacities. This year, MercadoLibre aims to launch a distribution center in Pernambuco state to serve the country's northeast, followed by two or three more facilities in other regions.

In Mexico, MercadoLibre opened three fulfillment centers and one major cross-docking station during 4Q23. Under the fulfillment option, sellers' products remain in MercadoLibre’s warehouses and logistics are handled by the e-commerce firm.

The company plans to invest US$2.45bn in Mexico this year, an increase of 48% on 2023. Mexico overtook Argentina as MercadoLibre’s second main market.

The group plans to open further centers across the region in the next months.

Together with these, MercadoLibre is investing in logistics, particularly greener logistics, with plans to increase its Latin American electric vehicle (EV) fleet to 10,000 from over 2,300 within the next five years.

In 2023, Mercado Libre had 2,321 EVs delivered in Brazil, Mexico, Colombia, Chile, Uruguay and Argentina. 

“We will invest in faster delivery,” Ariel Szarfsztejn, commerce VP said during the firm's 4Q23 earnings call.

The strategy also includes optimizing routes from first to last mile, new fulfillment center processes and demand prediction, including via AI.

“We will continue testing more automation and robotics as we’ve been doing over the last few years. We’ll continue working with our technology team. We have thousands of developers fully dedicated to improving the processes and the experience of our customers with logistics and the way we operate inside our warehouses and processing station,” added Szarfsztejn.

Shopee

Singapore-headquartered Shopee opened its 11th distribution center in Brazil. Shopee launched in the region in 2019 and has become a veritable competitor to MercadoLibre.

The warehouse is Shopee’s first in southern Rio Grande do Sul state. The Asian marketplace also has one in the metropolitan region of Paraná state capital Curitiba.  

The new site is expected to increase the delivery capacity of products from Brazilian sellers in the country’s south by 60%, serving also Santa Catarina state.

Similar to MercadoLibre’s fulfillment centers, the Rio Grande do Sul unit operates under a cross-docking model, where goods collected through logistics partners are reorganized and forwarded to last-mile hubs.

The company reportedly has 19 of these hubs in Paraná, Santa Catarina, and Rio Grande do Sul and aims to open two more hubs in Rio Grande do Sul soon.

Unlike MercadoLibre, Shopee is focusing on Brazil. 

In 2022, the company closed its operations in Chile, Colombia, Mexico and Argentina. In Chile, Colombia and Mexico, according to reports, service continued to be provided internationally. In Argentina, the operation was completely closed.

Logistics tech companies, or logtechs, have equally been ramping up investments to meet transportation demands, especially in technology. 

Frete, for example, plans to invest up to 70mn reais in other Brazilian startups with solutions based on AI to detect and prevent cargo theft. 

Another Brazilian logtech, Routeasy, developed an algorithm that reportedly saves up to 40% in costs for its more than 300 customers. These include Shopee, Royal Canin, GPA, DHL and Magalu.

Payments and Commerce Market Intelligence forecasts a 22% jump in Latin American e-commerce between 2023 and 2026, reaching a volume of more than US$700bn.

In Brazil, the region's main online market, e-commerce chamber ABComm estimates that online sales will climb 10.4% to over 205bn reais this year.