E-commerce grows but platforms in emerging markets struggle

Most e-commerce platforms are withdrawing their financial guidance for fiscal year 2020 and their outlook beyond, due to the unprecedented volatility in the economic environment brought by COVID-19. The length and impact of lockdowns, consumer confidence and the scale of economic stimulus reflect the uncertainty surrounding the financial performance of companies in the next months. Those platforms that deliver on their brand promise and adapt to the changing environment will be well-positioned for long-term success.

The pandemic has highlighted the strengths and weaknesses of e-commerce platforms. Some have become essential tools; 2020 volumes and financials will show which companies were up to the challenge and which suffer from the increasing demand for products. The boost in sales over the pandemic has resulted in companies hiring more employees and investing in their delivery capabilities, prioritizing the delivery of essential products, which have lower margins than more lucrative nonessential items.

According to the Q2 2020 report from the U.S. Census Bureau, U.S. retail e-commerce reached $211.5 billion, up 31.8% from the first quarter, and 44.5% year over year. E-commerce also accounted for 16.1% of total retail sales in Q2, up from 11.8% in the first quarter of 2020. The numbers from the U.S. reflect what has happened in other countries. As a result, most major online platforms worldwide have seen their net sales increase in the first six months of the year, as shown in Figure 1. Figure 1 - Online Platforms: 1H YoY Net Sales (2019-2020)

The exception is Jumia, the largest online platform in the African continent. Jumia’s stock is up 14% year to date but has fallen 27% during the past year, and investors consider Jumia an investment with increased risk, based on its recent performance. This is common for companies such as Jumia and MercadoLibre, Latin America's most popular e-commerce site; both operate in quickly evolving technological areas within emerging markets. The expansion and level of information technology and communications infrastructure is disproportionate in developed and developing countries, and several other barriers impede the e-commerce expansion in the Latin America and African markets: Poor domestic and regional infrastructure such as airports, roads or seaports; Lack of experience with import duties and sales taxes; Restrictions and difficulties with international payment transactions; and A digital and cultural divide that deprives many businesses of opportunities. Jumia reduced its footprint in late 2019, and shut down operations in Cameroon and Tanzania after having closed down its Rwanda operations earlier in the year. Jumia still has a presence in 11 African countries, however questions remain about the challenges of running an e-commerce business across a region with underdeveloped logistics and a weak infrastructure.

MercadoLibre’s financial position is far from a success story. Even though the company posted profits of $56 million in Q2 this year, its losses reached $172 million in 2019. The Financial Times included MercadoLibre on its list of 100 companies that have prospered during the pandemic, highlighting the implementation of new electronic payment methods during strict lockdowns in the region. MercadoLibre launched training platforms for SMEs and entrepreneurs in the region, facilitating the onboarding of merchants and creating strategic partnerships with the main e-commerce platforms that operate in the sector. Does the pandemic provide an opportunity for MercadoLibre to expand its operations in Latin America and position itself as a leader in this market?

The upcoming Cargo Facts Consulting Global E-Commerce Logistics Outlook will cover the development of domestic and cross-border e-commerce and its effect on multiple segments, including air cargo and contract flying, and the express, postal and ground network. It will also take a detailed look at the evolving fulfillment and logistics strategies of key global and regional e-commerce platforms, and the relationships developing between different parties in the e-commerce value chain. The report discusses how businesses are positioning themselves to benefit from years of double-digit e-commerce growth, as well as providing detailed logistics profiles of the 12 most important global and regional e-commerce platforms.

E-commerce grows but platforms in emerging markets struggle

Cargo Facts launches online freighter guide

New Democratic relief bill would extend airline aid to March

Related Posts

Routes, risk and resilience: The transformation of global freight

June brings stability, not relief

May freighter capacity extends April’s higher operating level

New Democratic relief bill would extend airline aid to March

Cargo Facts Free Newsletters

Cargo Facts Connect Podcast

Follow Us

Welcome Back!

Retrieve your password