Bloomberg Línea — The economic environment of high interest rates and slowing consumption, coupled with competition from Asian players, has wreaked havoc on the Brazilian retail market, but in this adverse scenario, Mercado Libre (MELI) has maintained the momentum of double-digit growth, gaining market share and improving profitability, in addition to advancing in verticals such as financial services, which allows an integrated journey for those who sell and consume.
The company’s recurrent discourse has been that there is still a lot of potential to grow in its two main business verticals, e-commerce and its fintech, Mercado Pago. But there are also opportunities that are beyond what can be seen in the short-term results and that gain increasing viability thanks to the advancement of technology and the gain of scale.
This according to Sean Summers, executive vice president and chief marketing officer (CMO) of Mercado Libre.
“Our big ambition [on this front] is to go beyond the dollars people want to spend on our platform or sellers looking to accelerate their sales. That’s a specific budget. With the solutions we have for ads, displays and videos for advertisers, whether they’re selling in e-commerce or not, we can become a much bigger media platform,” Summers said in an interview with Bloomberg Línea earlier this month during Web Summit Rio.
One of MELI’s differentiators, he argues, is the volume of people who use the platform on a recurring basis: the platform had 100 million active users in the first quarter of 2023.
The executive, who is in charge of Mercado Ads, the advertising business unit for companies interested in positioning their brands on the platform, said the goal is to go beyond the so-called retail media - the use of retail digital channels to offer ads to brands. The company has developed ads that seek to be assertive depending on the consumer’s moment.
Mercado Libre reveals little for now about the numbers and the reach of Mercado Ads on its bottom line. At Amazon (AMZN), advertising revenues accounted for $9.5 billion in first quarter, with an annual expansion of 23% free of exchange rate effects, which illustrates the potential. It is a business front that represented 8% of total sales in the period.
Summers has been at Mercado Libre for almost 11 years and has also been executive vice president of Marketplace. Previously, he served as marketing director for two consumer goods companies in the UK, PepsiCo and Twinnings.
“Retailers realize the world is moving from physical to digital and they need to rebrand. It’s one thing to offer the product equivalent of trade marketing. The challenge is to go beyond and offer something competitive in the face of traditional communication channels. We can do that because we have technology and many people coming to the platform at different points in the buying journey.”
The following interview was edited for length and clarity:
Bloomberg Línea: What are the strategies to continue to grow looking at the medium and long term?
Sean Summers: We believe that there are two great opportunities. And we are very consistent in our strategies. We are an e-commerce company and we have been here for 24 years. We still see opportunities to increase penetration, adoption and frequency. So, as the market leader in Brazil in all segments, what we try to do is grow the category and increase our share. And if we do things the right way, we will be able to deliver solid growth in the near future.
You can see that even now when markets are weaker, MELI is doing very well. When it comes to e-commerce, obviously you have to keep evolving the strategies. The basics of retail is always to offer a better customer experience, very competitive prices and more assortment, but in some ways reinventing ourselves or getting better and better on a daily basis.
We analyze data a lot, and our customers also give us a lot of feedback about what is working and what is not. We are constantly finding opportunities for improvement and thereby reducing friction in the buying experience, in the payment experience, in the receipt and even in the return of products. And what this is driving is loyalty. People are coming back more often and in greater numbers, and that has a multiplier effect.
This on the e-commerce front, but what is the other opportunity?
In fintech, we are further behind. We have been talking a lot about financial inclusion. I think we have contributed to improving the situation in Latin America along with other fintechs. But there is still a lot of room to grow. And we think it [the opportunity] is very much about product innovation. We started as a product just for online payments. But over the years we have identified other products that customers need. And now I would say that we are probably a unique one-stop-shop, ranging from payments to bills, from technology to credit and crypto.
Being a kind of financial supermarket, something that generates more adoption by consumers and for them to come more often. The strategies of both companies operate independently, while we are constantly watching for overlap. Which in itself is already a different strategy, to ensure that we are leveraging these relationships as much as possible. Maybe someone can come into the ecosystem through the blue app [from Mercado Pago] and we try to figure out ways to cross-sell part of the yellow app [from Mercado Livre] and vice versa.
And how does Mercado Livre decide if a new business is worth entering?
Underneath those two worlds, we are constantly looking for new things to do, like retail media. Our media business has been around for 12 or 13 years, and for a long time we didn’t figure out what role the product had. Three or four years ago that finally changed. I think we understood where and how we could add value. And we started to operate that business.
Why? Because it was an obvious solution for our customers. And we are perfecting it. In doing so, we identify new opportunities or new pains for existing and potential new advertisers. And that is why we decided to move forward. Obviously it is a difficult task.
Everyone is in search of the ‘Holy Grail’ of offering a complete financial solution, for example. So it’s not easy, but I like the chances we have. We have enough patience to understand what is the right moment to do this. There are many ideas that we have in our minds for a long time until we discover that now is the time to put them into practice.
Which example fits this description?
For example, content distribution. We identified and started from a pain we had in our loyalty program in relation to the main competitor, which is Amazon with their Prime service. We said, ‘How do we close this gap?’ At the same time, the industry and the content owners were starting to reach directly to the consumer [through streaming] and that was not part of their DNA. We saw an opportunity and got in touch with them [with partners such as Disney]. Suddenly, it’s like we have the content, the distribution, and the financial products for a subscription.
This was an idea we had for many years, but it didn’t come to life until 2020, until it was the right time with the right execution. That’s how we look at innovations. At the end of the day, it’s how we try to stay one step ahead of the competition. The good thing about these markets is that there is a lot of competition and it keeps you on your toes. If you relax a little bit, they simply overtake you.
How is the marketing strategy defined from the business verticals?
I wasn’t thinking from a marketing standpoint, but from a product standpoint. We are somewhat agnostic. We don’t think about platform. We look at the consumer pains that we are trying to solve. And then, more often than not, it turns out that this is a pain that naturally fits under the umbrella of fintech or e-commerce.
Content [as a product] was not an obvious problem, but it had to do with our loyalty program and was tied to competition with Amazon. So we started with consumer demands. We looked at product development and what vertical does it fit into, is it fintech or is it e-commerce? And then we discuss whether we should communicate jointly or not. Most things are communicated through the blue app or the yellow app.
What are the main avenues of growth right now?
Fortunately, we have many avenues for growth. In e-commerce we are the biggest player and growing more than the market. In fintech, we are growing significantly in both our individual and enterprise businesses. In ads markets the same thing. Overall, I see the whole ecosystem as an avenue for growth. And we will continue to innovate in different areas and eventually find new things, like we did in crypto.
You mentioned the retail media business. What opportunities do you see there?
Today everyone is talking about retail media. Retailers see the world moving from physical to digital and they need to rebrand. But it is one thing to offer the product equivalent of trade marketing. The challenge is to go beyond and offer something competitive in the face of traditional communication channels.
We can do that because we have a lot of people coming to the platform at different points in the buying journey. We have a lot of people coming in very early in the process. “I want to buy an iPhone.” That’s the beginning of research, of understanding the options. Maybe it’s not an iPhone anymore, but a cell phone. “I’m looking to know what the brands are, what the prices are.”
This enables us to develop the right products for advertisers to go beyond just trade marketing and be able to offer something that is competitive in relation to other communication channels at the time of awareness and product consideration.
Our big ambition is to go beyond the dollars that people want to spend on our platform or the sellers that are looking to accelerate their sales. That is a specific budget. With the solutions we have for ads, displays and video for advertisers, whether they are selling in e-commerce or not, we can become a much bigger media platform.
Obviously, we have to execute this vision and it is easier said than done, but I think we can do it with the amount of variables we have for the different stages of the buying journey and with the use of technology, because our products are really good.
How does the process of using data to understand the customer work?
There are interesting cases where customers provide feedback to improve the platform. If you make changes to the platform, the case goes away. The problem goes away. This fits very well with our product development. When we see a gap with a competitor, we think: do we need a process change or is it something we have to change or add to the platform experience? That’s the best way to improve our work.
This has been a source of endless insights on how to improve the overall experience. And obviously there are a lot of insights into improving the product experience and from a brand perspective, how consumers perceive us, in what areas do we have strengths and in what areas we have weaknesses. So there is an element of not only the product but also the brand. And the combination of both, which we follow up on regularly, I would say every week.