Mercado Libre the Amazon of Latin America
Mercado Libre (MELI) falls somewhere along that
spectrum, even though we’re a big, big fan of Latin American wrestling culture.
Oh, (*checks notes*) wait, that’s Lucha Libre. It turns out Mercado Libre is
the biggest e-commerce company south of the U.S. border, and is also rapidly
growing its fintech business in e-payments and nontraditional banking as well.
The comparisons to Amazon, PayPal, Square, masked wrestlers et al are inevitable. Readers have been nudging us to cover this $50 billion company for a while. It’s also one of top three holdings in the ARK Fintech Innovation ETF (ARKF), and even appears among the stocks that make up the popular tech-heavy Invesco QQQ ETF (QQQ) that tracks the Nasdaq-100 Index.
Mercado Libre was founded way back in 1999, just five years after Jeff Bezos launched Amazon, by a guy named Marcos Galperin, operating out of a garage in Buenos Aires. A graduate of Stanford Graduate School of Business, Galperin’s rags-to-riches story is now a business case study at his alma mater. (Meanwhile, our MBAs are involved in a class-action lawsuit after their business school was allegedly swallowed by a sinkhole, along with their diplomas.) The company IPO’d in 2017, 10 years after Amazon went public. Today, it sports a market cap of more than $50 billion and raked in $7 billion in revenue last year across its 18 markets in Latin America, and will likely break $10 billion in 2022 revenue.
Latin America is often an afterthought when it comes to conversations about the world’s great business markets. Of course, the region encompasses a diverse set of cultures, languages, and economies. There are about 650 million people in Latin America, representing about $5 trillion in gross domestic product (GDP). Compare that to Europe, which is home to some 750 million people but with more than triple the GDP. In addition, Brazil and Mexico account for about $3 trillion alone, and the other Latin American markets after those two begin to shrink dramatically, with Argentina accounting for about $500 billion in GDP.
In 2021, Brazil accounted for about 55% of all revenues, followed by Argentina at nearly 22% and Mexico at 16.6%. The other 15 markets combined are just 6.6%. The numbers have shifted a bit through the first three quarters of 2022, but are close enough. However, total revenue is already at $7.5 billion – and the holiday season has yet to hit.
Mercado Libre splits its business into two segments:
e-commerce and fintech. The former, which represents the various Amazon-like
marketplaces it operates in each country, generates revenue from transaction
fees, shipping fees, classifieds, ad sales, and other miscellaneous fees.
Taking another page from the Amazon playbook, Mercado Libre has its own robust
logistics delivery solution, Mercado Envios, especially in its major markets
like Brazil. It operates a network of independent neighborhood stores and commercial
points to receive and store packages. It even launched its own fleet of
dedicated aircrafts covering routes across Brazil and Mexico, with the aim of
improving delivery times. While the brand is largely associated with ecommerce,
fintech is nearly half of their business now.