eBay's Hoping Latin America Will Be a Big Win

NEW YORK (TheStreet) -- When it comes to e-commerce, the discussion often involves the U.S., China or India; but for eBay (EBAY), one of its major priorities these days is Latin America.

This geographic area in particular poses a lot of opportunity for growth, according to the San Jose-based company, so eBay is investing in delivering a relevant and localized experience on its site as well as in terms of marketing efforts.

"Early on, we set on Latin America given its economics and demographics," said Sylvie De Wever, senior director of geographic expansion and eBay Latin America. "It's a rising middle class, which gives rise to more purchase power so that's an interesting consumer base for us."

Plus the proximity to the U.S. helps, along with established trade agreements. And the demand there for lower-priced products is extremely high, De Wever said. "We also have a very strong brand in the region; we want to expand it, but the starting point is very healthy," she added.

The company first started focusing on emerging markets in general about three years ago, but eBay really started stepping it up in Latin America about a year and a half ago. In May 2014, eBay launched a site in Spanish and Portuguese and has since been investing in marketing and reaching new consumers. This past Monday, eBay launched a brand new marketing campaign in Mexico, including the company's first TV spot in the country. "That's a way for us to be relevant and explain who we are," De Wever said.

E-commerce only accounts for 3%-4% of retail sales in Latin America, vs. about 8% in the U.S., according to JPMorgan, which leaves a ton of room for growth. Since online shopping is still in its early stages in the region, eBay hopes to get in ahead of the game and proactively acquire consumers who may be new to e-commerce entirely.

However, eBay is going up against the Latin America e-commerce company MercadoLibre (MELI), which is currently "the clear leader in the marketplace business" in Latin America, according to JPMorgan analyst Andre Baggio. In 2001, eBay handed MercadoLibre its Brazilian subsidiary iBazar in exchange for a 19.5% stake in MercadoLibre, which positions eBay as both an investor and a competitor. Spokesperson Johnna Hoff says eBay is "rooting" for MercadoLibre but that eBay offers a more global selection of products.

There's also Amazon (AMZN) to consider.

In 2013, Amazon grew its sales in Latin America by 142% year over year, to $147 million in sales, according to Internet Retailer. That makes it the fifth fastest-growing Latin America Web merchant.

Either way, eBay understands the opportunity in the region is worth the battle. The business-to-consumer e-commerce market in Latin America is expected to more than double to $40.8 billion by 2019, according to research firm Forrester.

For now, eBay is seeing most of its growth in Latin America on mobile, De Wever said. About 18% of overall e-commerce in the region is done on mobile. "We've been focusing on marketing to increase activation from mobile," she said. "Our user acquisition is on mobile and it's in huge numbers. That's really driving the growth for us."

Besides mobile, another focus for eBay Latin America is shipping. The national infrastructure and transportation in the region is not as developed as other markets. There is also distrust among consumers, according to De Wever, so eBay partners with third-party logistics companies like Estafeta to make sure products get delivered in a reliable, efficient fashion.

Though eBay does not break out it's international revenue by region, the company brought in $2.1 billion in revenue in the first quarter of 2015 from all of its international marketplaces in total -- down 4% year over year. While eBay largely pointed to international currency fluctuations as the culprit for the lower numbers, many investors and analysts would probably be happier if investments abroad were curbed.

Nonetheless, eBay is confident that these investments will pay off in the long run.

"If you think about why we're focusing on emerging markets , it is really about expanding eBay's footprint and preparing for the future," De Wever said. "Looking at the future, eBay's growth will be coming from those markets, from Latin America, Southeast Asia, Russia, and this is investing for the future. We're seeing strong results in those markets. They are actually really good investments we're making in those regions."

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