E-commerce has been growing over the years, but the pandemic accelerated its adoption, declares Felipe Delgado, co-founder and CFO of Merama. According to a Euromonitor report, Latin America was the fastest growing region in 2020 with 24 percent annual growth.
He went on to say that as more users shift to e-commerce, more innovations in purchasing processes and payment methods become available. This growth is reflected in companies such as Merama, which recently obtained a $225 million Series B investment led by Advent International and Softbank.
Merama is an e-commerce brand builder. Its business model is based on investing in large brands in Latin America and helping them operate while supporting their (mainly online) expansion. Merama’s co-founder in conversation with Contxto:
Contxto: Do you think Latin America’s e-commerce growth trend will continue over the next 5 years?
Felipe Delgado: The pandemic accelerated the industry’s growth, but we were already seeing significant penetration of e-commerce throughout Latin America, which represents approximately $70 billion and is expected to continue to grow 25 percent per year going forward. We expect this market to reach $250 billion by 2025.
C: Why does Latin America have such great potential in terms of e-commerce?
F.D.: Because of investment sources from various marketplaces and changes in consumer behavior, as well as the support being provided to accelerate digital penetration.
C.: What challenges do e-commerce businesses face?
F.D.: One of the most important is access to banking services; access to multiple payment methods is still difficult, but there are stakeholders at work who are making it easier. Even the marketplaces themselves are streamlining buying options.
C.: How does Merama contribute to enabling growth for businesses?
F.D.: We look for businesses that are category leaders. We will always have the inventory needed to continue expanding – that’s what we bring to the table.
We want to work directly with the founders of the companies we acquire and divide up responsibility for various growth verticals, such as supply chain optimization, marketplace performance, brand positioning, and technology. We develop internal tools that facilitate catalog and product purchasing decisions.
C.: How is Merama different from its competitors in Latin America?
F.D.: We are not a business aggregator, but rather work with the largest number of businesses we can, bringing them together to create stability.
We are looking to partner with leading companies and grow together. We invest in our partners and provide the necessary capital, equipment, and technological resources, with a 100 percent buyout mapped out for after having completed the growth phase together.
C.: How does it feel to have large funds such as Advent and Softbank as investors in Merama?
F.D.: It was an enjoyable surprise. They are providing us with the support we need because they know e-commerce and the industry’s difficulties as well as how to excel through these challenges.
They are also very familiar with the Latin American market and know that it’s not just about localizing your business model, but that it’s also about how each region is distinct, and often that means creating a different model. This lines up with our business development process.
Advent and Softbank are the largest funds globally and are giving us the resources to shoot for the stars and eventually obtain an IPO for Merama with their help.
C.: How will you apply your new capital?
F.D.: We will continue to support the companies we’ve invested in and to identify new possible partners and will finance working capital to support organic growth aggressively. We will also use the capital to position our brand internationally.
What’s more, with additional investment in technology we will accelerate our companies’ growth and attract talent.
C.: Will you expand beyond Mexico, Brazil, Chile, Peru, Colombia and the United States?
F.D.: For now we are focused on Latin America where we see unbelievable potential. We’ve just gotten started and know of many companies we want to partner with. The short and medium terms are promising for the whole region.
C.: What are your goals as 2021 comes to a close? What’s ahead for Merama in 2022?
F.D.: Our pipeline is full of companies we’re looking to work with and our next move is to finalize partnerships with them. We will also be settling on budget and growth strategies for next year. That’s what we will be up to for the end of 2021 and early 2022.