Overcoming the top barriers to selling cross-border to Brazil

Brazil is a prosperous market for ecommerce, representing 34% of the segment’s revenue in Latin America, as recently shown by eMarketer. In 2018, ecommerce grew by 12%, generating over BRL 53.2 billion in revenue. And, with its nearly 150 million internet users out of a population of 210 million, there is no doubt Brazil’s ecommerce industry offers a huge opportunity for merchants from all over the world.

However, selling cross-border into Brazil is no easy task. There are many aspects that make it a real challenge for online businesses to tackle the market, including logistics, local legislation, and complex tax systems, to name a few.

Main obstacles for cross-border ecommerce in Brazil

Ecommerce merchants aiming at the Brazilian market must be aware that there are some barriers to be overcome. And they should be prepared for these difficulties prior to initiating their cross-border operations if they wish to be successful.

1. Unbanked population and limited access to international credit cards

Brazil is home to 45 million unbanked adults that are still economically active in digital environments. Local alternative methods, such as boleto bancário and PEC Flash®, enable consumers to pay for their ecommerce purchases, even if they do not have a bank account or a credit card. In addition to being an alternative for the unbanked population – that transacts over BRL 800 billion annually in cash – boleto bancário is also an option for those who do not want to or cannot use their credit cards.

Furthermore, limited access to international credit cards makes it difficult for Brazilians to purchase online in foreign currencies. Most credit cards issued in the country, even Visa and Mastercard labels, are restricted to purchases in Brazil in local currency. To top it off, cross-border ecommerce businesses cannot offer domestic payment methods if they are not based in Brazil or do not work with a local cross-border payment provider.

2. Logistics

When parcels arrive in Brazil, they are sent to Brazilian Customs, either in São Paulo, Rio de Janeiro, or Curitiba, depending on their characteristics. Currently, Curitiba is the main hub, receiving over 300,000 parcels each day. Upon arrival, they go through a series of inspections before being released for delivery. The entire process can take up to three months, which often frustrates consumers.

Also, despacho postal, a handling fee charged by Brazilian national postal service, Correios, may cause confusion for merchants and buyers if the process is not properly organised. Once the payment for the despacho postal is confirmed, the delivery process resumes – however, not all buyers are aware of this, which means communication is a key element for a positive customer experience.

In addition, the geographic spread between cities in Brazil, along with the poor infrastructure of the main roads between destinations, contributes to delays in the delivery process, not to mention shipment theft – Brazil registered 22,000 attacks in 2018 – which is another aspect complicating logistics in the country.

3. Taxes and fees

Generally, when buying from international websites, Brazilians are charged an extra 6.38% as IOF tax (a local tax for international financial transactions), in addition to the spread applied to currency conversion, which can sometimes be as high as 7%. Further, imported physical goods with a value of more than USD 50 are subject to import duty, adding 60% to the purchase amount – and, in some cases, an additional state tax is applied.

4. Legislation and licences

Some products might not be allowed to enter the country due to local legislation. Pharmaceuticals, food and supplements, telecommunications and LED products, among others, need special licences to be imported. Smartphones or drones not certified by the National Telecommunications Agency (ANATEL), for instance, are not allowed in Brazil.

What to do

International ecommerce businesses selling cross-border into Brazil can avoid these outcomes with a few measures. Partnering with local businesses and providing clear information, for instance, are a few ways ecommerce stores can boost their sales in the country. Here’s why.

1. Work with a local payment provider

Partnering with a local payment provider not only gives merchants access to a wide range of domestic payment methods, but also guarantees that buyers are charged in Brazilian real, avoiding extra costs for them. This is fundamental to providing a positive customer experience. Providing Brazilian consumers with the possibility of paying for their online purchases in cash is an effective way to expand reach and attend to the unbanked population, along with those who do not have an international credit card or do not want to use it.

When choosing a local payment partner, ecommerce stores should make sure to avoid providers working on a hidden fee model, using the ‘tourism dollar’. The ‘tourism dollar’ is an outdated rate created in the late 80s in an attempt to regulate currency exchange transactions carried out in the black market. Today, even though the tourism dollar is no longer an official currency rate, this term is still used for exchange operations related to buying and selling currency for international travel. Some market players apply an inflated spread to the official exchange rate to generate hidden profit margins and camouflage these by using the term ‘tourism dollar’ – which usually increases the spread by 7 to 10%.

2. Partner with a local logistics provider and grant full tracking

Because of the drawn-out shipping process, it is important to provide buyers with a tracking code so they can check the situation of their purchase every step of the way – even if it does take up to 90 days for it to be delivered. Additionally, sending out regular emails informing of the current status is a way to level-up customer experience.

Another option is to partner with a local logistics provider. This way, merchants can arrange to import in bigger amounts to a distribution centre in Brazil, not only reducing shipping costs, but also improving the delivery times for their buyers.

It is important to note that the right local partners, for either payments or logistics, will also assist merchants with navigating Brazilian regulations, which can ease the process of selling in the country.

3. Provide clear information and support in Brazilian Portuguese

The website and checkout page should provide clear information about delivery, returns, pricing and support. Ecommerce businesses cannot let their customers be surprised by extra costs at the checkout or when receiving the parcels. This is critical to achieve customer satisfaction. Offering online and phone support in Brazilian Portuguese also allows for a better experience. A good customer support strategy will help avoid refund and chargeback claims, preventing financial losses.

Even with all its barriers, Brazil is still the largest ecommerce market in Latin America. The segment registered BRL 26.4 billion in revenue in H1 2019 and forecasts approximately BRL 61.2 billion in ecommerce transactions by the end of the year, according to Ebit|Nielsen. So why would any ecommerce businesses want to miss out on that?

About Paula Martins

Paula Martins is Content Producer at PagBrasil. She has a bachelor’s degree in Journalism from Pontifícia Universidade do Rio Grande do Sul and is specialised in Digital Marketing.

About Ralf Germer

Ralf is Co-Founder and Co-CEO at PagBrasil. His fields of expertise are business management, international business development, marketing, online sales and payment processing. Prior to PagBrasil, he was Vice President of Product Marketing Europe at Actebis and later founded 4M Iberoamérica.

About PagBrasil

PagBrasil is an online payment platform for Brazil, with gateway and collection services. Its broad set of local payment methods includes the exclusive Boleto Flash with responsive technology. The company’s state-of-the-art infrastructure offers flexible integration methods, with extensions for Shopify, Magento, WooCommerce, VTEX, among others. PagBrasil has a full set of advanced services, including an automated split-payout solution for marketplaces, especially aimed at boosting online sales in Brazil.