Amazon’s Approach in Brazil

Faced with webs of tax codes, labor laws, logistics challenges, and strong competition from established Latin American e-commerce player MercadoLibre, Amazon ultimately launched in Brazil by only introducing its Kindle (e-book) Store. Estimates suggested that Brazilians purchased 435 million books in 2012 valued at

$2 billion.103 However, e-books accounted for only 3% of these sales.104 Upon its launch, Amazon listed 1.4 million e-book titles on its site, 13,000 of which were offered in Portuguese.105 Amazon’s launch of its Kindle Store, however, came only after lengthy negotiations with Brazilian book publishers who wanted control over pricing in fear of Amazon’s aggressive discounting strategies. To date, Amazon had formalized contracts with over thirty book publishers, prominently including the Distribuidora de Livros Digitais (DLD) group whose seven publishers controlled close to 35% of the market and whose demands caused Amazon to delay its entry into the country.106,107 As of February 2014, Amazon had increased its e-book selection to 28,000 titles in Portuguese, Brazil’s national language.108

In addition to its Kindle Store, Amazon introduced its Kindle e-reader in Brazil in February 2014. As of then, Amazon planned to leave logistics to its external partners in Brazil.109 In June 2014, Amazon’s Kindle Paperwhite retailed for R$479 (USD 215.62) on Amazon.com.br, nearly twice its price in the U.S. of $119.110 This significant price difference could most likely be attributed to Brazil’s high duties on electronics imports. Amazon offered customers the option to pay for the Kindle in up to 12 installments, given the predilection for Brazilian consumers to use payment plans for expensive products.111,112 Amazon also offered free shipping on its Kindle products.113 The Kindle may not be the only physical product Amazon would choose to sell moving forward.

Other Markets: Diversity in Geography, Products, and Customers

Most recently, similar to its approach in Brazil, Amazon launched its Kindle Store in Mexico in August 2013 (www.amazon.com.mx), its twelfth international expansion as of July 2014.114 On the other side of the globe, Amazon was also making a move. According to Forbes’ Russian language site, Amazon established

its first office in Russia, rumored to be headed by HBS graduate Arkady Vitrouk, director for Kindle Content at Amazon EU.115 With 76.5 million Internet users (53.3% of the population) and an e-commerce industry expected to grow to $36 billion by 2015 from only $12 billion in 2012, according to Morgan Stanley, Russia would be an attractive market for Internet retailers in the years to come.116 However, Russian laws, political uncertainty, and poor infrastructure would inhibit e-commerce growth in this market.

Previously, in 2008, Amazon was rumored to have entered an exclusive distribution agreement with the Saudi Arabian e-commerce firm Taufeer.com to become a part of its e-channel retailers program. Through Taufeer.com, Amazon would be able to sell its products to millions of people across the Middle East.117 According to an article from March 15, 2009, in Asharq Al-Awsat, an Arabic international newspaper, Amazon had sent $280 million of merchandise to the Kingdom of Saudi Arabia since 2007.118 However, no mention of such an agreement existed in Amazon’s company records and the Taufeer.com website was defunct as of 2014.

While Piacentini spearheaded Amazon’s international strategy, the rest of Amazon’s leadership continued to focus on developments in new products, services, and logistics. In order to increase its role in logistics, Amazon had tried its own hand at delivery with Amazon Fresh in select cities across the U.S. It had also been experimenting with 30-minute delivery using drone technology.

In terms of new products and services, Amazon introduced the second generation of the Kindle Paperwhite, the Kindle Fire HDX, and its Amazon Fire Phone in the year leading up to July 2014. Furthermore, Amazon was expanding its Amazon Web Services (AWS) to reach over 190 countries.119 In December 2011, Amazon announced a Sao Paulo Region for AWS (aws.amazon.com/pt/), and later introduced a Beijing Region in December 2013 (amazonaws.cn).120,121 Amazon also catered to AWS customers on the Indian subcontinent by opening edge locations in Chennai and Mumbai in July 2013.122 Through offerings such as AWS and its Kindle Store, it seemed that Amazon’s international strategy could perhaps transcend the domain of physical consumer products.

Whether Amazon would choose to continue its expansion in Latin America, capitalize on Russia’s dynamic e-commerce growth, export its business model to the Middle East, or stay focused on its current markets, the road to success in emerging markets would not be an easy one for Bezos and Piacentini. However, according to Bezos’ oft-repeated mantra, “it’s still Day 1” for Amazon, for every one of its markets around the world.

Acknowledgments

The authors thank Nowfal Khadar (MBA, 2014) for his insights in the creation of the India portion of this case.