SAO PAULO, Brazil — Amazon.com Inc is looking to lease a 50,000-square-meter warehouse just outside Sao Paulo, people familiar with the matter told Reuters, as it steps up its push into Latin America's biggest retail market, Brazil.
The logistics investment, which would be four times the size of its current book-shipping operation in the country, is a sign the online retailer may soon handle distribution of electronics and other goods sold on its Brazilian website.
That would be the first step of its kind for Amazon in Latin America's largest economy, where it currently relies on third parties to ship their own goods sold on its marketplace, and it underscores the seriousness of the e-commerce giant's renewed push into Brazil.
Amazon declined to comment to questions about leasing a warehouse.
While an estimated two-thirds of Brazil's 209 million people have internet access, online retail was slow to take off at first, amid concerns over security and complications with tax and logistics in the continent-sized country.
E-commerce accounts for around 5 percent of Brazil's roughly $300 billion retail market — about half its share in the United States — but it has doubled in the past four years and is forecast to keep growing annually at a double-digit pace.
Now Amazon, which expanded its Brazil business from books to electronics in October, is gearing up to fight rivals such as Latin Ameria's homegrown e-commerce champion Mercado Libre Inc and B2w Cia Digital, which is indirectly controlled by partners of private equity group 3G Capital.
"You obviously can't underestimate a company like Amazon," said Pedro Guasti, CEO of Brazilian online consultancy Ebit. "It has huge capacity to invest and it's obviously taking a bigger bite of the cake than it did last year."
Mercado Libre Inc, B2w and local retailer Magazine Luiza SA have stolen a march on Amazon by storing and shipping goods appearing on their websites even when offered by third-party sellers, to ensure speed and customer satisfaction.
Amazon, by contrast, has been slow to tackle the challenges of shipping in a country where tricky logistics and tax issues have long made online retail an unprofitable venture.
In Mexico, Amazon launched its third-party marketplace coupled with its own shipping service, called "Fulfillment by Amazon," in 2015.
The contrast has been stark. Nearly 20 percent of reviews on Amazon's Brazilian marketplace are negative, compared with 10 percent in Mexico and just 4 percent in the United States, according to e-commerce analytics firm Marketplace Pulse.
Complaints in Brazil often focus on delayed or canceled orders - a problem dramatically reduced in other countries when Amazon itself packs and posts orders of third-party goods stored at its warehouse facilities.
In an early sign of Amazon's Brazilian logistics push, the company posted more than a dozen listings for distribution jobs in the country to LinkedIn last year, including "Site leader, Fulfillment Center".
The new warehouse site outside of Sao Paulo, in the municipality of Cajamar, looks to be a step in that direction.
There San Francisco-based logistics company Prologis Inc has offered a 50,000-square-meter space to Amazon in a new industrial park that hosts DHL and Samsung, according to sources, who said adaptation of the warehouse had not begun.
Prologis, which also partnered with Amazon on a mega-warehouse north of Mexico city last year, declined to comment.
The preparations in Brazil come as Luft, the local logistics operator for Amazon's book business, readies a move into another Prologis site nearby in Cajamar, sources said, leaving its current 12,000-square-meter facility in the city of Barueri.
Amazon registered in October to conduct operations in Cajamar, according to municipal records seen by Reuters.
The new logistics investment could spell trouble for rivals.
Mercado Libre has been a success story among Latin America tech start ups: its shares have nearly tripled since 2014, bringing its market capitalization to more than $15 billion.
Magazine Luiza's stock has risen sixfold in each of the past two years as it shifted its rolled out an ambitious e-commerce strategy built on its brick and mortar stores.
By Gabriela Mello with writing and additional reporting by Brad Haynes; Editors: Daniel Flynn and Alistair Bell.