Brazilian online sporting goods retailer Netshoes is investing heavily in making deliveries more efficient, a senior executive said, as it steps up efforts to turn a profit and eventually list its shares in the United States. Netshoes, which analysts say is the largest pure play e-commerce company for sporting goods in the world, with a presence in Brazil, Argentina, and Mexico, has halved delivery costs since 2011, Chief Operating Officer Graciela Tanaka said in an interview.
The company has implemented four different types of freight charges, allowing it to increase delivery efficiency at a time when rivals are focusing on profitability. "When online retailing started in Brazil, free delivery and monthly instalments were the case," Tanaka said, adding that those practices were not financially sustainable over time. Netshoes, which has Tiger Global Management LLC and Singapore sovereign wealth fund GIC among its shareholders, has been in the black over the past three months, a source with knowledge of the firm recently told Reuters.
Staying profitable is seen as a pre-condition for pitching an initial public offering plan in the United States, said the source, who requested anonymity because the data was private. Tanaka said Netshoes is "on the way to turning a profit," adding that talk of an IPO "has become part of the daily conversation." Likewise, roadshows with investors have also become common for Netshoes, she added.
Netshoes reported a net loss of 71.9 million reais ($30 million) last year, an improvement over 93.7 million reais in 2012, with revenue from sales and services rising 21 percent to 965 million reais in the same period. Brazil's e-commerce market is expected to grow an average 18 percent annually by 2016, according to several consulting firms including E-bit and A.T. Kearney. Still, some issues linger for online retailers.
Over the past two years, B2W Companhia Digital SA , the largest Brazilian online retailer, has struggled with intense competition, eroding profitability and onerous upfront investment in technology needed to increase scale and improve customer service. With local interest rates at their highest in almost three years, household debt peaking and persistently high inflation eating up disposable income, Brazil's leading online retailers are likely to post a net loss this year, Goldman Sachs Group Inc said earlier this year.
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