Will e-commerce companies improve delivery?

Back home, he researched the best price on the internet. and, since the website promised delivery for no later than October 8, he bought the same product as a gift for his son. Is it necessary to continue telling this story? The 8th came and no ball pool.

In the following days, no truck stopped in front of his door and, so that Lorenzo wouldn't spend the 12th of October in silence, his dad ran out at the last minute in search of another present. It's just one more story among thousands of the genre: the delay appears in first place, with 32% of the total number of complaints, in the ranking of the biggest problems for those who buy online.

Since the beginnings of ecommerce in Brazil, the delivery model followed the same logic. If someone makes a purchase in Fortaleza, the product leaves São Paulo (where the distribution centers are) and travelsthe 2 kilometers to reach your destination. If the truck breaks down on the long way, too bad for the customer.For the companies, even with the setbacks, it made sense to maintain this scheme: there was a lack of a market with more scale throughout Brazil to justify a different model. A refrigerator bought on the internet for delivery in São Paulo arrives, in the fastest option, in four days. In Curitiba, there are eight days; in Fortaleza, two weeks.

It is this unequal treatment that is now beginning to be fought. All the big e-commerce companies are in a kind of race to see who opens more distribution centers outside São Paulo. “After years of double-digit growth, the Brazilian market has reached a respectable size.

Now it makes sense to have a regionalized distribution”, says Esteban Bowles, partner at AT Kearney consultancy. Last year, online sales totaled almost 30 billion reais and, by AT Kearney's own calculations, should maintain an annual growth rate close to 20% until 2018, with higher rates outside São Paulo.

Until 2010, B2W, owner of the Submarino and Americanas.com brands, had two distribution centers, both in São Paulo. Since then, it has opened two in Pernambuco, one in Minas Gerais, the third in São Paulo and another in Rio de Janeiro. In the company's plans, which had a logistical blackout in 2010, it is planned to open seven more distribution centers by the end of 2015.

All this without mentioning that in just over a year, B2W bought control of two transport companies, Direct Express, with national operations, and Click Rodo, specialized in the transport of volumes above 30 kilos. Cnova do Brasil, which manages the Ponto Frio, Casas Bahia and Extra online stores, concentrated its distribution centers in São Paulo until the end of 2013.

In recent months, it began to share with Via Varejo, responsible for the company's physical stores, the distribution center in Camaçari, Bahia, and opened a new one in Rio de Janeiro.

At Magazine Luiza, all deliveries of online purchases departed for years from a warehouse located in the interior of São Paulo. That was until July, when the eight distribution centers spread across the South, Southeast and Northeast regions were qualified to serve, in addition to stores, purchases made over the internet.

All the work to be able to manage inventories has been done, but the deployment of decentralized delivery will take place in several phases. The goal is that, by the end of 2015, 50% of internet orders placed outside São Paulo will be distributed by warehouses located closer to customers.

“We are working to reduce the delivery time outside São Paulo by 70%”, says Frederico Trajano, director of operations at Magazine Luiza. Walmart.com's case is slightly different. Instead of São Paulo, the state where the company concentrated its products was Minas Gerais. Other than that, the rest of the story is pretty much the same as its competitors.

This year, the company opened a new center in São Paulo, another one close to the central region of Recife and is negotiating the purchase of land in the South, probably in Rio Grande do Sul.

“All this movement has only one objective: to arrive before competitors in the region and establish itself as the company that increased customer satisfaction”, says Pedro Guasti, director of Ebit, a research company in the field of e-commerce.

And the money?

The e-commerce sector in Brazil — and in most other countries — is one of those good for investment and bad for profit. B2W and Cnova do Brasil had a loss in 2013. The others even say they are profitable, but no one can know for sure what the numbers are. Why, then, the investments in new distribution centers? Wouldn't it make sense to first have a profitable operation?

“In Brazil, there are no carriers operating throughout the country that deliver to customers' homes. Therefore, companies are obliged to invest heavily in distribution centers”, says Marcel Moraes, an analyst at Deutsche Bank. Another more urgent factor is the arrival of new competitors.

The American Amazon, which started selling books in Brazil this year, should expand the range of products at some point in the future. The Chinese Alibaba just made a record IPO and is capitalized.

An executive from one of the great Brazilian e-commerce companies sums up a common feeling in the sector: “Amazon is not going to deliver with drones in Brazil or revolutionize everything from one hour to the next. But that it is necessary to prepare for this new competition, there is no doubt”.