May 19, 2015 2:19 pm
Much has changed in Marcos Galperín’s life since 1999, when he and a colleague set up what would become the eBay of Latin America. But the 43-year-old Argentine dotcom entrepreneur has lost none of the youthful vigour that drove him to set up MercadoLibre, the region’s most visited ecommerce website.
“I feel exactly the same way as I did 15 years ago. I feel a desperation that there is so much to do, that this is just starting,” says MercadoLibre’s chief executive, explaining that although his online shopping site has become the undisputed leader of ecommerce in Latin America, the sector is still in its infancy.
He looks much the same too. In a hooded top, slouching on a sofa, with his feet up and a laptop on his knees as he awaits the FT, Mr Galperín could be just another employee at MercadoLibre’s buzzing designer offices in Buenos Aires. They fill three floors at the top of a glistening tower that peers down over the muddy waters of the river Plate.
It is a long way from the garage of his family’s leather business, where the operations of MercadoLibre — “free market” — began.
It was just before the dotcom bubble burst in 2000, which could have spelt doom for the fledgling enterprise. However, Mr Galperín knew a thing or two about raising money, having worked at JPMorgan and in the finance department of Argentina’s largest oil company, YPF; MercadoLibre’s strong financial support helped it survive the crash.
He remembers well the moment he persuaded the first investor to back his project, when he was finishing his MBA at Stanford Graduate School of Business in California. He was driving financier John Muse, who had given a lecture, to the airport and seized the chance to pitch his idea. The co-founder of the Hicks Muse Tate private equity fund was persuaded by the time he boarded his private jet.
“I went back home and told my girlfriend: ‘You remember that trip we were going to do to Europe after graduation? Well it’s not going to happen,’” Mr Galperín says. He had already ditched dreams of sports stardom despite being selected to play for Argentina’s junior national rugby team.
Of as many as 40 rivals in Latin America at the time, only a handful could raise meaningful financing, says Mr Galperín, who also secured funds from JPMorgan, Goldman Sachs, GE Capital, Flatiron and Banco Santander. “We were the only ones that didn’t throw the money away doing mass media advertising. Instead, we focused on getting a team together and a good product. That’s what set us apart,” he says. His co-founder was Hernán Kazah, who was also at Stanford at the time and who left the company after 10 years.
By 2001 — when Argentina was plunging into a deep economic crisis — MercadoLibre had already caught the eye of eBay, which acquired a 19.5 per cent stake in exchange for its Brazilian subsidiary. MercadoLibre maintains an unusual relationship with eBay — which as both a shareholder and a competitor, Mr Galperín says, is a “frenemy” — but crucially the US group pledged not to return to the region for at least five years. This cleared the way for MercadoLibre’s rapid expansion, just in time to raise more funds when it launched on New York’s Nasdaq exchange in August 2007, the same day that economic historians now say marked the start of the global financial crisis.
The more inefficient retail is, the more value we can provide to a society
- Marcos Galperín
Despite the economic problems, MercadoLibre has become a household name across Latin America. Now with a market capitalisation of some $6bn, last year it matched nearly 30m different buyers and sellers, about 5 per cent of the region’s population, of everything from computers to cars. Its gross annual merchandise value — the total cost of goods sold — was almost $8bn. Revenue is generated from transaction fees, online ads and MercadoPago, its own payment system.
Mr Galperín reckons the figures are “minuscule” compared to the growth he expects over the next 20 years, with just 5 per cent of Latin Americans engaged in ecommerce, compared to 15 per cent in the US. In the next five years alone, as more Latin Americans use the internet, analysts expect MercadoLibre’s gross merchandise value to double, despite gloomy prospects for the economies of some of its biggest markets, such as Brazil and Venezuela.
“The speed at which people are accessing the internet and doing ecommerce for the first time is on a different scale relative to consumption patterns. It’s not just faster, it’s in a different league,” says Mr Galperín, adding that broadband connections are about 2,000 times faster than in 1999.
In fact, MercadoLibre has done a roaring trade in some of the region’s worst-performing economies, such as Venezuela. Traditional retailers there are stifled by regulation, leading to empty shelves and the cash-strapped population is selling more of its possessions, while many are simply afraid to go shopping because of rampant crime.
“The more inefficient retail is, the more value we can provide to a society,” says Mr Galperín. But access to the internet, he says, means that consumers in isolated communities can buy the same goods at the same prices as those in big cities, while small businesses no longer have to sell through big retailers. “Just as Google democratised the ability of people to access information, and Facebook democratised the ability of people to organise themselves and voice their opinions, so we have democratised commerce,” he says.
Small businesses caught on to MercadoLibre some time ago, and Mr Galperín expects big retailers to join in: those that do not will be left behind, he warns. “The traditional gatekeepers of commerce have realised they need to be where the consumers are,” says Mr Galperín. “We are trying to help them successfully navigate the transition to digital commerce. We don’t see traditional retailers as our competitors — actually most of them are our clients,” he adds, noting that 500 or so retailers including Walmart and Fravega have online stores on MercadoLibre.
Nevertheless, Mr Galperín is acutely aware that there are too many examples of companies “whose picture was great, but the movie ended terribly”. He points to the experience of eBay in China, which was muscled aside by Alibaba, and of many companies such as MySpace or BlackBerry. All were market leaders that stopped innovating and were overtaken. “That’s what makes my job so fascinating, and it’s why I come to the office every day,” he says perkily. “Winning is fun.”