Consumer-to-Consumer Distrust in Brazil

Any company aiming towards the consumer-to-consumer market space should not underestimate the fundamental distrust between consumers in Brazil when it comes to consumer-to-consumer transactions.

Internet have disturbed industries where traditionally brokers and middle-men role were strong and profitable. This disruption mostly happened through introduction of online automated self-service systems. Traveling agencies are one of the first industries that comes to mind, but there are many similar examples.

eBay, Craigslist and MercadoLivre, Brazilian’s eBay, have been successful front-runners in the consumer-to-consumer online transaction space for years.

A closer look at MercadoLivre shows that the idea of consumer-to-consumer transactions is long gone. In most categories, professional sellers represents 70% or more of the items offered at a fixed price. In reality the platform has evolved into a B2C market space like any other webstore.

Consumer-to-Consumer Transactions in Brazil

Any company aiming towards the consumer-to-consumer market space should not underestimate the fundamental distrust between consumers in Brazil when it comes to consumer-to-consumer transactions. People do not trust strangers when it comes to financial transactions, whether it’s selling used baby clothing or used cars.

The concept of Garage Sales is non-existing in Brazil. In fact, the Brazilian middle class will rather donate items they do not need anymore to their maid or doorman than go through the effort of trying to sell the item using an online service.

Don’t get me wrong, there are Brazilians interested in earning some extra money by selling their goods or services but the demand is low. Being a market facilitator when facing a low supply and even lower demand does not seems to be a good business.

Airbnb in Brazil

In April 2012, Airbnb announced their first office in São Paulo, Brazil. The introduction of Airbnb’s Peer-to-Peer accommodation model would, at first glance, seems dead on arrival based on my previous observations of the consumer-to-consumer market in Brazil.

As Airbnb entered the market I was ready to be proven wrong. I thought that a successful and innovative international company like Airbnb wouldn’t enter the Brazilian market unless they found the “secret formula” to crack the Brazilian consumer-to-consumer market.

Airbnb 1 Year Later

Eager to learn from Airbnb, I have followed their development closely over the last 10 months. Unfortunately Airbnb did not managed to change my observations regarding consumer-to-consumer transaction in Brazil. In fact, Airbnb have been moving in the same direction as MercadoLivre, and are becoming a B2C platform.

Airbnb have about 700 properties listed in São Paulo as of today, but the number of advertisers are much lower. Although Airbnb want to give a C2C experience I would not consider “Carlos” with his 62 apartments a regular consumer, neither Luiz who run several hostels around Brazil.

How to succeed with consumer-to-consumer Business in Brazil?

We strongly believe that there will be a real success in consumer-to-consumer transaction facilitation within the next couple of years in Brazil based on our observations. The breakthrough may come with Etsy entering the Brazilian market or the Brazilian version of Elo7 gaining momentum.

Whoever cracks the business model will have to address 5 key concerns:

1) Secure Transactions

The facilitator needs to address the real concern of safety. If you expect the buyer to physically meet the provider, a safe environment must be provided to do so, where there is no risk of robbery or kidnapping.

If goods are going to be shipped, the provider needs to give a level of guarantee for the delivery, as well as the authenticity of the goods.

Trust is the number 1 issue to address.

2) Convenience

Buying a used sofa through a consumer-to-consumer service is far less convenient for the buyer than going to a retailer and buying a new sofa. The facilitator cannot consider the transaction finished when the order confirmation is delivered by e-mail. The transaction is not finished before the buyer is happy with the sofa at home.

3) Win the Women

Although women are the most active online shoppers, they are less likely to complete a consumer-to-consumer transaction. This is closely related to concern 1) about securing the transaction.

4) Create Status

Although Brazilians like good deals, low prices alone will not make a consumer-to-consumer facilitator successful. The core reason why I believe services like Etsy have the secret formula of being popular in Brazil is the status that comes with buying something unique and special.

Brazil has a strong mainstream consumer force but there is an aspirational element towards enjoying popular art and craftsmanship. An example of this is the increasingly popularity of the neo-pop artist Romero Britto.