Challenges For the Cross-Border Sale of Physical Goods to Brazil

It is undeniable that Brazil has earned its place in global e-commerce rankings. With an avid consumer base, the country is by far the biggest e-commerce opportunity in Latin America and is among the top 10 largest e-commerce markets in the world. However, a quick Google search about selling to Brazil unveils the challenges faced by international merchants who sell physical goods to the country. International shipping to Brazil can be troublesome. The lack of knowledge about logistical barriers, a complex customs handling system, import taxes and local consumer rights and habits, often result in unpredicted problems and even losses for some online retailers entering the market. With this in mind, we have talked to some of our clients who have been selling to Brazil in the past years so as to share their experiences and advice with merchants thinking about starting to sell to the Brazilian market.

Logistical Barriers

Regardless of the business size or the type of product sold to Brazil, merchants who took part in this study agree that both the continental size of the country and the deficient logistical infrastructure in some regions impose major challenges. Because of this, delayed deliveries are not uncommon. In addition, depending on the courier or postal service used and the region where the parcel is set to be shipped to, the shipping costs can increase significantly.

Overall, the experience of merchants using courier services indicates that deliveries tend to be quicker with said services than those made via Correios (the Brazilian postal service). However, these are not shielded from delays at Brazilian customs. In this scenario, it is essential for merchants to test the delivery times in order to give buyers a close estimation at the time of the purchase.

Brazilian Customs and Import Taxes

One of the respondents, who has asked to remain anonymous, sells vintage household hardware to Brazil and comments that it is hard to provide competitive prices because “customs bureaucracy and Brazil’s closed economy makes the final price of the goods more expensive in the country than elsewhere.” However, other merchants note that generally, even after import duty and taxes, prices are still more affordable than what consumers find in Brazilian shops.

In theory, every good purchased on international websites is subject to taxation upon arrival in Brazil. However, in practice, the Brazilian customs handles such a large volume of parcels on a daily basis that they fail to collect taxes on some of the imported goods. Merchants using courier services sometimes have the option to pre-pay the taxes. In this case, such an amount is added to the final price of the product.

Using a courier service that pre-pays import duties is a good way to avoid having buyers refusing to accept parcels because they don’t want to or can’t pay import duties upon delivery. When asked if they have ever faced such an issue with Brazilian consumers, merchants selling higher-value products had more of these experiences. On the other hand, merchants selling low-value goods and shipping them through Correios rarely have issues with their parcels being taxed.

When opting for shipping without pre-paid taxes, merchants must inform buyers at the checkout and in confirmation emails that their purchases will be subject to import duty and taxes upon arrival in Brazil. This information is essential to avoid misunderstandings and possible returns and chargebacks.

Regardless of the shipping method, merchants should always opt for a service that provides delivery tracking. Both the delivery tracking number and the link for verification should be included in the confirmation email and in every subsequent delivery status email. If the sale was done through Facebook, it is recommended that merchants inform of the tracking code and delivery status via Facebook Messenger as well.

Chargebacks

Some industries experience more trouble with chargebacks than others. In this study, merchants selling fashion and cosmetics items were the ones to note that chargeback prevention is a big concern for their businesses and most of them emphasize the benefits of using an antifraud tool. PagShield, PagBrasil’s fraud prevention tool comes with multiple functionalities to avoid fraud, for instance, it registers any previous chargebacks from fraudulent purchases and uses this information for the risk score of future purchases.

Friendly fraud and unjustified chargeback requests, which are nearly impossible to be identified by a fraud prevention tool, are often a headache. Pierre Larose, founder of Calça Thai, points out that “banks are quick to approve chargebacks and customers are quick to act on them in Brazil”, which puts merchants in a difficult position. Asked about what measures to take to avoid friendly fraud, Mr. Larose added: “we try to maintain continuous communications with customers in the post purchase process and our soft descriptor includes our brand name. When we do suffer friendly fraud, we apply a fraud block on those customers and only remove it when we are refunded.”

However, it is important to highlight that not all chargeback requests are fraudulent. In many cases, consumers request a chargeback due to delivery delays and a lack of response from merchants on emails requesting an update on the delivery status. For this reason, a good solution is to proactively send automated status updates to buyers from time to time, particularly when deliveries are expected to take several weeks.

Other reasons for justified chargebacks are unexpected charges at Brazilian customs or an inaccurate soft-descriptor. The above point already explains how to avoid problems derived from taxation upon arrival in Brazil. However, what exactly is the soft-descriptor and why is it important to help fight chargebacks? It refers to a text that identifies a debit on the credit card statement. Having a soft-descriptor that indicates the store, product or brand name – whichever is more familiar to the buyer – avoids chargeback requests because consumers will recognize the payment and won’t have it mistaken with a fraudulent charge to their card.

Biggest Challenges

Most of the respondents agree that delivery delays are among the biggest challenges faced when shipping to Brazil. A Portuguese business owner, who has asked not to be named, indicates that although his store has not experienced issues with lost goods or goods not being delivered, the delays often generate a lot of work for their customer support team.
When it comes to customer support, it is important to mention that Brazilian consumers expect to be answered in Brazilian Portuguese. Customer support done by use of Google Translator has proven to be ineffective. Besides, it is important to provide quick answers within 24 hours, as well as revising and answering entries on complaints websites such as Reclame Aqui and social media profiles.

Regarding the delivery delays, Mr. Larose adds: “guaranteeing delivery times is a challenge. This affects domestic merchants too, but international ones are especially vulnerable. Lack of reliable deadlines, limited tracking systems and frequent strikes are some of the contributing factors.” Therefore, the recommendations of this article are crucial for customer satisfaction and a profitable business.

Advice for Merchants Entering the Brazilian Market

Asked to share their advice with merchants considering venturing into the Brazilian market, not all respondents have been completely positive at the first response. We have heard things such as “don’t do it” or “do you really want to do this?”, but after this initial thought, the overall response was that Brazil can be tricky, but it is also a huge opportunity. Merchants have highlighted that while working in the Brazilian market they learned that it is important to rely on local partners, to provide very clear information to customers from the beginning and great customer support, both pre- and post-sale. Furthermore, merchants should “make sure their anticipated product margins and average cart receipt allow for inevitable inefficiencies in logistics, finance and operations”, as stressed by Mr. Larose.

Despite the challenges for the market entry, merchants who adapt their businesses to the market can succeed and create a very profitable business. Due to the initial barriers, the Brazilian market is also less competitive, what helps merchants grow their businesses quickly and profitably in comparison to other markets where everyone can easily start selling.

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