Having worked closely with underserved communities in Latin America, Elevar had identified a massive financial and impact opportunity in addressing the pain points and productivity gaps faced by micro, small and medium enterprises. In Latin America, MSMEs account for 90% of the companies and 70% of the jobs, many employing low-income workers, but only ~25% of the GDP. Yet, given their size and level of informality, these businesses operate in a constrained environment and lack access to capital, technology and efficient market linkages. Closing the productivity gap between MSMEs and large enterprises can have massive, positive implications for economic growth, employment, and poverty reduction.
When we spoke to small entrepreneurs and merchants who were the target customer base of Nuvemshop, we found that they were passionate about their products and customers but had limited avenues to sell offline and close to none to sell online. The vast majority of these MSMEs were solo entrepreneurs who were selling to friends and family or had a small physical store. For those trying to sell through online marketplaces, the time spent on managing the inventory, communication and shipping distracted them from what they did best – creating and selling quality products. Furthermore, many wanted to convey their own brand, image and voice to customers, which could only happen in an owned store. When such merchants joined Nuvemshop, the boost to the productivity and performance of their business was substantial. Given the growth and potential of ecommerce in Latin America, Nuvemshop allowed them to participate in a massive opportunity. In 2017, the year we invested, e-commerce sales in Latin America surpassed the $50 billion dollar mark.
This growth story has only been accelerated with Covid, and we expect a massive disruption around commerce in the next 15 years that will lead to a majority of retail being tech-enabled in some way.
Today, the $85 billion e-commerce market in Latin America is growing rapidly, with projections of reaching $116.2 billion in 2023. Yet, in Latin America as a whole, e commerce penetration is somewhere between 5 and 10% compared to 21.3% in the US and 44.8% in China. More importantly, the density of MSMEs in most Latin American countries is higher as compared to the US – an indicator of the exponential impact that Nuvemshop can have on MSMEs and the region.
By reducing the barriers of entrepreneurship and accelerating merchants’ digital transformation, Nuvemshop’s platform has enabled thousands of MSMEs across Latin America to succeed.
Nuvemshop’s proposition aligns well with our e.MTM framework and vision for companies that create and thrive on momentum.
LAhWSTM Proposition: 90% of Nuvemshop customers are MSMEs with less than 5 employees, and in a COVID influenced world, are earning almost 100% of their revenue online. This dynamic combined with the range of solutions Nuvemshop provides, means that it occupies a high share of the customers’ wallet and is extremely valuable as a partner. Furthermore, with pricing plans that can range from $5-90/month subscription fee and a low 0.5-2% sales take rate, Nuvemshop offers flexible and affordable options to its customers. This leads to a low ARPU (Average Revenue Per User), thereby making Nuvemshop customers fit the definition of LAhWS.
Customer Business Value: The range and depth of services that Nuvemshop provides is extremely attractive. Merchants have the ability to create their online store, manage inventory, promotions and orders, offer a range of payment options to their customers and streamline logistics. The company is creating its own white label logistics and payments solutions, cheaper than other options available to MSMEs in the market. With an MSME average sale of close to $1,000/month and an average cost of only $20/month, the value to cost ratio to the MSME is extremely attractive .
The Customer Business Value is further enhanced by Nuvemshop’s ecosystem of services and Nuvemshop’s APIs that allow other service providers / app developers to integrate seamlessly onto the platform. Nuvemshop’s merchants can now easily access a range of curated and high quality logistics, marketing and accounting solutions, just to name a few.
The e.M Twin Flywheels: Nuvemshop’s ecosystem of solution providers creates a positive feedback loop: as the platform’s value proposition improves with more service providers, it leads to better productivity and performance for sellers, leading to brand loyalty and attracting more sellers on the platform, which in turn attracts more providers, leading to economies of scale.