David Geisen talks about the digital tax; about the performance that Mercado Libre has had in this 2019; about the competition he faces in a market like Mexico and about the goals he has as head of one of the most relevant digital businesses in Mexico.
Mexico City. David Geisen is not worried about the so-called digital tax that has been raised by the Mexican authorities. The new director of Mercado Libre in Mexico believes that this assessment is aimed at digital services but above all foreign companies that offer their services in Mexico. In any case, he thinks that the spirit of this initiative is good.
In an interview with El Economista, the director of German origin talks about this issue and about the company’s performance in this 2019, when he celebrates his twentieth anniversary; about the competition he faces in a market like Mexico, and about the goals he has as head of one of the most relevant digital businesses in Mexico. The investment in logistics infrastructure and the deployment of more and more financial technology products stand out.
Before being appointed general director of Mercado Libre in Mexico to replace Ignacio Caride, Geisen was Digital Director of Media Markt Iberia in Spain; He is the founder of Clickonero startup and Dafiti ecommerce. He is also a founding member of the Mexican Association of Online Sales (AMVO), of which he was its general director until 2016.
You arrived almost a year after Caride’s exit from Mercado Libre. How did you find the business in the country?
I was very surprised when in the process of my interviews they told me about the growths and the releases that they were having in Mexico and that they had contemplated. Also, when I started, in the first month I was presented with the growth plans for Hot Sale – the AMVO initiative of rebates in electronic commerce – and seeing the results with 83% growth, they really confirmed that the plans were very successful.
Mexico is the country in the region, where we operate in 18 countries, which has been growing the most in recent years.
Marcos Galperin, founder of Mercado Libre, presumed that the company was valued at a higher price than eBay in the stock market. What does this mean for the Mexico office?
I would tell you that it is very pleasant to see that investors are seeing and understanding the strategy that we are executing and implementing specifically here in Mexico, which is one of the most competitive markets. So for us it is an affirmation of what we are executing. I like to see that the strategy we are executing translates into results that investors are waiting for. The results we published last week were above expectations because just after its publication, the stock rose more than 10%.
Mercado Libre announced in February an investment of US $ 300 million in Mexico, how will this amount be distributed?
In 2017 we invested US $ 100 million here in Mexico; In 2018, it was US $ 275 million and this year it will be US $ 300 million. This investment mainly goes to the expansion of our fulfillment (distribution) centers and also to the new launches that we have in fintech with Mercado Pago. Those are the two main initiatives for investment this year.
You arrive at a time when the Mexican market is increasingly competitive in electronic commerce. Amazon just opened a distribution center very close to those of Mercado Libre, what does this mean for your company?
For us, competition is a very positive thing because, first, the consumer has more and more variety, more choice, more service and better shopping experiences online. This causes all companies that are competing in e-commerce to innovate faster because they want to have a positive differentiation for the consumer. So for us it is something very positive and something that is surely helping the total growth that electronic commerce is having in Mexico.
Last year we opened the first 30,000 square meter distribution center and last month we started operating our 100,000 square meter fulfillment center, which is one of the largest in Latin America. It was already necessary, because the first one this year will reach its capacity limit and the services we are offering in our distribution centers are very well received by the companies that sell in Mercado Libre. This center helps reduce its operational complexity and also benefits from lower costs and higher sales, simply because the consumer has a better experience.
The Federal Economic Competition Commission (Cofece) initiated an investigation into possible relative monopolistic practices in the ecommerce sector, are you suspects? Is Mercado Libre still cooperating with the investigation?
In general, we cooperate with all authorities and investigations and think that it is important that all companies operating within electronic commerce in Mexico continue to obey the same rules of the game. More than this, I have no other details to share. Just say that Mercado Libre is actually complying with all regulations and cooperating with all authorities in all concerns and investigations they want to do or are doing.
One of its strategies is the alliance with major brands for the establishment of official stores within the site, how does this affect the competition? How can a smaller seller compete with a great brand that offers the same products?
The rules for competing in Mercado Libre are the same for everyone. This starts from the quality of the publication: the images, what quality they have, how many images they are, the product description, the price at which it is published and the operational service levels they can give. For a seller who is less sophisticated, less operationally speaking, the recommendation is to send your product to our fulfillment center, because at least it does not have a disadvantage against someone who has a very large operation and can compete much better with the big ones.
Official stores that are only assigned to the brands themselves are a benefit that only they have because they are the owners of the brand of those products and they stand out in this way. But the rules of the game are the same in Mercado Libre and that is a very important element within the platform, just to democratize electronic commerce.
Regarding credit and financial services, how is the process of loans to buyers going? Is it already started? Was it late? Are they already in tests?
In fintech solutions under the Mercado Pago brand, at the end of 2018 we launched the issuance of credit to companies that sell through Mercado Libre. At the beginning of this year we extended this program to companies that use our Point terminal for the collection of cards in a physical establishment. Then we launched the QR code payment in the second quarter of this year and what comes in the second half of this year is precisely the release of credit to the final consumer, depending on their behavior on the platform and their transactional history with us. , and also comes the savings fund performance product that allows the end consumer to generate interest on the balance he has in the Mercado Pago digital wallet.
All this is in plan and soon will be the releases. We are doing tests, because before launching something on a scale like Mexico, where we have more than 30 million registered users on the platform, we want to be sure that the experience is pleasant for the end user.
There is much talk about a digital tax in Latin America and in Mexico specifically, do you think this tax affects the end users of Mercado Libre?
Mercado Libre has a business name in Mexico and pays all applicable taxes. We have been incorporated in Mexico for 20 years and this regulation, as I understand it, has the spirit of balancing the industry for foreign industries without a social reason in Mexico but that are providing a service in Mexico, so it does not affect Mercado Libre. That’s why I don’t see how it can affect our end users.
I believe that the idea and spirit that companies that provide services in a country also pay taxes is correct. There is regulation for exports and imports and it is very clear the minimum and maximum values that can be passed and how the taxes we are covering must be paid. I believe that it lends more to digital and virtual services where there is no physical transaction involved.
During the year that Mercado Libre did not have a director, the company showed impressive performance in its financial results in Mexico, what will be your differentiator? What is your goal in Mercado Libre?
My goal is that this leadership that Mercado Libre has within fintech and electronic commerce continues and, for the same reason, I will continue betting on the growth and more infrastructure of the fulfillment centers, which has worked quite well, and of the products financials that we are launching, which also work quite well in Mexico.
It must be considered that in the country there are 55 million adults who do not have a formal financial product. The third point on which I want to focus more this year and the coming years are collaborations with brands and retailers to help them with their digitalization and their entry into electronic commerce.
Also published on Medium.