Avenida is set on cementing its leadership position Argentina’s e-commerce market after a $30 million Series C led by Naspers with participation from Tiger Global (both firms are returning investors).
Combined with its previous rounds, this brings Avenida’s total capital raised so far to $52 million. The company launched in 2013 after co-founders Federico Malek and Alan Kraus saw that there wasn’t a pure-play e-commerce business, with its own warehouses and in-house logistics system, in Argentina. The two worked for nearly four years at Groupon after the group-deals giant acquired their previous business, Wallooz, and they were eager for a new challenge.
“We said, let’s start the Amazon of Argentina, which is the second largest e-commerce market [in Latin America],” says Malek. The company quickly got its first round of funding from IRSA, the largest shopping mall operator in Buenos Aires.
Avenida now processes 20,000 orders every month and expects gross merchandise volume, or total sales, of $30 million in 2015, compared to $8 million last year.
A pure-play business model allows Avenida to control the entire customer experience from browsing to last-mile delivery. This is especially important because e-commerce still constitutes just four percent of the total retail market in Argentina. The country’s smartphone penetration rate is over 70 percent, however, so Malek expects that number to grow quickly.
One of Avenida’s main challenges was the lack of logistics providers who could provide the kind of immediate and trackable service it needed to reassure people making major purchases online for the first time.
“The logistics companies here are not prepared for e-commerce. Customers want fast fulfillment of their orders and they want to know where their packages are at every moment, and the companies we have in this country just can’t provide that, so we had to build our own,” says Malek. “We talk a lot to the guys from Flipkart because they have the same investors as we do. They have the same challenge in India.”
Eighty percent of Avenida’s orders are currently delivered overnight to its 11 pickup locations in Buenos Aires. These small storefronts are cheaper to run than retail stores, but still allow customers to interact with Avenida’s staff, which helps build trust and brand loyalty.
The company competes against traditional retailers that also operate online businesses, but, like Amazon and other e-commerce businesses, is able to offer lower prices and larger inventory because it doesn’t have to pay for a lot of infrastructure.
“Providing good customer service is how we build confidence in the public in Argentina and break the barrier, so more people move from brick and mortar to online shopping,” says Malek.
Avenida will use its Series C to improve its technology platform and open more pickup locations in Buenos Aires and smaller cities like La Plata, Rosaria, and Mendoza before expanding in the rest of Argentina.