Magalu on Mercado Livre: What the Partnership Reveals About E-commerce

Magazine Luiza has just opened an official store within the Mercado Livre app. There are 28,000 items from Magalu's own catalog (1P), including beauty products from Época Cosméticos and electronics from KaBuM, available to the customer base of the largest marketplace in Latin America.

The move may seem counterintuitive. Why would a retailer with its own platform hand over part of its sales flow to a direct competitor? The answer lies in the numbers and, mainly, in what Fred Trajano, CEO of Magalu, publicly acknowledged: the company has given up on being a generalist marketplace.

Why Magalu Decided to Sell on Mercado Livre

The customer acquisition cost (CAC) in Brazilian digital retail has been consistently rising. With the audience more dispersed across dozens of platforms, growing online profitably has become a structural challenge for those who do not have the traffic scale of Mercado Livre.

According to Trajano, the contribution margin from sales made via Mercado Livre is higher than that obtained through paid media, although lower than that of the organic channel, when the consumer accesses Magalu's site or app directly. In other words, selling within the competitor is more profitable than spending on ads to attract the same customer.

The company's estimate is that three-quarters of consumers who buy Magalu products on Mercado Livre would not have been customers of the retailer otherwise. This means low cannibalization and incremental volume, the type of equation that investors like to see, as we often discuss in our retail coverage on the portal.

The End of the Generalist Marketplace Dream

This partnership is not an isolated case. It is the third of its kind in just over a year. In June 2024, Magalu made a similar agreement with AliExpress, where the Chinese e-commerce platform also began selling part of its catalog on the Brazilian retailer's marketplace. More recently, in June of this year, the company closed a partnership with Amazon Brazil to make 12,000 1P products available on the American giant's marketplace.

The pattern is clear. Magalu is trading the ambition of competing as a generalist platform for a multichannel distribution strategy. Instead of spending to attract traffic, the company takes its inventory to where the consumer already is.

Trajano was straightforward in stating that the Brazilian e-commerce market will accommodate few generalists, and that Mercado Livre is well-positioned in that role. Magalu's bet now is on category marketplaces: Netshoes for sports, KaBuM for games, and Magalu itself as a reference for furniture and home products. The logic is that niche consumers prefer platforms with curation and specific filters.

What Mercado Livre Gains from the Agreement

For Mercado Livre, the benefit is equally strategic. The company was born selling small products, and all its logistics infrastructure, including fulfillment centers, was built around this format. Aisles with shelves and compact boxes cannot accommodate refrigerators, televisions, or cooktops.

Fernando Yunes, CEO of Mercado Livre Brazil, acknowledged that the operation has low penetration in categories such as appliances and furniture. By bringing Magalu on as a 1P seller, Mercado Livre gains instant access to a range that would take years to build organically, in addition to being able to use the retailer's specialized logistics network to deliver heavy and bulky items.

The two companies are also negotiating a second agreement: the use of Magalu's more than a thousand physical stores as collection and exchange points for Mercado Livre sales. If confirmed in the coming months, this move would integrate Magalu's physical retail with Mercado Livre's last-mile operation, something that could reshape e-commerce logistics in the country.

What This Means for the Investor

The most relevant reading of this agreement is not operational. It is strategic. The Brazilian e-commerce market is consolidating around two or three large generalists, with all others being forced to choose between niches or distribution via third parties.

For Magalu, the partnership solves a real problem of online growth without destroying margins. For Mercado Livre, it fills gaps in assortment and logistics that limited its TAM (total addressable market) in high-ticket categories.

The move also reflects a global trend. In the United States, Shopify already allows retailers to sell simultaneously on Amazon, Walmart, and other marketplaces. In China, brands operate on multiple platforms like JD.com and Tmall at the same time. Brazil has been lagging in this dynamic, as we analyzed in previous coverage of Brazilian digital retail.

The question remains whether this logic of cooperation among competitors can sustain itself in the long term, or if it is merely a transitional phase until consolidation progresses further. If Magalu can maintain positive contribution margins while growing through partners, the model could become a reference in the sector. If cannibalization proves to be greater than expected, the company will have relinquished part of its customer relationship to platforms it does not control.

In any case, Fred Trajano's message is unequivocal: in Brazilian e-commerce in 2025, it is better to be a well-distributed specialist than a generalist struggling for increasingly expensive traffic.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.