Yahoo Finance UPDATE 3-Shares of Brazil's Magalu soar on AliExpress sales partnership
(Updates share reaction, adds comments from analysts in paragraphs 5-7)
By Peter Frontini
SAO PAULO, June 24 (Reuters) - Brazilian retailer Magazine Luiza has struck a deal with Chinese e-commerce platform AliExpress to allow the two companies to sell products on each other's platforms, it said on Monday, sending its shares soaring.
AliExpress will sell products from Choice, its premium service, on Magazine Luiza's marketplace, while Magalu - as the retailer is also known - will sell products from its own stocks on the Chinese firm's platform in Brazil.
Shares of Magazine Luiza rose more than 13% on the news, while Brazil's Bovespa stock index gained 1%.
E-commerce companies from China and other Asian countries have competed aggressively with local competitors in Latin America's largest economy in recent years, often selling a broad range of products at lower prices.
In addition to Alibaba Group-owned AliExpress, Sea's Shopee and Shein have also gained a foothold in the Brazilian market, while PDD's Temu entered the market earlier this month.
Analysts at JPMorgan said the partnership deepened Magalu's third-party offerings with products that were not its focus under a structure that would avoid the company incurring delivery costs.
This would improve Magalu's "unit economics and potentially increase conversions and recurrence, but also be subject to AliExpress service level," analysts led by Joseph Giordano wrote in a note to clients.
Chinese items to be sold on Magalu's marketplace include categories such as beauty products, computer peripherals, consumer electronics and home improvement items.
"Our idea is to expand the range available on both platforms over time," Magalu Chief Executive Frederico Trajano told reporters on a conference call.
Under the deal, Magalu will receive a take-rate, or a fee, for each sale of AliExpress products on its platform and vice versa, he added.
Products purchased from AliExpress on Magalu's marketplace will be imported through Brazil's tax benefit program, Remessa Conforme, "boosting Magalu's cross-border operations," the Brazilian company said in a securities filing.
The program, created last year amid criticism from Brazilian retailers about Asian competition, has implemented faster and cheaper customs treatment for participating firms in exchange for declaring imports and including taxes in the product listings.
Under the program, cross-border purchases under $50 were exempted from federal taxes, but Brazil's Congress voted earlier this month to charge a 20% levy. (Reporting by Peter Frontini; Editing by Gabriel Araujo, Anil D'Silva and Barbara Lewis)
