Dafiti gets $70M investment, strengthens its position in Brazil’s e-commerce

What: Online fashion retailer Dafiti has been granted a $70M USD investment to continue building its business in Brazil.
Why is it important: This significant injection shows that, despite inflation and stagnant growth, foreign investors are confident in Brazil’s e-commerce potential, and leads the way to an investment chain reaction in other Latin American markets.

As reported by sources such as Reuters and TechCrunch, online fashion retailer Dafiti announced it will receive, via a cash-for-equity transaction, $70 million USD from Canada’s Ontario Teachers Pension Plan (an independent organization that pays defined benefit pensions and invests plan assets on behalf of over 300,000 school teachers of the Canadian province of Ontario). OTPP is known for its investments in other tech ventures, such as Chinese e-commerce site 360Buy.com.

The Teachers‘ investment will help Dafiti expand its catalog, increase its warehouse capacity, strengthen its customer service and automate operations.

Brazil‘s e-commerce market is regarded by foreign investors and venture capital groups as a segment with great possibilities, due to “a growing middle class, huge consumption potential and significant growth in online and mobile access“, as Wayne Kozun, a senior vice president at Teachers, said.

Philipp Povel, one of Dafiti’s founders, said in an interview that “when we look at Brazil, we don’t think only of GDP growth, but also a middle class and disposable income that continue to grow. And most encouraging is online potential”. And he added: “The overall size of the Latin American market for Dafiti is worth more than $100 billion.”

As Reuters’ Esteban Israel writes, “e-commerce represents only about 1 percent of all commerce in Brazil, compared with a level closer to 10 percent in the United States, Great Britain and elsewhere in Europe. Overall internet penetration is also relatively low, at about 50 percent of the population. Both factors represent a large untapped market.”

The investments –says Israel– have enabled the retailer, based in São Paulo, to consolidate its position as Brazil’s top online fashion outlet, with 30 percent of the market. Dafiti first opened for business in Brazil in 2011, and it has also ventured into other big Latin American markets, including Argentina, Chile, Colombia and Mexico.

TechCrunch’s Ingrid Lunden learned that Dafiti gets over 25 million monthly unique visitors, with 2,000 brands and 125,000 products across its five sites. She also says that in Brazil alone, sales from e-commerce sites, led by those specializing in fashion, are projected to grow 25% in 2013, having added 10 million consumers in 2012. It is predicted that by 2015, 39% of internet users in Brazil (31.6m people) will be making at least one purchase online.

Economic analysts expect Brazil’s economy to grow by little more than 2 percent this year, compared with the 7.5 percent growth posted in 2010.