Should Mercado Livre keep funding lower free-shipping thresholds in Brazil or shift that budget to faster delivery?

Introduction

In 2025 Mercado Livre lowered its free-shipping threshold in Brazil, so many more low-ticket orders now ship free. That move answered pressure from Shopee, Temu and Shein, which win shoppers with cheap items and frequent free-shipping coupons. It is also expensive: every free R$25 order carries a shipping cost that the item's commission barely covers. The alternative use of that budget is speed, expanding same-day and next-day delivery through more Full warehouses, service centers and last-mile capacity in more Brazilian cities. I'll analyze whether to keep funding the lower threshold or shift budget to faster delivery.

Step 1

Clarifying Questions (3 minutes)

• Context: How much of Brazil's GMV and order volume now comes from orders that qualify for free shipping only because of the lower threshold?

Why it matters: Shows how many buyers are directly affected if we raise it again. Expected answer: A meaningful share of orders (perhaps a quarter) but a much smaller share of GMV. Impact on approach: Analyze orders and GMV separately; volume and value tell different stories.

• Business Context: Is the shipping subsidy funded centrally, shared with sellers, or partly covered by Meli+?

Why it matters: Determines who bears the cost and who would feel a change. Expected answer: Mostly MercadoLibre, with sellers contributing on some listings and Meli+ members getting extra benefits. Impact on approach: Consider a middle path, such as a lower threshold only for Meli+ members.

• User Impact: Where do we lose buyers today, on price at checkout or on long delivery times outside big metros?

Why it matters: Points to the actual pain. Expected answer: Price matters most for low-ticket items; speed matters more for electronics, health and urgent needs. Impact on approach: The answer may differ by category and region.

• Technical/Operational: How fast can delivery speed actually improve with extra budget, and in which regions?

Why it matters: Speed investments take months (warehouses, fleet), while shipping subsidies change instantly. Expected answer: Next-day can expand to more cities in 6–12 months; same-day only in large metros. Impact on approach: Compare effects over the right time horizon.

• Resource: Is the budget fixed, or could the answer be "both, funded by efficiency"?

Why it matters: Clarifies whether this is truly either/or. Expected answer: Fixed for this year. Impact on approach: Treat as a true reallocation decision.