MELI & COUP Reduce Pain

I think that reducing pain for customers is as important as making money. Most of the time, not always, the best solutions win. A case can be made that Microsoft Windows was inferior to Apple OS and Android is inferior to Apple OS, yet both are more widespread. However, when the pain is GREAT, an upstart can challenge the market leader.

If there’s one sales and marketing team to emulate, it’s SAP’s. They’re masters of bait and switch. As a member of two corporate R&D teams, I have lived through two SAP conversions. They make companies think that they can get by on the cheap and the conversions are as easy as pie. Neither conversion went well. A lot more money than expected had to be deployed to SAP to pay for additional capabilities. To be clear, SAP does not primarily benefit R&D. From what I have heard, it improves how large manufacturing operations can share an expensive inventory of machine parts and equipment. It also makes R&D’s procurement a living hell. Procurement at my last employer was fascinating. They decided that they had such a good handle on the SAP system that they didn’t pay the maintenance costs to keep the legacy system running as they switched to SAP. After the conversion to SAP, my previous employer COULD NOT PAY BILLS OF ANY KIND FOR 4 MONTHS. Payment for 15 contract researchers working with me, not paid for 4 months. R&D technical center electrical bill, not paid for 4 months. R&D technical center water bill, not paid for 4 months. As a result, all R&D that was not involved with day-to-day operations, about 25% of personnel and 100% of the research fellows, had to be released. Our guess is that the remnants of a once venerable company will be sold (it was only 3% of a conglomerate).

COUP customers seem not only to avoid this type of trouble, but also have hard data to know if people they are working with are financially sound. On top of that, recent purchases of Xpenser and Yapta round out the procurement profile so that they can compete with SAP on the travel side as well.

Both of these are awesome companies, but why has Amazon been so slow to move into South America? Could it be due to ongoing corruption in South America? Troubles in Venezuela? Largely cash based economies? Difficulty shipping to people who don’t necessarily have physical addresses? MELI has found a way to solve these problems. For example a system of convenience stores where you can pay cash and use the store to purchase things off the internet. MELI is essentially a bank for the bankless people. What is MELI? It’s Latin America’s version of:
Square Cash

rolled into one. In spite of all the regional troubles, Latin America’s middle class is growing, so Mercadlibre’s their business is RED HOT. Total payment volume in currency neutral terms +98.5%, Gross Merchandize Volumes +39.4%, net revenues +84%.

And they are squeezing the vice on competition too. They just announced that they are investing $700M to improve their Brazilian operations. Yesterday they were up about 20% on earnings and their operations news.

As we look at the business results of our companies, it’s good to remind ourselves of the good that they are doing.


Long COUP and MELI


What is MELI? It’s Latin America’s version of…

No so. While I was still in Venezuela I inquired about opening an account with Mercadolibre (MELI). Fantastic customer service. I was impressed but… your account is good for one country only and only in that country’s currency. Most of those currencies are not worth the paper they are printed on, if they exist at all.

Mercadolibre might be a good business but it’s no Amazon or Shopify or PayPal.

Denny Schlesinger


My point is to inform people of the functions that MELI serves, not to comment on each currency or the state of each economy. In terms of what MELI does, the analogies hold up. Additionally, PayPal has invested with MELI and also formed a partnership with them- sorry I don’t have time to dig into those partnership specifics right now.

Importantly, the numbers that I provided were all currency neutral. They are doing well now.