Why Latin America should be on your e-commerce expansion list

12 March, 2019
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It's time for investors to start looking at South America with a fresh perspective. The truth is, while the ‘old world' has been preoccupied with Brexit, national debt, and other political and economic dramas, Latin America has been evolving into one of the fastest growing ecommerce markets.

Made up of 13 dependencies and 20 countries that stretch across South America and a small portion of the northern hemisphere, Latin America is home to over 645 million people, with Portuguese and Spanish being the common languages.

The Latin American ecommerce market

The significant growth of the middle class (50%) over the past decade, particularly in countries like Brazil, has created a myriad of opportunities for global business.

Mercado Libre is currently the most popular ecommerce and auction site for countries like Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, Ecuador, Guatemala, Honduras, Peru, Panama, Uruguay and Venezuela. Amazon, Walmart and Alibaba are strong competitors, however.

While tracking technologies and intelligent fulfillment methods are improving in Latin America, logistics and infrastructure are still an influential factor in the pricing of orders, adding as much as 15% to the final bill; however, with a growing GDP of USD 8,296 per capita, it’s only a matter of time before things start to improve to accommodate demand.

Getting consumers on board with online payment methods can be challenging in a new ecommerce market, but 87% of Latin Americans reportedly felt that their transactions were secure. The use of credit cards is growing – countries like Argentina, Brazil and Mexico strongly prefer this method, while significant numbers also use PayPal. Cash on Delivery is also quite popular due to the region’s large number of unbanked populations. The situation has created an incentive for new fintech players to step in and accelerate the progress of digital banking in the territory, enabling greater access to online marketplaces for consumers across the region.

Young consumers who have adopted digital purchasing methods are the most prevalent group of online shoppers and also the more affluent. As in many other countries, mobile devices are the preferred tool for browsing the internet, placing an importance on optimisation for mobile sites and social media marketing strategies. In 2018, mobile retail ecommerce sales were expected to hit USD 14.62 billion.

Why should I export to Latin America?

The key message to take away when considering Latin America for your next export location is that timing is everything. Now is the time to lay the foundation for your brand’s future trade in the region. Growth projections for the Latin American ecommerce market are estimable, and investors will enjoy good returns with the right plan of action.

Brazil spent USD 17 billion on online purchases in 2016, with countries like Mexico and Argentina also racking up the numbers. By 2021, forecasters are expecting online sales to double in value to USD 118 billion across the territory: a promising outlook for any ecommerce business.

GDP was projected to grow by 2.3% in 2018, creating favourable conditions for spending. Statista’s estimates show a very positive outlook for sellers as retail ecommerce sales are expected to reach USD 74.8 billion by 2020.

Admittedly, Latin America faces many teething problems as it stabilises its economies and improves infrastructure, but, undoubtedly, this is not a region to be ignored when looking for potential to grow and establish your business on the international market.