Latin Americas Rapidly Growing Ecommerce Markets

Episode Description:

The e-commerce market in Latin America is one of the most rapidly growing in the world. Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Panama, and Peru are among the top online markets as a result of the pandemic, which ultimately changed the way consumers shop.

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EPISODE INTRODUCTION

Cold Opening:

[Cue intro music]

What is going on everyone? This is the LEO podcast where we talk about various educational topics especially those impacting the Latin American community.

In today’s episode, we’ll explore the Latin American e-commerce boom and why these eight countries dominate the online market.

If you’re listening to this episode on the day it’s released, then that means today is Monday, December 5th. We would also like to invite you to become part of our Palomitas community on patreon.com/latinamericaneo if you want early access to future episodes and bonus content!

But don’t worry if you aren’t a patron yet! You can still enjoy this episode. It’s packed with great content.

So, sit back, relax, and enjoy!

[End intro music]

Topic: Ecommerce Flourishes in Latin America

By definition electronic commerce or e-commerce for short refers to companies and individuals that buy and sell goods and services over the internet.

The e-commerce market operates in different segments and can be conducted through computers, tablets, smartphones, and other smart devices. You can purchase almost anything through e-commerce transactions, including books, music, plane tickets, and financial services like stock investing and online banking. Because of this, it is considered a disruptive technology.

And of course, it is no surprise to anyone that a global pandemic accelerated the adoption of e-commerce sales. Out of necessity, people became e-commerce shoppers for the first time, buying essentials like groceries, household goods, and apparel.

This is especially evident in Latin America where in 2020 it quickly became the world’s faster-growing region for e-commerce with big players like Amazon, and Mercado Libre who both have strong SEO and logistics.

However, out of all the Latin American countries that experienced this boom in e-commerce, only eight countries made up the top online markets.

Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Panama, and Peru. This is due to a lot of key factors but most importantly being that collectively in these eight countries, 79 percent of the population have internet access, and 50 percent of them shopped online in 2021, according to the research firm Retailx, which is up from 33% in 2017.

And yes as one can imagine countries with smaller populations like Costa Rica, Panama, and Peru are limited in how much e-commerce revenue they can bring in, while countries with bigger populations like Brazil, Mexico, Argentina, Chile, and Colombia show impressive e-commerce gains.

Topic 2: Hurdles Remain In Latin America

Despite the impressive growth that these Latin American countries have enjoyed, there are still many hurdles in the Latin American market. Primarily payments and logistics. Half of the population has no bank account. Rural areas have few roads. And so marketplaces that provide solutions for consumers and businesses are the ones dominating the region’s e-commerce.

And I know when we think about online shopping in the U.S. we immediately think of Amazon because it’s the biggest player here. But interestingly enough this isn’t the case in Latin America.

Argentina’s Mercado Libre takes that top spot even over Amazon which ranks as the second top online marketplace in Latin America.

So because Mercado Libre is such an important player…well… really… THE player in Latin American e-commerce let’s talk a little bit more about it.

According to Bloomberg Intelligence, Mercado Libre’s revenue grew 90 percent in 2020 as the pandemic forced the closure of brick-and-mortar stores. Mercado Libre offers its own logistics service that provides shipping options and warehouse stocking for local and overseas merchants. Like Amazon, Mercado Libre has its own air cargo fleet and delivery trucks operating in large markets, primarily cities.

Additionally, last year Mercado Libre acquired Kangu, a Brazil-based logistics

company that also operates in Colombia and Mexico. And Pago, Mercado

Libre’s fintech arm, serves as a payment processor. But Consumers in Brazil and

Mexico can also use PayPal for their Mercado Libre purchases.

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Don’t go anywhere we’ll be right back after this quick break

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Topic 3: Consumer Behavior

Another important aspect to explore is consumer behavior in Latin America. Because let’s be real we all have trust issues and are always skeptical when it comes to spending our money because of corrupt regimes and institutions all over Latin American countries. So naturally, consumers in Latin America remain suspicious of the quality of online goods and rely on customer reviews. Groceries dominated online sales during the pandemic. But in 2022, electronics generated the most sales in the top eight countries, according to Statista, followed by fashion.

And of course, Mobile usage varies by country, according to Statista Brazil has the strongest preference for mobile for online shopping at 48 percent in 2022, up from 27 percent in 2017. Although Colombians and Costa Ricans are also avid fans of mobile commerce, usage has not increased as much.

Also interestingly enough the average online buyer in Latin America tends to use Android over IOS by a margin of about 80 percent and they don’t spend much time window-shopping online. Almost half of all internet users in Latin America never go past the first page of Google search results, with almost 20 percent never looking past the top three results, even if they’re just ads.

This would also explain why the same content that might work at pulling in a consumer in the U.S. might not work in Latin America. Blogging and review sites are the top draws for U.S. buyers. However, market research shows that consumers in Chile, for example, are particularly skeptical toward this kind of content, whereas an average of seven out of 10 buyers across Latin America favor review sites.

Topic 4: Conclusion – How Each Country Compares

For the final point of this episode, let’s look at why the eight countries mentioned throughout the episode have the largest online markets according to data from RetailX.

For starters Argentina. Ninety percent of Argentina’s population uses the internet. Of these, 58% shop online. E-commerce revenue in Argentina grew by 68% in 2021 compared to 2020, according to the Argentine Chamber of Electronic Commerce. Most online shoppers are between 25 and 44 years of age. While average spend per shopper has increased to about $420 thus far in 2022 from 2021 according to Statista, total e-commerce revenue has decreased due to a struggling Argentine economy.

Brazil. In 2021 online sales were more than double what they were in 2019 and 30% higher than in 2020. Eighty-four percent of the population uses the internet, with 53% of internet users shopping online — up from 38% in 2017. Brazilian e-commerce shoppers tend to be younger; roughly half are less than 35 years old. Only 9% are 55 or above. The average annual online spending amount is $397.

Chile. Chile has the highest proportion of internet users and e-commerce adoption. Ninety-four percent of the population uses the internet, and 62% of those users shop online. Chile has a higher gross domestic product than most Latin American countries, and the average annual spend of e-commerce shoppers is high at $780 thus far for 2022.

Colombia. In 2021, Colombia was Latin America’s third-largest e-commerce market. Forty-nine percent of internet users shop online, an increase from 28% in 2017. Fifty-three percent of those shoppers are 34 or below. Transportation networks in Colombia are poor and inadequate for fast delivery, but consumers seem undeterred.

Costa Rica. Costa Rica’s population is just 5.2 million. Eighty percent are internet users, but only 45% shop online. Nevertheless, the preference for online purchasing has been doubling since 2017. The average annual e-commerce spend will likely reach $711 in 2022 — up from $477 in 2019.

Mexico. E-commerce revenue in Mexico grew by 81% from 2019 to 2020, according to the Mexican Online Sales Association, making it the fourth fastest-growing e-commerce market in the world. Mexico will likely have around 77 million e-commerce shoppers by 2025 as improved infrastructure and digital literacy drive adoption. That’s up from 50.7 million e-commerce shoppers in 2020. Mexico has experienced the most substantial shift to online of all Latin American markets, especially for groceries, which have grown over 100% since the pandemic began. Seventy-six percent of the population were internet users in 2021, with 44% shopping online, an increase from 26% in 2017. Online buyers will likely spend an average of $727 in 2022 versus 2017’s $249.

Panama. Of Panama’s 4.3 million residents, almost three-quarters are internet users. Forty-six percent of those users shop online, up from 25% in 2017, purchasing an average of $710 in 2022.

Peru. In 2021, 71% of Peruvians were internet users. Forty-four percent of the users shopped online in 2021, compared to 25% in 2017. A third of e-commerce shoppers in Peru are 25 to 34 years of age, while 20% are 45 or over.

THE END

That’s all for today on the LEO podcast. I’m Kevin Muñoz and as always feel free to send me a voicemail through my website latinamerianeo.org simply click the purple “send voicemail” popup and record your thoughts or any interesting topic that you’d like to see covered and I might just feature it on the next episode!

and for those of you on Patreon, I’ll see you there.

Otherwise, I’ll see you all in next week’s episode!

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