The fact that the Latin American e-commerce market is one of the fastest growing in the world is hardly news to anyone. Gross domestic product in the LatAm region will exceed $15 trillion in 2019. Growth in e-commerce is expected to be 19 percent over the next five years. This is significantly more than the global average of 11 percent..
In addition, physical stores are seldom found in many regions outside the major cities, which is why many people make use of online purchases. This offers enormous opportunities for retailers looking for lucrative cross-border business. They can hope for a profitable turnover there, but they should definitely follow the following six tips if they are serious about entering the market.
After all, anyone who wants to succeed in Brazil, Argentina, Chile and Co. should do their homework beforehand as Computop payment experts, Torsten Bongartz, and Mauricio Salvador, President of the Brazilian E-Commerce Association ABComm, revealed to the Ecommerce Foundation in the webinar “Zooming in on LatAm Ecommerce”.
Full video of the webinar
1. E-commerce in LatAm is heterogeneous
A ” one size fits all ” strategy will not work in Latin America. This is particularly true with regard to payment methods. Only using PayPal and credit cards to catch customers is not a viable option. In many countries, there are local payment methods which are completely unknown in Europe and that specifically address the precise needs of the local consumer groups. In many South American countries, for example, the number of citizens without a bank account is significantly higher than in Europe.
As such, there are solutions that enable cash payments to be made at special collection points even for online orders. If you don’t include this kind of option in your web shop, you’re excluding a target group with a high purchasing power.
The significance of the credit card in e-commerce is also different from its importance in Europe and the USA. One reason: high fraud rates. Card-based payments are therefore only possible to a limited extent and many banks, for example, do not allow debit cards for online payments.
2. Maximize your sales through local acquirers
Companies planning their LatAm business should definitely work with a local acquirer bank. Otherwise, significant transaction fees could be incurred which have a negative impact on profits. Cross-border transactions can therefore quickly become very expensive. Up to 20 percent of the sum is lost to banks when traders want to bring the money to Europe or the USA.
3. Beware of the language trap
If the texts in the web shop are not adapted to the local conversional etiquette, this could lead to a change in the way the web shop is run. If the texts in the web shop are not adapted to the Latin American context, this quickly has a negative effect on customer trust. What appears to be an unimportant detail should not be underestimated, as Portuguese Portuguese, for example, differs significantly from Brazilian Portuguese.
The situation is similar with Spanish. Local online shoppers feel a distance if they are approached incorrectly, which can ultimately lead to a bounce. A well thought-out web presence with optimized communication can therefore have considerable positive effects.
4. Trust and security are the key
Trust is also important in other areas. Brazilians, for example, love free shipping. If a retailer can’t provide this service, it will quickly be substituted for one that will. Another thing to keep in mind: due to the comparatively high fraud rates, seals of quality such as the trust emblem of the Brazilian E-Commerce Association are very important.
5. The buyers are young
Compared to Europe, the average age of the population in Latin America is relatively low. 41 percent is under 25 years of age. Only 17 percent are 55 years or older. As a result, e-commerce and m-commerce are advancing rapidly and the advertising opportunities through social media are enormous.
Mauricio Salvador therefore compares the Brazilian market with China, as Brazilians have a high affinity for new technologies just like customers in China. Accordingly, mobile is a significant growth market.
6. Start small
Traders who take their first steps in Latin America should start small. It is often advisable, especially for smaller companies, to use one of the large online marketplaces and enter the market with just a few products. This makes it possible to explore the potential without going “all in”.
7. Customers in Latin America are open for cross-border orders
“If everything works out, you can increase your investment tenfold, regardless of whether you are a small, medium-sized or large company,” explains Salvador. One of the reasons for this is that LatAm customers often find it worthwhile to import goods online instead of buying them locally.
This is especially the case in Brazil, where customers are generally open to buy products from foreign companies because they pay astronomical taxes on many products in store. An iPhone, for example, costs around USD 2,000 there, as Mauricio Salvador points out. Added to this is the dealer margin. An import from America is therefore often the better option.
Nevertheless, the USA only ranks second among Brazil’s most popular import partners. China ranks first by a wide margin. When it comes to Europe, customers in Latin America prefer to order from France, Great Britain and Germany.