How E-Commerce Industry Grows in Latin America
Oct 27, 2022
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E-commerce is a fast-growing phenomenon in Latin America. For example, e-commerce accounted for 33% and 25% of the countries’ GDP in Brazil and Mexico, respectively, in 2021. These statistics are an example of how e-commerce is a significant contributor to the economy of Latin America.
A question arises on what makes e-commerce grow rapidly in Latin America. The following are some of the catalysts that make it grow:
Increase in the Number of Internet Connections
Since e-commerce rides on the wings of the internet, increased internet connections are a sure reason e-commerce will keep growing in Latin America. In the 2000s, Latin Americans with internet connections were less than 3% of the entire region’s population. However, the percentage shot to 56.6 percent within two decades.
Globally, Latin Americans with an internet connection make up more than 10% of the global internet users.
It is this increased internet connection that brought a revolution to the Latin American market. In other words, increased internet connection has made e-commerce grow and thrive in the region.
A Growing Middle Class With Complex Taste and Preferences
Latin America is home to around 600 million people. The region experiences a booming economy that has closed the economic gap to move over 70 million people from poverty over the last 10 years. Notably, the now financially dependent Latin Americans are more than the UK’s total population.
Latin America’s middle class has grown faster in the last decade. In fact, the decade has witnessed a 50% increase in Latin Americans earning middle-income.
Currently, middle-class Latin Americans form a third of the entire region’s population. In other words, there are over 200 million middle-class people in Latin America.
Notably, middle-class Latin Americans are avid users of the internet. Also, their taste and preferences keep on evolving at a rapid rate. In return, the local supply of goods and services is not enough. For this reason, the middle class has turned to e-commerce to find goods and services that can match its taste and preferences.
Increased Inclination to Non-Banking Institutions
Latin America continues to experience a surge in the number of non-banking institutions offering financial services. Some of the services that these institutions are offering are e-wallets, prepaid cards, credit cards, and other eMoney services.
Several financial startups have also come up in the region. These startups are increasingly coming up with innovative financial solutions. The startups leverage a nimble and lean operating model that the banking institutions cannot use. Also, this model enables startups to identify opportunities and take advantage of them more quickly than banking institutions.
The financial startups in Latin America offer a range of payment channels, especially to the under-banked population and e-commerce merchants. In return, Latin Americans can transact online, thus growing e-commerce in the region.
The Mobile-First Aspect of Latin America
Admittedly, other regions are superior to Latin America in terms of mobile internet and smartphone penetration. However, Latin Americans are leaders in using their mobile phones to shop.
Latinos are a mobile-first population. In other words, the first internet-enabled device that Latinos use to shop is their mobile phone. For this reason, an internet-enabled phone is a necessity rather than an option for Latinos.
Since 2015, Latinos have owned more smartphones than laptops and PCs. In some Latin American countries, mobile penetration is more than 100%. In other words, some Latinos own more than one smartphone. Also, the region’s smartphone sales exceeded desktop sales in 2020. This sales level was unprecedented.
Given the high number of smartphone users in Latin America and the region’s population’s high appetite to shop using a phone, e-commerce sales have to thrive in the region.
Covid-19 Pandemic
The Covid-19 pandemic is also one of the reasons e-commerce thrives in Latin America. In January 2021, the Covid-19-related e-commerce sales growth was 20%. This growth continues to rise with no signs of stagnation or decline. It seems that Latin Americans found online purchases more convenient than conventional brick-and-mortar purchases.
Before the pandemic, Latinos were hesitant to make online sales. However, the Covid-19’s lockdowns and the need for isolation made it mandatory for Latinos to make online purchases. Afterward, Latinos started trusting online vendors and e-commerce sales began to grow.
For example, in Mexico, online sales were less than 10% of all sales before the pandemic. However, online sales shot to 74% after the pandemic.
Increased Use of SEO
Research shows that Latinos trust articles on products and services more than social media posts and adverts. For this reason, they are constantly looking for articles using their smartphones. For this reason, online merchants use SEO to increase their online visibility.
Successful online merchants in Latin America align SEO with mobile-friendly content and interface. In return, their posts become more visible online and appealing to those that access the content.
Notably, it is impossible for international content to rank well in Latin America’s search engines. What is one of the solutions to this issue? One of the methods of increasing the visibility of the international business context entails engaging providers of Brazilian Portuguese translation services.
If you can get your business content translated into Brazilian Portuguese, your content can come among the first results in Latin America’s search engines. Notably, search engines pick local content first before displaying the non-local content.
So, any international business entity targeting Latin America should consider translating its business content first. Afterward, it should employ SEO to increase its ranking on search engines.
A Spotlight on E-Commerce Growth in Some Latin American Countries
How has e-commerce grown in Latin America? What is the projected growth in some of its countries? Let’s find out.
Brazil
The e-commerce chamber (ABComm) forecasted that Brazil’s e-commerce revenues would hit 170bn Reais (US$33.2bn) in 2022. In 2021, Brazil realized 151bn reais from e-commerce. So, the 2022 e-commerce sales represent growth compared to the country’s 2021 sales.
ABComm also forecasted that the Brazilian e-commerce users could grow to 83.7 million in 2022, up from 79.8 million in 2021.
From the statistics, Brazil is experiencing an upward trend in e-commerce sales. If this trend holds, Brazilian e-commerce will keep on growing every year.
Mexico
According to the e-commerce chamber (AMVO), Mexico realized 401bn pesos (US$20bn) from e-commerce sales in 2021. This figure represents a 27% growth when compared with 2020 e-commerce sales. Also, this figure represents 11.3% of the total Brazilian retail sales.
Market research from Statista indicates that Mexicans buying goods from the online platform will grow by around 58% by 2025. This is a significant growth compared to 2020’s, which was 39%.
What do most Mexicans buy online? A 2021 study showed that Mexicans mostly buy electronics, fashion products, and food from online platforms. They also buy home décor, furniture, and sportswear from online platforms, even though not as much as the earlier list.
Even though the e-commerce market in Mexico looks promising, high inflation remains a challenge to many online customers. On the other hand, suppliers find freight, logistics, and other costs high because of inflation.
Argentina
In 2021, Argentina realized an additional over 684,000 customers to close the year with 20.7 million e-commerce customers. These statistics were from the e-commerce chamber (Cace). However, the e-commerce sales growth was lower in 2021 when compared with the 2020 sales growth.
In 2021, the country’s total e-commerce sales were 1.5 trillion Pesos (US$12.3bn). This level represents a 68% growth. In 2020, the country experienced a 124% e-commerce sales growth. This was a boom compared to the 76% sales growth the country had realized in 2019.
What do Argentinians like to buy from online platforms? In 2021, most Argentinians bought food, drinks, sports and non-sports apparel, and cell phones and accessories.
Chile
According to a forecast by the Santiago chamber of commerce (CCS) and the local Chilean e-commerce committee CCE, e-commerce sales growth will drop in 2022.
Projections from the two bodies indicate that the 2022 e-commerce sales were to hit US$12.6bn. This level represents a 5% growth when compared to 2021’s sales. Also, the 2022 sales would represent 12% of the total retail sales that Chile would realize in 2022.
In 2021, the Chilean e-commerce sales revenue was US$11bn. The figure represented a 20% increase when compared with 2020’s sales.
Ecuador
Ecuador was also expecting e-commerce sales growth in 2022. Its e-commerce chamber (CECE) forecasted that 2022 sales would hit around US$4bn. In 2021, the country realized e-commerce sales revenue of US$3.2bn.
Colombia
Colombia’s e-commerce chamber (CCCE) projected that the country’s e-commerce sales would grow by 19%. In 2021, the country had realized e-commerce sales worth 40 trillion Pesos (US$10bn). Compared with 2019 e-commerce sales, the 2021 e-commerce sales grew by 40.2%.
In the first quarter of 2022, Colombian e-commerce sales were 12.2 trillion Pesos. This figure represents a 47% growth when compared with the 2021 sales during the same period.
The Bottom Line
LatinoBridge, a language service provider (LSP), believes that Latin America is a region to watch out for when it comes to the growth of e-commerce. What should we expect Latin American e-commerce to perform in the years to come? Only time will tell.