By Jack M. Germain
May 11, 2021 at 10:53 a.m. PT
If you want to expand your sales territory and have not yet put Latin America on your waybill, you are missing out on a unique opportunity. Latin America offers the fastest growing regional e-commerce marketplace in the world.
You don’t think so? Well, think again. Last year, total e-commerce retail sales in the LATAM region grew 36.7 percent to $ 84.95 billion. That’ll grow this year.
Of the larger economies in the region, Argentina was the fastest growing, with retail e-commerce growing at 79 percent. Brazil’s e-commerce growth rate was 35 percent and that of Mexico was 27 percent.
“Usually our vacation frenzy starts in November. Last year it started in July and basically never ended,” said AJ Hernandez, President and CEO of international business-to-consumer shipping company SkyPostal.
The pandemic increased shipments in July to Christmas levels around the world as well as across Latin America. With summer approaching, Hernandez sees a sustained growth trend as the region works to vaccinate the population.
“I don’t think there will be a flattening now as people are more familiar with online shopping,” he predicted.
Hernandez, whose company is widely recognized as the industry leader in Latin American shipping and delivery logistics, noted that Latin America is not only a rapidly growing e-commerce market, but also one of the most complex economic regions in the world.
South America consists of 33 individual countries and another 15 dependencies and areas. The population varies, with Brazil being the largest with 212.6 million people. The Falkland Islands are the smallest with just under 3,500 inhabitants.
Most of these countries support their own currencies and have their own tax and customs authorities. They also have their own postal systems. However, they are generally considered to be unreliable. So you need to be a bit creative with the last mile of delivery.
“US-based businesses need to understand the local flair. Last mile delivery is key. This means working with local delivery service providers and hiring local executives,” said Ray Wang, principal analyst at Constellation Research E-Commerce -Times.
In Latin America, digital technology has accelerated across the board. In the e-commerce market, transformation has accelerated five years in one year, Wang said of the existing potential for revenue growth.
“In Latin America, we’ve seen innovations in last mile delivery services, increased use of online roadside buying, and even improvements in payments and apps,” he added.
E-Commerce Market Maker
The pandemic introduced many people to online shopping as it became a necessity. Before the pandemic, according to Hernandez, acceptance in the region was not as high as in the US, Canada, Asia and Europe.
But the pandemic has changed the e-commerce landscape in Latin America significantly. The percentage of market growth in other countries wasn’t as impressive as those regions already had higher adoption rates. However, their volume increases were just as great.
The product offering is ripe for choice among Latin American consumers. Many product categories are in demand around the world. Then there are “niches” or hard-to-find items that are not as easy to come by as in other markets, noted Hernandez.
This is an opening that US providers should take advantage of. Successful marketers don’t need to overdo ecommerce technology. Rather, they should use technology to better cope with the logistical challenges.
For example, US suppliers should identify products that are not readily available in local markets or that are very expensive. They find a way to make these products available to customers who are backed by a strong logistics network to manage the shipments, suggested Hernandez.
“Fifty-two million people in this region are expected to make their first online purchase during the pandemic, which could lead to a 30 percent increase in online consumers in some Latin American countries,” said Hernandez.
In addition, the Latin American market is expected to grow more than eight percent and reach a market value of $ 200 billion, he added.
US-based marketers and vendors need to be proactive to get into this market. Obstacles exist but are not insurmountable.
For example, the number of consumers who venture to shop online are lacking physical bank accounts. That’s a key challenge, noted Constellation Research’s Wang.
“One possibility is to use the mobile network operators, who can extend the credit on the phone bill or improve the registration of micro-credit services,” he offered.
Prior e-commerce-related issues for consumers in the Latin America region have long existed, added Hernandez. But a shift in consumer attitudes to improve the damaged online trust score.
Build trust or no sale
Before the pandemic, Latin American consumers fell on the wrong side of the trust barrier. Many feared that they would put their credit card information online. This also included American citizens reluctant to do business with Latin America for fear of credit card fraud.
The arrival of Covid-19 closed local stores. Latin American consumers had no choice but to change their confidence issues. A new level of confidence is now emerging that will support the growth of e-commerce in the region even after the pandemic breaks out.
“Positive experiences with online shopping have gone a long way in undermining the longstanding distrust in Latin America,” said Hernandez.
Whether it was stealing a credit card number or getting products never ordered, these issues are less of an obstacle. After trying it out and finding it works, Latin American consumers trust the process, he added.
Challenges and technology
The biggest challenge for companies expanding into Latin American consumers is that each country has its own set of rules. It is important that companies work with experts who are familiar with the region to avoid the pitfalls that have caused other companies to fail, Hernandez recommended.
Don’t sell logistics too short either. Logistics is about both the delivery of data and the delivery of packages.
Sellers want data. They want to know where their packages are when they are delivered and if there are any challenges.
“Online visibility is just as important as data services to help sellers provide vital information needed to import goods such as tax numbers and HS codes,” he said.
In addition, the technology to correct errors in the original shipping data and validate zip codes is critical to its success.
Navigate the shipping and sales lanes
The growth in required e-commerce and logistics capabilities continues to require merchants to pay close attention to tapping into the entire Latin American retail economy. To successfully master this course, US traders use Latin American logistics specialists to handle their shipments.
For example, SkyPostal is actually an IT company that focuses on package delivery. It offers its customers API-based solutions that coordinate their own POS systems with all the necessary delivery data. The company also provides services in the US, Canada and Europe through partners with similar expertise.
Instead of having problems setting up an optimized web presence to sell your goods to consumers in Latin America, consider an existing online sales market with built-in sales expertise.
Mercado Libre, known as “Amazonas Latin America”, operates in 18 countries in the region, is the fourth largest online marketplace in the world and the largest in Latin America in terms of monthly visits. The most important markets are Brazil, Argentina and Mexico.
Another option for handling localized shipping is ShipStation. That has a partnership with Mercado Libre. This could be of great help to US based SMBs looking to sell to the Latin American market with a package deal.
ShipStation provides shipping software and has partnerships with more than 300 leading shopping cart, carrier and fulfillment services. These include FedEx, UPS, the United States Postal Service, Amazon, Shopify, and BigCommerce.