Latin America is a top region for emerging e-commerce growth, due to rising internet penetration rates and a growing middle class demanding foreign goods and services. But with 27 separate nations or territories and a variety of currencies and payment preferences, market entry in Latin America for cross-border retailers can be complex. That’s why the Global E-commerce Leaders Forum (GELF) is hosting a special forum all about Latin America, GELF LATAM, on May 9 in Miami. The day is full of educational sessions for global e-commerce leaders on how to best expand into this region.
For cross border retailers, it can be challenging to jump into LATAM ecommerce all at once. One approach is to start with one or two target countries and establish a foothold. But which nations should be the first markets? According to the E-commerce Foundation’s 2018 Latin America E-Commerce Report, shoppers in Argentina lead the way in online shopping activity: 39 percent of consumers in the country make regular purchases online. Coming in a close second is Brazil, with 38 percent of its population turning to the web for shopping needs. Rounding out the top five e-commerce markets in Latin America are Chile, Mexico and Columbia.
While the desire for online shopping is there, Latin America can be a tough region for cross-border merchants. The biggest domestic competitor in Latin America is Mercado Libre, an online marketplace that draws in an estimated 47 percent of Latin American online shoppers. Earlier this year, Mercado Libre raised $1.8 billion through a public share offering, and through direct investments from other e-commerce players, including PayPal.
Despite the domestic competition, Brazil is a hot market for cross-border retailers. Our research shows that 86 percent of online shoppers ages 18-54 in Brazil have shopped cross border. The most popular countries of origin for cross border purchases by Brazilian shoppers are China, the U.S. and Japan. However, 62% of Brazilian cross-border shoppers said that slow product delivery was the top barrier to shopping from another country. High taxes and duties and expensive shipping, respectively at 47% and 42%, were also cited as barriers to cross-border shopping for online Brazilian consumers.
Currency localization or Latin American markets can also be a challenge. All sovereign nations, with the exception of Ecuador, use their own currencies (Ecuador uses the U.S. dollar). Online merchants should consider displaying different currencies for consumers on websites for each Latin American country in which they do business. Displaying the local currency is one way to better localize the online experience for consumers so they feel they are purchasing from a domestic retailer when shopping on your site.
Then there's the hurdle of payment preferences across Latin America. Each country's preferences vary significantly and may not line up with traditional online payments such as credit cards or even PayPal. For example, 90 percent of the population in Mexico use cash when making purchases. This has driven e-commerce merchants to find creative ways to accept cash for online transaction. Some have been experimenting with solutions that allow customers to pay for online purchases using physical currency, allowing consumers to pick up and pay for their orders at nearby partner locations such as partner banks, pharmacies and even convenience stores. In Brazil, using credit cards that offer payments with installments is very popular as is the alternative payment method Boleto bancário.
Look for Flow's global e-commerce experts at GELF LATAM on May 9. We'll have a table in the exhibition area, and we're also hosting a special cross border e-commerce dinner the evening of May 9 at CVLTRA, starting at 6 pm. To reserve your space at the dinner, or to schedule a one-on-one session with one of our cross border retail leaders, send us an email at sales@flow.io or contact us through our website.
