Interviews, insight & analysis on Ecommerce

Latin America: The next market to conquer on emerging ecommerce leaders’ agenda

By Marius Costin, Head of EMEA High Velocity Sales & US Global Account Team at PayU

The way we work, shop, sell, and live has changed enormously. 2020 will be remembered as a period unlike any other which witnessed unprecedented demand for online products and services. This is particularly true for markets like Latin America where this demand was already growing rapidly, pre-COVID 19, and the region’s ecommerce market was on course to reach $187 billion by the end of 2021.

As parts of the world open up again and traditional brick and mortar stores revamp operations to remain viable alternatives to shopping online, retailers will be under increasing pressure to keep these newly found ecommerce revenues from plateauing.

There are many strategies that will help merchants on this quest, but they will do well to take note of one in particular: tapping into the largely overlooked opportunity that high-growth markets present. Indeed, PayU’s most recent report looking at consumer spending globally found that Latin America is set to become the new global destination for emerging ecommerce leaders – fast growing online and omnichannel businesses looking to stand out from the crowd.

Opportunities for success across promising ecommerce verticals

In the first seven months of 2020 alone, PayU processed more than 120 million online transactions across Latin America; this represents over a 50% increase on 2019 levels in the same period. In June 2020, purchases were up by 86% against 2019 levels and consumers turned to ecommerce for more than just the essentials. For example, PayU saw the region’s beauty and cosmetics market grow by 133%. Meanwhile, data analysis showed that total online spend on beauty and cosmetics across the region reached nearly $3.8 billion in 2020.

Looking more specifically at consumers in Chile and Argentina, PayU’s data indicates that they gravitated towards digital goods in 2020. Indeed, consumer spending increased by 211% and 131% respectively, while by the end of this year, it is expected to reach $615 million in Argentina only.

Fashion and gallantry merchants should look to Mexico where total online consumer spend is expected to grow 57% above 2019 levels by the end of 2021. Though a smaller market, Peru has also seen rapid growth across its ecommerce market. As our research has found, total ecommerce spend on digital

goods is expected to increase above 2019 levels by 47% to $314 million by the end of this year. On a similar note, the fashion and gallantry vertical is expected to jump by 62% to $690 million during the same interval. 

Key factors set to drive further growth

Brazil has proven itself to be a market leader in ecommerce within the region. As the pandemic accelerated the shift to digital, we saw online sales grow by more than 50% across the country on our platform. Crucially, this isn’t just made up domestic payments either. International, cross-border sales are growing rapidly and for two key reasons, namely increasing interest shown by consumer-facing players, such as Alibaba and Amazon, which have already recognised the tremendous opportunity that the market presents. Furthermore, the emergence of e-payment businesses that offer simple API integration to enable global cross-border payments online is also a crucial factor.

However, lockdowns and shops being closed were not the only factors driving consumers online. Governments have been very supportive of ecommerce adoption and spending and invested in creating and encouraging more inclusive environments. In particular, the Colombian government created three VAT-free days for consumers in June, July and November, two of which were online only in recognition that ecommerce is integral to boosting its economic health. Merchants across the country saw sales skyrocket, PayU alone processing 81 million transactions, well above our daily average.

Through our research we’ve also found that the consumer behaviour of the Latin American population plays a crucial role, too. According to the Economist Intelligence Unit and the Consejo Nacional de Poblacion, the Mexican agency responsible for monitoring population growth, 66% of Mexico’s citizens are 15 to 64 years old, and 80% live in cities. Naturally, this translates to more Mexicans using the internet than ever before, and implicitly higher ecommerce spend.

A positive outlook for the landscape

It’s clear that there are exponential growth opportunities for merchants looking to Latin America, as part of their next expansion strategies. And rightfully so, given the continent’s fast-growing, and relatively unsaturated market for ecommerce. In fact, a survey conducted by UNCTAD found that more than half of respondents will shop online more frequently, regardless of the pandemic.

Emerging ecommerce leaders won’t be able to conquer these high-growth markets alone though. They will need to choose their payment technology carefully to ensure that they can meet consumer expectations by providing a frictionless, convenient and secure payment experience. Merchants will also need a deep knowledge of the local commerce frameworks and consumer preferences. Partnering with payment providers with local market and industry expertise can be a fantastic way to fast-track this process.

There is a huge, sustained demand for ecommerce across the Latin American continent, and I don’t see this pace slowing down. The sky is the limit for emerging ecommerce leaders arming themselves with the relevant research, market knowledge, technology and partnerships.

Opinion

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