Online shopping has rapidly begun to spread in Latin America, helping to make it a prime target for foreign retailers. According to the Latin America 500, it is currently the fastest-growing ecommerce market after China. By 2020, it’s projected that Latin America will have 640 million consumers, and private consumption in the region will nearly double in comparison to 2012. Forrester has predicted that ecommerce in Mexico, Brazil and Argentina will continue to gow at a rate of 20 percent year-on-year. While these numbers are enticing, it’s important to carefully prepare before entering Latin American ecommerce.
Building an online site in-house can be both time-consuming and complex. One option is to use such a service as Shopify, which enables merchants to set up independent online stores. Many brands use this route to build local ecommerce stores. Once a merchant’s website is set up, the next step involves SEO, best-performed by a local vendor who understands the search habits of the chosen market. Going solo in any foreign territory can be risky, therefore merchants should consider working with local web platforms. Since online retail has yet to reach maturity in all Latin American countries, many shoppers will gravitate towards household-name online merchants such as Amazon, although certain local online leaders are emerging, such as MercadoLibre and B2W Digital.
Merchants can only sell goods or services through their websites if they offer effective international shipping; cross-border consumers will often not use a site if they don’t know how their purchases will be delivered. Partnering with a local logistics provider that knows the market can significantly increase chances of success. Yet the cost of logistics in Latin America stays high; the Latin American President for DHL Supply Chain Logistics has stated that logistic costs amount to about 15 percent of the cost of the sold merchandise.
It’s essential that merchants are able to understand and accept the preferred payment methods in every Latin American region. Credit card and alternative payment methods have been rapidly gaining popularity, although cash-on-delivery is also widespread. In addition, mobile ecommerce has risen considerably, and almost a quarter of shoppers have used their smartphone for payment at least once.
Retail-wise as well as language-wise, Brazil is in a field all of its own. Online spending in this country alone nearly equals the rest of Latin America combined. More than half of Latin American ecommerce sites are based in Brazil, Brazilian online shops in 2013 generated three times more than Mexico and Argentina combined and a staggering 81 percent of Brazilians research appliances online (compare that to 66 percent of Mexicans and 73 percent of Argentines).
More than 80 percent of Brazil’s adult population now has a bank account, and banks are widely used. While most Brazilians pay by card, other methods are still popular, such as paper cash, eWallets and cash on delivery. New regulations enacted by the Brazilian government in 2013 and 2014 have helped to boost the growth of online and mobile payments, and mobile popularity is soaring as 79 percent of consumers in Brazil use their mobile phones for at least part of their shopping experience. At 20.1 percent, Brazil has the highest penetration of smartphones in all of Latin America.
While the numbers are good, business in Brazil remains expensive and complicated. There are a total of seven different income taxes, which are cumulative. And merchants that decide to use cloud service outside of Brazil for their online stores are charged 40 percent on top of the invoice as an additional tax. Brazil also imposes a flat import tax of 60 percent on the cost of merchandise valued up to $3,000. Since the buyer has to pay the taxes up-front, the delivery process can drag on indefinitely if the sum isn’t promptly paid.
Ecommerce is flourishing around the world, and online markets are constantly on the lookout for their next market. Latin American ecommerce is by all accounts up-and-coming, although it’s best not to rush in without any knowledge. Taking the time to learn about local/regional online shopping habits and payment systems, merchants have a much better chance of meeting shoppers’ expectations and ensuring profitability.
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