As Latin American businesses increasingly come online, here’s a look at some of the biggest opportunities to keep an eye on.
5 min read
Opinions expressed by Entrepreneur contributors are their own.
Over the past few years, consumers in Latin America have shifted to buying online due to a rise in internet access and smartphone usage. By 2025, 79 percent of all mobile connections in Latin America are expected to be via smartphones. From 2016-2018, the region was the fastest growing in the world for Uber, Netflix, and Airbnb, according to a white paper by DHL and the Panama Ministry of Commerce. The global health crisis is now accelerating this digital transformation on an unprecedented scale. Over the past few months, more consumers have shifted their shopping and payment behaviors towards online channels, and companies are investing heavily in digital infrastructure to support the demand.
Related: Mark Your Calendars: The Key to Latin American Ecommerce Is Knowing the Right Dates
The consumer foodservice industry is just one example of a sector that is growing alongside new connectivity in the region. The sector reached $200 billion in 2019, with almost $30 billion in the food delivery segment alone. Delivery services, in general, have quadrupled between 2014 and 2019, making Latin America the fastest-growing region after Asia Pacific. According to data firm Sensor Tower, downloads of delivery apps shot up by more than 250,000 in March from February.
With Latin America’s digital transformation accelerating, traditionally “offline” businesses must adapt to digital channels in order to survive and attract new customers. Although switching to fully-digital platforms is not easy or ideal for every business, the number of new businesses coming online is also creating a surge in new data. Many businesses that have never collected data on their customers’ behaviors and transactions are doing so now. This data can help them understand what consumers want or need and make better decisions. As Latin American businesses increasingly come online, here’s a look at some of the biggest opportunities to keep an eye on.
E-commerce enablers
According to Americas Market Intelligence (AMI), even if just 25 percent of consumers who had never shopped online before the pandemic are retained, digital sales in Latin America will still grow 39 percent or an extra $42 billion for the whole market. Still, it’s important to remember that the region is very fragmented, and consumer interests, connectivity levels, and payment options can vary drastically by city and country. That’s why e-commerce enablers, like Latin America’s largest e-commerce marketplace MercadoLibre, have been so successful at providing end-to-end services to businesses that want to sell online. The company saw its market value jump to a record $50 billion this year, making it the most valuable company in Latin America. The e-commerce giant also provides digital payment options via Mercado Pago, which saw activities increase eight times compared to the same period last year.
Related: Why Your Ecommerce Business Should Look to Brazil
The largely unbanked population in Latin America and lack of access to credit make digital payment services one of the most in-demand sectors. Currently, more than half of the region’s fintech firms offer payments or loan services in an effort to push the cash-based society towards digital banking and payment systems. Brazil and Mexico are among the countries with the most potential for collecting valuable e-commerce and payment data in Latin America. There are currently 66.4 million e-commerce users in Brazil, with an additional 28.2 million expected to come online by 2021. There are 59.4 million Internet users in Mexico, accounting for just under half of the population or the equivalent of the entire population of the UK.
Hyperlocal data dissemination
Another sector of e-commerce enablers to watch includes logistics or delivery services. Not only will there be a rise in data related to consumer transactions at the point-of-sale, but also location data about businesses, such as opening hours, exact addresses, or any other information that has never been digitized. Having this hyperlocal data on retailers or restaurants can help companies, such as last-mile logistics or on-demand delivery services, better meet consumer needs, and cut delivery costs and time. Last-mile and delivery startups have already raised tens of millions of dollars in fresh capital this year, reflecting the increasing demand and opportunities in this space.
Related: Why ‘Hacking’ Your Way Into the U.S. Market Via Latin America Makes Sense for Your European Startup
Better data and decision-making
The boom in Latin America’s e-commerce activity due to the global health crisis lockdowns and restrictions will also introduce a new wave of consumer and business data that has previously been scarce or out of reach. For businesses operating in the region, taking advantage of this data can help them respond to new challenges as they arise, and ultimately, drive better decision-making as they move online. If collected quickly and ethically, this data will also help governments and other key organizations better understand the pandemic’s impact on the local business environment and provide resources more efficiently, even in the face of ongoing uncertainty.
loading…
