The Latin American online population is growing at a faster pace than the Internet population at large. As barriers such as expensive connect charges come down, the Latin population is jumping online at an astounding rate.
Who are these people and what are they doing once they’ve gained access to the World Wide Web? Many of them are buying things, and their decisions will help shape the future of the Latin Internet economy.
Jupiter says 5 percent of the worldwide online population, about 7 million users, are Latin Americans.
IDC Research suggests that the Latin American online population will increase to 19 million by 2003 — a 170 percent growth rate over the next few years!
This growth creates the critical mass necessary for the Internet economy to cater to the specific needs and interests of this powerful, uniquely Latin American, market.
Nazca Saatchi and Saatchi says that the Internet is used by Latin Americans with purchasing power: 90 percent of Latin American users come from upper middle and high socio-economic classes. Twenty-nine percent of the respondents to the Nazca study had made an on-line purchase.
In contrast, 23 percent of US users have made an online purchase (Jupiter, July 1999). Applying that 29 percent to Jupiter’s 7 million estimate above, suggests that only 2 million Latin Americans have bought something over the Internet.
Boston Consulting Group says Latin domestic online spending will reach about $77 million in 1999. If 2 million Latin consumers spend $77 million dollars on the Internet, that’s an average of only $38.50 per Internet consumer! This seems like a low number, suggesting a lot of room for growth.
BCG suggests that Latinos follow a trend similar to the rest of the world, using the Internet to buy mostly books, computers, electronics and groceries.
Only about half of Latinos’ e-commerce dollars go to domestic companies. Compare that to BCG’s estimation that 90 percent of the dollars that Americans spend online go to US companies.
This data suggests that companies in Latin America need to do a better job providing Internet purchasing opportunities to their domestic customers, or, with one click, consumers from Santiago will be shopping in an American superstore in cyberspace.
For example, think about Yenny, Argentina’s largest seller of books, and the threat posed to them by Amazon.com.
The main difference at the moment is that Yenny’s web site is in the Spanish language, a barrier easily overcome by Amazon. If you consider most of the items sold over the Internet to be commodities, then marketing, service and price become increasingly important in competing in the Internet marketplace.
Yenny is battling Amazon with services like book reviews, cross-references to best-seller lists, the option to download the first chapter of some books, and an aggressive marketing campaign targeted to Argentines and the U.S. Hispanic population.
Considering how the Internet changes markets, Latin retailers will need to adapt to compete on the Internet, or they will see a significant portion of their sales go to someone else.
Those who will be most successful will think outside of the parameters in which their business operates in the physical world, and they will make it easier for people to do business with them in the cyber world.
The e-commerce winners will provide instant information, they will provide selection and scale, they will make their offerings searchable and sortable, and they will eliminate any boundaries that stand between their goods and the people who want them.