Latin American E-Commerce Still Has Hurdles to Clear

Online retailing revenues in Latin America are expected to reach $1.28 billion by the end of 2001, more than double the $540 million from 2000, according to a report from the Boston Consulting Group.

The report, which was sponsored by Visa International, Latin America and Caribbean Region, found that one segment of the e-commerce market — online grocery shopping — bucks the North American trend and is comparatively strong in Latin America, especially in Argentina and Brazil where consumers are accustomed to having groceries delivered. Online grocery sales are estimated to reach $79 million by the end of 2001 and is the only segment of the e-commerce market in Latin America with penetration rates comparable to those in the United States.

Despite this, the online grocery market’s revenue are dwarfed by the online sales in four other markets. Direct sales in the automotive sector are likely to reach $504 million; consumer auctions (the largest category in 2000) will bring in $203 million; travel will be responsible for $140 million; and computer hardware and software will account for $139 million. In 2000, only two online categories had revenues exceeding $100 million.

E-Commerce Revenue
in Latin America

2001, U.S. Dollars
Brazil $906 million
Mexico $134 million
Argentina $119 million
Chile $45 million
Latin America $1.28 billion
Source: Boston Consulting Group

“In a sluggish local and global economy, it’s surprising to note just how much growth is occurring in the Latin America region, and this growth is led by incumbents using the Internet to create competitive advantage,” said BCG vice president Jorge Becerra. “In the automotive category, for example, manufacturers in Brazil have launched direct-to-consumer ventures with penetration rates — and gross sales — unmatched in any other market, making Brazil the world leader in direct auto sales.”

Brazil continues to be the leading market in Latin America for e-commerce with $906 million in revenue predicted for 2001. While you might expect other countries to be coming online and catching up to Brazil, the country has actually increased its share of the region’s overall online retail market from 62 percent in 2000 to 71 percent in 2001. The other top markets in the region include Mexico ($134 million), Argentina ($119 million) and Chile ($45 million).

E-commerce in Latin America is gathering steam, but there are forces working against it, in particular weaknesses in the offerings and in payment systems, fulfillment and customer service. The report calls on retailers to provide a “richer, more focused, better-executed experience.” The report did find a select group of Web-based and multichannel retailers selling goods and services online that are finding new opportunities and are penetrating their existing markets more effectively. Some of the market leaders in the region have begun using creative ways to use the Internet, such as standalone Web kiosks, to expand their online retailing reach to the majority of consumers in the region who do not have Web access.

In last year’s report, BCG conducted a “mystery shopping” exercise that found considerable room for improvement within the typical online shopping experience. BCG repeated the exercise for this year’s report and found no significant improvement in three critical areas: payment, delivery and customer service. For example, despite the increasing use of secure systems and digital certificates issued by third parties, consumers and retailers remain wary of credit card transactions to some extent. According to the survey, 95 percent of sites accept credit cards.

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