Latin American E-Commerce Taking Hold

Online retailing is beginning to take hold in Latin America, with spending at domestic online retail sites to reach an estimated $77 million in 1999, according to a study by The Boston Consulting Group (BCG) and Visa International.

The study also predicts that as the barriers to e-commerce growth in the region continue to fall, the Latin American market could reach $3.8 billion by 2003.

“The conditions are right for creative online retailers to establish a significant business on the Internet,” said Jorge Becerra, a BCG VP. “While there are substantial barriers to growth, such as high telephone and computer costs and the lack of adequate delivery systems, these appear to be falling. The challenge for retailers is to move fast to establish an early and dominant market presence.”

BCG expects the total online sales, from both domestic and international sites, to exceed $160 million in 1999, with approximately $90 million going to US-based online retailers. Brazil currently dominates the Latin American e-commerce market, representing 88 percent of all the region’s online sales. Mexico, the second largest market, accounts for just 6 percent of e-commerce sales.

“We’re experiencing significant change in electronic commerce in Latin America,” said Jonathan Sánchez-Jaimes, Visa International’s president for the Latin America and Caribbean region. “There are growth opportunities for all players in e-commerce — from retailers to telecommunications companies and portals to payment platform providers like ourselves.”

According to the study, a number of conditions need to first appear for growth in online retailing to continue:

  • Internet access costs (telephone rates, Internet service provider charges, and PC costs) need to fall closer to international levels
  • Retailers and payment platform providers will need to address consumers’ lack of confidence in online payment systems
  • Consumers will be looking for a more reliable and cost-effective delivery infrastructure in order to be confident that products ordered online will arrive at their homes

The report also describes how Latin American retailers need to provide a more compelling consumer value proposition relative to their US competitors. The market is fragmented and cluttered with many small players with unexciting shopping sites. Online retailers in Latin America need to use the Web’s functionality to increase convenience, selection, and service, and offer more competitive offerings.

Other findings of the report include: