How Can Merchants Benefit from Latin America eCommerce Market?

Finding room to grow in a market used to present a considerable challenge. Today, with the world accessible from almost anywhere, the challenge is no longer whether you can grow, but which markets present the best opportunity for you. As you look to expand, Latin America offers tremendous growth potential for all kinds of companies. The key to this growth is the proliferation of smartphones, which facilitate the immediate purchase of products and services with a few taps of a screen. While smartphone ownership penetration is high throughout Latam, there is significant variation among countries when it comes to using these devices to make online purchases through shopping apps. For example, the highest usage of shopping apps on smartphones is in Brazil, coming in at 83%. By contrast, the lowest rate is in Chile, with 44% of those with smartphones using their device to shop. Peru comes in at second to last, with 50%.

Source: Mastercard Whitepaper December 2019: Examining the Latin American and Caribbean E-commerce Market

Latin American countries have exhibited a significant growth trend in online sales in recent years. While that growth is expected to slow, Statista estimates sales to Latin America will grow by 13% in 2020, and another 10% in 2021. This surge is thanks to, in large part, a middle class that has doubled in size during the last decade, creating more potential customers than ever before. If you are looking for paths to new customers, this data suggests that Latin American markets present a powerful opportunity for you – if you know how to market and sell effectively there, of course.

Distribution of e-commerce spending in Latin America in 2018 and 2022, by payment method:

In 2018, digital wallets such as AliPay or PayPal accounted for 15% of Latin America e-commerce spending. This share is set to increase to 18% in 2022 (Source: Statista 2020)

Latin American Challenges

Of course, Latin America does not consist of a single, homogeneous area. Countries differ in the kinds of products they purchase, the ways they shop, and even the languages they speak. Connecting to customers in these countries means overcoming language and dialect barriers, as well as cultural differences.

You have to be able to work with the currency of each country, and focus your marketing efforts on segments where you can achieve the highest rates of sales conversions. Many of the Latam countries do not process under Visa and Mastercard directly. Instead, they use local interchange agreements, which are generally aligned to the schemes’ rules, but apply their own interchange fees, timeframes and chargeback rules. APMs for Cash-In services are still widely preferred in many of the Latam countries, and local eWallets are also preferred by the consumers in the region as they are more comfortable using them. The settlement period is incredibly variable throughout the region, while Mexico settles T+1 as the U.S does, Argentina and Brazil may only settle once a month.

Merchants who wish to penetrate and grow within any of the Latam markets, has to both understand the target market and work with vendors and business partners that possess the necessary experience and capabilities to help them reach their sales potential.

Your Opportunity

Once you’ve made the decision to expand into Latin American markets, you need to do your research. Study the markets to find where the best opportunities lie for the products or services you sell. Depending on which countries you identify, you will need to develop an online marketing strategy that connects with your potential customers. Take the time to learn about local customs, nuances to local language, and specific challenges that customers are likely to present to you. The more you can speak to what matters to a customer base, the more effectively you can grow in that market.

The largest online market in Latin America is Brazil, with almost 50% of the region’s ecommerce sales. Mexico is also a market with significant growth potential that has attracted many international merchants in recent years.

Frequency of online purchasing by country:

Source: Mastercard Whitepaper December 2019: Examining the Latin American and Caribbean E-commerce Market

Marketing can get you as far as bringing in potential customers. But to convert and grow your revenue streams, you still need to understand what payment methods they prefer and ensure you are equipped to process those payments. The right processing partner should come ready to handle the basics like conversions, regulatory hurdles, and accepting local forms of payment. Furthermore, they need extensive experience in limiting the kinds of fraud that foreign transactions sometimes enable. Make sure you are working with a partner ready to elevate your business as it explores new customer markets and territories.

SafeCharge has a Latin America team of payment experts located in Mexico who specialise in providing services to merchants that have existing ecommerce activity in this continent, or wish to expand their activity into this region. The Latin America team and I, as the regional director, have local knowledge of the culture, alternative payment methods, and the ways in which business is conducted within this market. The chances to gain the trust of Latin America online shoppers and grow revenues in this region increase when your payment provider is able to combine knowledge of the local payment infrastructure with international technology and acquiring services to facilitate frictionless payments. Contact me today and let’s discuss how to optimise the payment activity of your business in Latin America.

About the author:
Javier Guerrero, Managing Director Mexico, SafeCharge, a Nuvei company
In his role as Managing Director Mexico, Javier is responsible for the strategic direction of SafeCharge’s merchants, channels, and partnerships in both Mexico and other South America countries. Javier is an esteemed finance executive with 33 years of experience spread across global consumer banking and technology institutions. He also has extensive knowledge of local markets, competition, and authorities, which supports SafeCharge’s merchants’ growth within Latin America countries.

 

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SafeCharge Limited is an Electronic Money Institution authorised and regulated by the Central Bank of Cyprus and is a principal member of Mastercard, Visa and Unionpay International (CUP). SafeCharge Financial Services Limited is authorised and regulated by the Financial Conduct Authority as a Payment Institution. Both SafeCharge companies are wholly owned by SafeCharge International Group Limited.