When most people think of investing in Latin America, they think of “old economy” businesses like oil and basic commodities. These industries are vital to the growth of the local business, but the area is also home to a thriving private sector, with several rising stars in the fields of computers and the internet. In this “EM Explorer” issue, we examine the booming field of online retail and the promising prospects it presents for business people in the developing world.
Since its inception, the growth of headless commerce has been a major area of attention for Central-American people, especially in light of the potential threat it poses to conventional stores in the region. Our research relies on in-depth conversations with business representatives and expert phone calls, in addition to the examination of data from reputable third-party sources. Naturally, trips to the area were also crucial to these efforts before the outbreak, and they will continue in due time.
How Did the Global Pandemic Affect Headless eCommerce In Central America?
The year 2020 was a watershed year for eCommerce acceptance in Latin America, largely thanks to the effects of the Covid-19 epidemic and the accompanying increase in social distance. According to the latest predictions1 by eMarketer, a market data and analytics provider, online sales will have increased by 63.3% in 2020, reaching USD 104.6 billion. Considering the already staggering worldwide pace of growth of 25.7% in 2020, this is a startling development.
While we shouldn’t expect 2020s rapid expansion to repeat this year, the prospects are bright. In other words, eMarketer predicts that online retail digital commerce sales will increase by 25.6% in 2019, bringing them back in step with their pre-pandemic levels of growth. It is predicted that by 2022, 248.7 million people in Latin America will have made at least one digital purchase, representing over half of the region’s inhabitants aged 14 and above.
Growth-promoting Basics
When it comes to headless eCommerce, things are in place for Central America to make up lost ground. To begin, the World Bank ranks its industry as the fourth biggest in the world. Argentina, Brazil, Colombia, and Mexico are home to a combined 80% of the region’s 650 million people. In contrast to the many languages spoken in Africa, Asia, and Europe, only Spanish and Portuguese are recognized as official trade dialects in this area.
According to United Nations data, with over 80% of the people included there residing in urban areas, this area is the world’s second most populated after North America. The rising urban inhabitants and widespread use of smartphones bode well for online retail, since they will increase pricing competition in the bandwidth and information plan markets. Therefore, luring more businesses and encouraging banks and retailers to expand their support for online purchases. Online retail sales are expected to expand from $100 billion in 2018 to $222 billion in 2021, a CAGR of 22 percent, as per Americas Market Intelligence.
Many Of The Shifts In Internet Shoppers’ Habits Became Institutionalized
Improvements in vaccine distribution and the loosening of movement restrictions will contribute to a return to normalcy in consumer behavior, which in turn will aid the recovery of offline shopping traffic and revitalize brick-and-mortar stores. In any case, the transition from offline to online will continue over the long haul. As delivery and customer experience continue to improve, frictions are removed from the process, and consumers who began making more frequent and diverse online purchases in 2022 are likely to retain this behavior.
Recent studies of Brazilian consumers have confirmed this. Despite a return to a more normal pattern of away-from-home activities by the end of 2020, data suggests that the shift in consumer behavior favoring online shopping persists.
Improvements In The Supply Chain’s Infrastructure Hold Great Potential
When it comes to logistics, the Latin American market is one of the most challenging in the world. A lack of cohesive planning has resulted in a disjointed area with a sluggish economy and gridlocked major cities. In nations like Brazil, where private delivery services don’t reach every corner of the country, shipping takes a very long time. It is never guaranteed since people have to wait for their packages to arrive through the country’s official post office.
Companies that are successful at increasing customer involvement and buying patterns do so by continuously focusing on enhancing the completion journey, which consists of processes such as picking, packaging, and delivery that occur after an order has been placed. MercadoLibre and B2W are just two of the many marketplaces that have created their own delivery networks. They often run their own distribution centers and employ local courier services for the last mile of their shipments.
Market Regulation In An Era Of Digital Disruption
E-commerce is still a relatively young phenomenon, and as such, it presents significant regulatory issues on both the national and international levels. It is difficult to untangle the local from the global components of e-commerce, since they are among the most apparent results of the technology revolution that has gone hand-in-hand with urbanization. It’s logical that the internet, which has always been a global connecting system, will give birth to as many international business links as it does domestic ones. Among the aforementioned regulatory hurdles is the urgent need to modernize several of the legal foundations for business transactions.
Conclusion
The successful online merchant will have extensive expertise selling to the Central American market and will provide goods that are in high demand there. It is also recommended that traders achieve a monthly volume of $60,000 or more, however, this figure might shift based on individual conditions. Organizations looking to break into the Central American market should keep the time zone difference between their headquarters and customers in these areas. Business-wise, we consider Central America has a lot of potential since there aren’t many local brands available and customers there are used to buying foreign ones.
