Latin American e-Commerce in the Near(est) Future: A Window of Opportunities
29 de April de 2021
29 de April de 2021
“A fundamental principle of digital economy is that it must be based on platforms in which we’re all connected through a network but, most importantly, in which all interactions are carried out in real time”. This is the first thing that Nicolás Eduardo Rodríguez —Country Manager in Colombia for Openpay (a fintech that focuses on payment processing)— tells Jorge González, a professor at EAE who is in charge of the latest EAE On Session: “Growth and Projections of Latin American e-Commerce”.
Before we get started, we must ask some questions and clarify some issues. So, what exactly is e-Commerce? Well, it’s everything that is subject to hiring, buying and selling through digital media — i.e. websites, mobile apps, web apps, social networks, etc. And, how is it doing in Latin America? This region has been the one to grow the most during the pandemic — a steady growth that promises to keep on going for a long time.
Let’s focus on Colombia for a moment. This country is expected to show the biggest growth in e-Commerce by 2024. The tourism sector is where e-Commerce has been developed the most, making it one of e-Commerce’s main pillars in the country. As you can imagine, this sector was severely affected by the restrictions that brought about limited mobility and the impossibility to travel during the first weeks of the pandemic. However, even though tourism hasn’t recovered yet, e-Commerce has done so progressively thanks to companies that started making use of it.
Many of the companies weren’t prepared. The Covid-19 crisis took them by surprise and they’ve had to adapt without having a properly designed e-Commerce project. They found a way. And, even though almost a whole year went by, they are now starting to develop and design their websites, setting up their e-Commerce and finding their way in the marketplaces.
There are three challenges that e-Commerce must face in Latin America. On the one hand, in order to take part in electronic growth models, it’s necessary to understand the logistics and to have local operators that will guarantee the delivery and exchange models. On the other hand, a sound knowledge of tax regulations is a must — given that, currently, every country is going over their regulations. In fact, in Colombia, there’s a new Digital Payments Law.
And, lastly, adopting a Cross Border model — i.e. a model that allows trade across borders. The goal of this model is for this region to be seen as what it is: a region. This would be an easy solution for any company that wants to land in Latin America with Cross Border solutions.
Nicolás reviews his presentation and gives us some recommendations: Regarding Latin America’s e-Commerce technological capacities, he mentions that there are two areas that are covered. One of them is the region’s infrastructure and the other is the fact that they run on API and Plugin connection models. However, he thinks that the IT human talent needs to improve. There’s not much talent development in the region to carry out these kinds of e-Commerce solutions. In this context, the demand for such profiles creates opportunities that encourage people to engage and look for an education centred on programmes that are in line with the needs of the sector.
Regarding the market, he points out that, in 2020, there was a 40% increase of customers. Incorporating e-Commerce is a quick process —within a few weeks, a company can be setted up and ready to operate— and the market penetration is low, which is fertile ground for easy company differentiation. The key elements that need to be improved are the development of the Cross Border model and the solutions for the logistic challenges.
Sometimes, the vision we have of the future is a dystopian one, where machines replace people — much like the animated film WALL•E. But, that’s far from true. Physical stores are not to be replaced — e-Commerce is here to complement them with their digital versions. The goal is to open the spectrum and reduce the limitations that are inherent to physical stores.
In this way, instead of only reaching clients in the surrounding areas of the shop, it’s possible to reach clients in other parts of the city, in the surrounding or faraway cities and even other countries. Besides, it’s a loyalty model that’s potentially beneficial for client relations — if they already trust your company, why not let them shop online? e-Commerce doesn’t replace; it complements.
The growth of e-Commerce in Latin America is not casual — it’s been going on for years and it’s been boosted by the situation that Covid-19 brought about. This is why this is a great opportunity for companies, both national and international — companies that are becoming increasingly aware of this and are signing up!
It’s important to bear in mind that, the more it grows, the harder it will be to differentiate in this market. This is a market in its initial stage of maturity that has a very high growth prospect and that’s shouting at us that, whether you're thinking about it or not, now is the time to do it!
A window of opportunity that connects people, taking the future we’ve imagined and making it happen right here and now.