Jason Simon explains how COVID-19 triggered an eCommerce boom in Latin America

Global trends mirror the coronavirus pandemic, which led to a rapid rise in online payments activity in Latin America during 2020. This made the region one of the fastest-growing eCommerce markets in the world. Jason Simon, an expert on eCommerce behavior, explains how COVID-19 caused its boom to grow even further in this region.

eCommerce penetration in Latin America was low before the virus epidemic. The region’s large unbanked population, complex logistical connections, lack of trust in online services, and low adoption rate were all factors that impeded eCommerce penetration. COVID-19, which saw many stores close, has helped to drive significant growth.

According to estimates, 13 million Latin Americans made their first online purchase two years ago. Meanwhile, retail eCommerce grew 36.7% to $85 billion. Particular growth was observed at the country level in Argentina (79%), Brazil (35%), Mexico (27%). Despite being far below the comparable figures in Asia-Pacific ($2.4 trillion), North America ($750 billion) and Western Europe ($500 billion), Latin America saw significant growth throughout 2020.

Simon explained that “Quarantine, social distancing and trust measures greatly accelerated adoption of digital platforms and helped Latin America reach more mature digital markets like the U.S. and China.”

Multinational eCommerce and digital payment companies have seen rapid growth during the pandemic. However, there are many local options that have been taken advantage of. The online marketplace Mercado Libre is the most prominent. It allows people and businesses to sell, buy, advertise, and pay for products through its online platform.

Mercado Libre was one of the biggest winners from the pandemic. Its value has more than doubled in the past year. Sales of COVID-19-related items, such as protective gear or hygiene products, were the main driver at the start of the pandemic. Several other categories saw steady growth in sales from May onwards.

Notes Simon, “In the second quarter, not only did it register three million new customers on its platform, but purchase frequency increased dramatically, with customers transacting in a quarter more than they previously did in a year.”

The number of active users increased by 84.3% over the past year, going from 61.1 million to 112.5 million, gross merchandise value increased 41.8% and total payments volume increased 71.5% to 33.8 billion. Simon estimates that the company’s share of Latin American eCommerce increased to 28% in this period, up from 19% in 2015.

The super app Rappi from Colombia, which has nine offices in the region, is another key player. The company was founded in 2015. It offers many services, including the ability to order groceries, food delivery, and even fashion. It allows users to transfer money, and offers its own delivery service. Rappi’s value is approximately $3 billion. Softbank Japan has backed Rappi in its first Latin American investment.

The region’s other major players include WiPay, a Caribbean-focused payment platform, Linio Mexican online marketplace, and Justo, a Mexican grocery delivery company. Many eCommerce businesses in the region offer services other than shopping and delivery. Rappi, a partner with Visa, announced in 2019 that it would offer prepaid cards in Brazil, Colombia, Mexico and Mexico. In June 2020, Rappi also created a joint venture in financial services with Banorte, a Mexican bank.

Mercado Libre’s online marketplace business has been expanded in recent years. The company now includes a logistics division as well as a credit service and a financial technology platform. It also includes an advertising agency. The company’s credit division received a permit in Brazil in late 2020 to operate as a bank. This will allow the company to offer more financial services and credit in Brazil’s largest market.