The digitization of sales reached a point of no return in Latin America, one of the fastest-growing markets for eCommerce. During the pandemic, millions of users shopped online for the first time and few would stop. This year, market experts told investors that the demand that shifted to virtual channels is likely to remain online. Jason Simon is one of those eCommerce experts discussing the huge market growth in the Latin American region.
According to Simon, online sales volumes in Latin America should grow 29% between 2020 and 2024 to reach $580 billion, which should open up different business and investment opportunities. By the end of 2022, despite the resumption of traditional retail activities, the segment should experience further growth in sales and a new expansion in the user base.
This expansion is partly due to the fact that e-commerce still represents a small fraction of total retail sales. “Latin America is currently the most attractive place for local and international online stores to tap into a market where commerce is forecast to grow by 30% every year until 2025,” says Simon.
Some countries may fare better than others. While Brazil and Mexico’s reign in regional eCommerce will remain intact in the coming years, other economies such as Argentina, Chile, and Peru are expected to experience much faster growth. According to estimates, Argentina will register the highest growth rate among the top six countries, with an expected rise of 59% between 2021 and 2025.
According to studies by Statista (a firm specialized in market and consumer data), during the last few years, Latin America has experienced a progressive growth of eCommerce buyers, registering a total increase of 23 points between 2019 and 2020 (267 million buyers for the latter year), 55% more than the global average. For this same period, this stood at a total of 15 points. By 2024, the number of people buying products and services over the Internet is expected to grow by a further 31%, reaching 351 million users throughout the region.
Simon explains, “The above behavior registered its greatest acceleration as a result of the confinement measures generated by COVID, which moved consumers away from traditional face-to-face shopping, accelerating the digital transformation and positioning of eCommerce. Overall, eCommerce has grown at double-digit and even triple-digit rates in almost all markets in the region.”
With the entry of a large contingent of new shoppers and the maturation of the current user base, the bar has been raised on customer demands for both payment methods and delivery times. Consequently, groups such as MercadoLibre, Amazon, Brazil’s Magazine Luiza and others have been investing heavily in the construction and expansion of logistics centers, as well as in different modes of transportation, to bolster same-day and next-day deliveries as much as possible.
In recent months, almost 80% of all items sold by MercadoLibre, a regional leader in e-commerce, were delivered within 48 hours. MercadoLibre reports more than 12 million sellers in Latin America, ranging from individuals to large companies, and 78 million active users.
Amazon is also expanding its presence in the region. In Brazil, the U.S. retailer opened its tenth distribution center late last year, the fourth in São Paulo. In Mexico, Amazon has ten distribution centers and launched four in September alone. Amazon claims to have 185 logistics facilities worldwide.
Two years after its arrival in Brazil, Singapore’s Shopee is building its first distribution center in the country, local media report, in a sign that it wants to strengthen its logistics network to compete with its major rivals. The company, which also operates in Mexico, recently announced the start of sales in Argentina.
“Latin America is, above others, a region that prioritizes mobile devices, as it accesses the internet primarily through smartphones and similar devices,” notes Simon. “This has a direct impact on how services and solutions are delivered and how e-commerce investments are channeled.”