The Rise of E-Commerce in Latin America
Over the last several years, Latin America has seen a dramatic increase in the level of e-commerce conducted within the region, making it an increasingly attractive region to invest in. The younger demographics of the population are increasingly embracing mobile phones and other technology and contributing more and more to the $580 billion or so that is spent globally on internet sales. The Latin America region also represents one of the fastest growing markets for e-commerce, ranked only behind Asia-Pacific for growth during the period 2007-2012. Because of this, there are an increasing number of tech start-ups and online businesses popping up throughout the region.
Success Stories
Latin America is now playing host to many large brands and successful tech start-ups that are now widely recognised throughout the region. While most of these companies aren’t recognisable to an international audience, they have captured the market in South America. One of the reasons for a lack of expansion outside the region is the language barrier. Capturing the biggest markets requires companies to offer their services in English or Japanese and localisation, translating software, apps or websites into different languages for different regions, can be expensive.
BuscaPé: The comparison website BuscaPé was founded in 1999 and has gone on to become one of the most recognisable brands in all of Latin America. In 2009, the South African investment group Naspers bought the company for a reported $342 million. The company now invests in other startups throughout the region and has previously organised contests where various startups submit their social or mobile e-commerce ideas, with the winner being offered 300,000 Brazilian Realis (approximately $183,000).
PaygosOnline: PaygosOnline is an online payment processing service, billed as ‘The Colombian PayPal, and is headquartered in Bogota. Most residents of Latin America don’t own a credit card and so PaygosOnline has paid particular attention to its services related to bank transfers and cash payments. Despite this, PaygosOnline has managed to expand throughout the region, and beyond its Colombian headquarters, the company now has operations in Peru, Argentina, Panama, Mexico, and Brazil.
Despite the low uptake rate for credit cards, Columbia alone accounted for US$600 million in 2010. Paygosonline is reportedly handling payment processing for a number of regional businesses, including airlines with plane tickets accounting for 40% of all the transactions they processed in 2010. That same year, BuscaPé acquired 75% of the company and began using them for its own payment processing.
Vostu: Founded in Sao Paolo, and now operating as far as Buenos Aires and even New York, Vostu is a games developer who claims 50 million users are playing its games across a variety of social media platforms. The company has attracted significant funding in recent years, including US$30 million from a pair of hedge funds in 2010.
Mentez: Mentez is another Brazilian gaming company. Like its competitors, it also publishes games across social media platforms and has been referred to as ‘the Zynga of Latin America’. In fact, it was chosen by Zynga to be their regional partner, selling pre-paid cards on Zynga’s behalf through the payment processing platform Paymentez.
Restorando.com: An online restaurant booking service, Restorando launched in 2010. The app is free to use and unlike many of its competitors, it offers a loyalty program that entitles users to a free meal after a certain number of bookings. The company comes from an impressive pedigree with several board members who have had a hand in some of Latin America’s most successful start-ups.
Smowtion: Founded in 2008, Smowtion is focussed on online advertising and advises publishers on ways to potentially monetize their content. The company has expanded beyond its base in Argentina and is now operating in Mexico City, Miami, and Spain.
Movile: Another Sao Paolo based success story, Movile offers a variety of mobile services, including; mobile payment processing for virtual goods (a market worth more than $500 million alone in 2012), marketing services, and HTML 5. In emerging countries, mobile internet is more widely used than the conventional internet. It is no surprise, therefore, that an increasing number of start-ups are looking for ways to make money from the huge mobile internet market. Movile operates worldwide and has offices throughout Latin America, including in Argentina, Colombia, and Mexico.
These are just some of the successful tech start-ups to appear in Latin America, and with many more appearing year on year, the list of success stories will continue to grow.
A Region on The Rise
Online retail is accounting for an increasingly significant portion of Latin American economies with the strongest players Argentina, Chile, Mexico, and Uruguay, experiencing a particularly rapid rise in sales. A lack of investment in infrastructure in some areas is still proving a barrier to the region reaching its full potential. However, the region is on course to have two-thirds of its population connected to the internet by 2018.
The region has rapidly adapted to the meteoric rise of e-commerce, driven by an increasingly youthful market, but one noticeable pocket of resistance has remained: Brazil. Brazilians have proven to be particularly attached to the mall shopping experience and while the e-commerce market is growing there, its pace has been slow for such a strong economy. However, it is still the regional market leader with sales in excess of $16.58 billion in 2016.
The increasingly diverse range of homegrown online apps and services is also benefiting Latin America by diverting economic investment inwards and breaking the region’s dependence on overseas companies to deliver services. It is also incentivizing governments in the region to continue to invest in network infrastructure to improve traditional internet connections, as well as mobile ones. Universities in the region have mirrored work being done by their counterparts across the developed world and have experimented with high-speed data transfer, but outside of these closed networks, internet speeds and uptake rates are still lacking for much of Latin America.
The Future
Increasing investment in the region, particularly in its internet infrastructure, has numerous benefits beyond the boon to local businesses and many developed nations and advanced economies offer online university courses and other ways of using the internet to learn. For example, the National CPR Foundation offer courses in learning CPR and many universities offer online versions of their regular courses. As internet speeds in Latin America rise, be it mobile or conventional internet, the delivery of these services will become increasingly viable.
By the end of 2019, it is expected that Latin America will see $84.75 billion in e-commerce sales, up from $57.02 billion in 2016 and representing a market of 151.1 million people. This is still a much smaller market than North America, the largest in the world, but Latin America continues to rise at a prodigious rate and is showing no signs of slowing down.
As the online retail market booms the internet services market is also experiencing growth, albeit at a slower rate. Services are generally easier to sell across borders and this is bringing the already tightly interwoven economies of Latin America even closer together.
E-commerce is becoming an increasingly important part of many Latin American economies and represents fertile ground for potential investors. The region has a lot going for it as an investment centre for e-commerce; a very high uptake of mobile phone usage, an increasing percentage of the population having a traditional internet connection in their homes are both significant factors. Despite lagging behind the rest of the world for many years, the region is now catching up rapidly with a large year on year growth.
