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The global fashion business journal

12 Dec 201817:40

Online shopping in Americas: from fierce USA to challenging Latin America

All markets within the continent have their own particularities: from Canada, where online e-commerce is based on imports, to Mexico, where challenges like credit cards use or logistics are starting to being solved.

06 Dec 2018 — 18:00
Silvia Riera
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Online shopping in Americas: from fierce USA to challenging in Latin America

 

 

The evolution of e-commerce in the American continent is in harmony with the economic development of each of the markets that compose it. On one hand, there is the United States and Canada, with consolidated backgrounds, and on the other, Latin America, where digital commerce is currently taking over, although highly focalised on three countries: Brazil, Mexico and Argentina.

 

The figures that recall internet consumption show the differences between some countries and the others. Thus, whilst in 2017 the United States produced through e-commerce a business worth 453.46 billion dollars, Mexico obtained 16.48 billion; Brazil, 12.9 billion and Argentina, 2.52 billion.

 

Notwithstanding, a higher use of mobile phones, an improvement of social networks on the internet and a raise of the middle-class are all accelerating the development of e-commerce in the whole of the territory. Latin America, with forty countries and a population over 650 million inhabitants, is destined to be the next main field of e-commerce.

 

 

 

 

In Europe, the United States and China, e-commerce already has a certain degree of maturity. In the European continent, groups such as Zalando, Asos or Ynap have been consolidated next to other titans such as Amazon and other local players from each of the countries. In the United States market, the battle between Amazon and Walmart defines the new background’s rules of the game and opens new spaces for new players.

 

And in China, the merge of online and offline is already a reality, equally to other technological advancements that seem only science fiction for the West. But in Latin America, despite having strategic regions for international players, e-commerce is still undergoing a take off phase. Matters such as security of payments, access to the web, last mile logistics or salaries are still weighing down the boom of digital commerce in the region. But it’s only a matter of time.

 

 

Latin America, the last territory to conquer

At the same time as in mature markets, the growth rate of e-commerce is beginning to stagnate, Latin America is just starting to step on the gas. It is estimated that, in 2018, retail sales through the web in Latin America will go 17.9% up in base to last year, standing at 53.2 billion dollars, according to eMarketer.

 

Despite increasing the prices for consumption due to currency devaluation in some of the region’s countries, the economy around the area is starting to recover, and the last presidential elections could contribute to develop the trust of consumers further. It is predicted that in 2019 Latin American sales will sum up to 84.75 billion dollars and that this channel will be used by 155.5 million purchasers, according to Statista. Despite being a huge land, the main focus of growth for e-commerce is aimed at three countries only: Argentina, Brazil and Mexico.

 

Colombia is another of the countries in which e-commerce is starting to lead the way. Online sales produced a volume of business of 51.2 trillion pesos in 2017 (17.9 million dollars) in the country, a 24% more if compared to 2016, according to Cuarto Estudio de Transacciones Digitales en Colombia 2016-2017.

 

 

 

 

The report claims that digital transactions registered a growth of 37% between one year and the other, which reflects that operations in Colombia through digital ways of payment is successfully increasing. The document also reports that e-commerce already represents a percentage equivalent to 2% of the country’s Gross Domestic Product (GDP). In 2017, the categories that have a greater representation in digital commerce were finances (17%), commerce (15%) and government (13%), as stated in the information provided by payment processing networks.

 

The Argentinean player Mercado Libre is the most popular e-commerce platform in Latin America, with a total of 56.3 million unique visits during May 2018. With a C2C formula similar to eBay’s in its beginnings, Mercado Libre operates in Argentina, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Mexico, Ecuador, Panama, Uruguay and Venezuela.

 

The company has also started to operate in Europe, starting in Portugal. It is followed by Amazon, at the second position, with 22.4 million unique visits and then by Brazilian B2W, another of the region’s e-commerce behemoths. The most visited platforms are completed by Chinese Alibaba and American eBay. Dafiti, another platform from Brazil, was launched in 2011 as a footwear online store and eventually gained strength thanks to German incubator Rocket Internet.

 

 

 

 

Mobile phones are also making e-commerce more dynamic. It is estimated that, in 2017, 27.5% of online sales in Latin America were done through the phone. One of the keys highlighted by experts to consolidate e-commerce in the region is to adapt to the cultural preferences of local trade, which also implies knowing about its usual payment methods. It is calculated, for instance, that a 49% of the Latin American territory’s population does not belong to any bank, according to data from the World Bank in 2015.

 

This environment entails that half of the population in this area do not have a credit card nor any other method for bank payment, which extremely complicates their access to e-commerce. On the other hand, there are financial entities that do not allow clients to use their credit cards for foreign companies, which penalises international retailers. Each country, furthermore, has its own online payment methods. In fact, there are researches that link in a direct way the growth of e-commerce with the popularisation of payment through credit and debit cards, as it happens in the Mexican territory.

 

Canada, the discreet consumer

Despite being an advanced economy, with an elevated average of income and an 80% of population connected online, e-commerce’s degree of development is yet quite far from the United Sates one. Nevertheless, during the last years, the online consumption of Canadians has gone up and it is predicted to accelerate even further during the next decade. The country’s top players are from the United States: Amazon, eBay and Walmart. Canada has not provided any strategic player in this segment.

 

Retail sales in the Canadian market grew about 30% during 2017 according to eMarketer, promoted mainly by huge consumption, which advances quickly in the web at the same time as it has limited the frontiers between online and offline universes. Nowadays, online retail business stands at 7.3% of the whole of retail, and according to Statista, it is predicted to reach a market share of 10% by 2020. 

 

 

 

 

E-commerce in Canada is also supported on imports, as half of the articles that its citizens purchase online come from third countries. E-commerce is also promoted by the fast expansion of the phone as a purchasing channel.

 

Compared to the United States, e-commerce in Canada is actually quite a little behind. Thus, whereas about 70% of people form the United States purchase at least once a month online, among Canadians, the share stands at 50%.

 

As per the average expense on the internet per year, in the United States it stands about 3,000 dollars, whereas in Canada, it stands at 1,500 dollars, according to a research carried out by The Boston Consulting Group. Regarding the most purchased product categories on the internet, Canadian consumers put fashion at the top of the podium, next to consumer electronics and music, films and media. 

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