The rise in the use of electronic and instant payments by shoppers, greater penetration of cross-border purchases and Asian goods, new functionalities and applications based on AI and new offers of services by marketplaces such as credit, loyalty, cashback and even content and connectivity.
Those are some of the main trends expected for e-commerce in Latin America in 2024, which is projected to enjoy another year of sustained growth.
Payments and Commerce Market Intelligence forecasts a 22% jump in Latin American e-commerce between 2023 and 2026, reaching a volume of more than US$700bn.
In Brazil, the region’s main online market, e-commerce chamber ABComm estimates that online sales revenue will climb 10.4% to over 205bn reais (US$42bn) this year.
Furthermore, recent data from the Brazilian tax authority points to a 150% rise in cross-border sales in the last five years, with big growth from Asian retailers like Shein and Shopee.
In Mexico, the outlook is also for robust growth.
According to local e-commerce association, AMVO, the country ended 2022 with 528bn pesos (US$31bn) in sales through digital channels, up 23%.
AMVO has not yet presented final figures for 2023 or estimates for 2024, but the ECDB e-commerce database platform predicted that Mexican e-commerce revenues will rise to produce a compound annual growth rate of 7.2% for 2023-27.
What is more, the Mexican internet association estimates that 80% of the country’s online shoppers bought from international retailers in 2022, up from 50% in 2021, with 49% of those sales coming from US sites and 34% from Chinese ones.
In Colombia, local e-commerce chamber CCCE projects 17% growth in total sales of online goods and services this year, while growth for 2023 is thought to have been around 12%.
Online retail sales were expected to have dipped 13% in 2023, but are forecast to rebound 8% this year.
In 3Q23, total Colombian online sales amounted to 15.4bn pesos, up 10.3% year-on-year, according to CCCE.
LOGISTICS
E-commerce in Latin America is set to continue taking a greater role in retailers’ strategies, as well as the omnichannel bet that integrates physical and virtual stores. However, there are still challenges on the logistics front.
“The biggest departure in expectations when we talk about e-commerce continues to be in last mile logistics, which still has a lot of room to evolve,” said Fernando Gambôa, partner at KPMG and consumer and retail leader for the consultancy in Brazil and South America.
“We have seen a tremendous leap in this type of logistics when we compare pre-pandemic and the present, but there is still a lot of room to advance,” he added.
According to Gambôa, more connectivity is also needed to allow new customers to make purchases in the digital environment, as well as receive their orders, even if they live in isolated communities.
Digital commerce has also become a reality for small business owners. In Brazil, on average it accounts for more than 40% of the revenue of microentrepreneurs, microenterprises and small businesses.
According to the study “Digital Transformation in Small Businesses” by the country’s micro and small business service Sebrae, approximately 70% of Brazilian SMEs use digital tools for sales.
The segments where this digitization has occurred most intensely are creative economy, logistics, handicrafts and tourism, where approximately half of revenues already comes from online channels.
The survey shows that the platforms most used by SMEs to do business are WhatsApp (56%), Instagram (43%) and Facebook (23%).
PAYMENTS, AI AND MORE
Social networks, notably TikTok and Instagram, have also become a new shop window for e-commerce and powerful channels of communication with Latin American customers in so-called “social-commerce”.
This means cross-selling via advertisement clicks, purchases during influencers’ live transmissions (“live-commerce”) and more – all of which are set for growth and diversification in the coming years.
In payments, several Latin American countries still have a lot of room to achieve greater maturity in the penetration of debit and credit cards versus current account transfers, for example. Others already see instant electronic payment formats – such as PIX in Brazil – outshining cards and beginning to dominate transactions.
On this front, another trend set to gain further ground is the Buy Now Pay Later (BNPL) format, provided in Latin America by companies such as Galileo and Addi as well as by global groups.
Research and Markets predicts that BNPL adoption in Latin America will grow steadily between 2023 and 2028, reaching US$52.5bn in transaction volume by the end of the period.
As for technologies, in addition to the use of AI for fraud detection and data analysis, advanced algorithms are expected to be increasingly present in the development of products, to understand consumers’ spending patterns and in new technological advances, including greater precision and tracking of logistics.
This has even accelerated the growth and launch of startups and technology companies specializing in logistics and transport services.
Logistics is also one of the main investment focuses of MercadoLibre, the leading marketplace and the largest company in the online sales arena in Latin America.
In March, the company announced plans to invest 19bn reais in Brazil this year, focused especially on new warehouses and related logistics hubs, in addition to tech advances and new services.
In Mexico, MercadoLibre is also launching new fulfillment units.
In June, the company opened a new distribution center, saying it invested US$1.6bn in Mexico this year, including the new facility, and underlining that more was to come.
Doubling down on its diversification strategy, the Latin American giant also announced an agreement to be a sales channel for Starlink in Chile, expanding its cross-sell and service offering for customers, which already included microcredit, insurance and Mercado Play content in partnership with streaming platforms such as Disney+ and Star+.
“If you look at MercadoLibre six years ago, in terms of scale, but also in the scope of things that we do and where we are today, they are extremely different companies. And I expect that to be the case in the next six years” CEO Marcos Galperin told investors in a 3Q23 earnings call.
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