E-commerce opportunities: tapping into Latin American markets

The COVID-19 pandemic has brought about massive changes in the world of commerce and consumer behaviour patterns, with merchants worldwide having to adapt to an unprecedented demand for online products and services. 

With the pandemic shifting the consumer buying habits from offline to online and e-commerce becoming the key element that every merchant should consider, the current landscape is more prospective than ever. Industry predictions show that the global e-commerce market is set to generate almost $4.9 trillion by the end of 2021. As vaccinations against COVID-19 are rolled out across the globe, and physical shopping slowly back on the retail agenda, merchants will need to adapt their approach in order to maintain the momentum of e-commerce growth. One way to do so is by looking beyond their own borders and tapping into the opportunity presented by high-growth markets such as Latin America.

PayU data found that Latin America is on track to become the new powerhouse for emerging e-commerce leaders globally. In fact, the region is predicted to reach $187 billion by the end of 2021 and this shows no signs of slowing down. 

Recognising opportunities for growth across prominent verticals 

While the pandemic created a surge in online sales, consumer migration towards e-commerce has been underway for years. Our data reveals that by 2025, there will be 424 million mobile internet users in Latin America. 

This number will see continued growth as e-commerce takes off in popularity. Mexico, for example, saw verticals like beauty and cosmetics take the lead in online revenue, with a year-on-year growth of 1410% in 2020. In fact, beauty and cosmetics showed significant potential, growing by 133% in Latin America and reaching nearly $3.8 billion in the past year alone. 

For digital goods merchants, our data suggests that they would do well to look towards Chile and Argentina. Chile now projects above average growth in digital goods, creating a thriving market for merchants to tap into. Consumer spending in both Chile and Argentina increased significantly by 211% and 131% respectively and e-commerce revenue in Argentina alone is expected to reach $615 million by 2021. 

Merchants in the fashion and gallantry vertical on the other hand, would find an opportunity to expand their reach to Columbia. PayU’s platform saw a 124% increase in year-on-year consumer spend on fashion and gallantry in 2020 alone. Consumer spending in the vertical was particularly high in Q3 2020, where it increased by 211% compared to 2019 levels. 

For merchants looking to expand internationally across certain e-commerce verticals, a clear understanding of consumer behaviour and spending in their specific sector will be the difference between success and failure. 

Market analysis for further growth 

Even before the pandemic, countries like Brazil have proven to be amongst the most profitable high-growth markets for merchants. With a gross domestic product of $1.87 trillion, Brazil is the world’s ninth-largest economy, and the largest economy in Latin America. In fact, over the past few years, PayU saw online sales grow in Brazil by more than 50% across the country. Early data suggests that new consumer habits are likely to stick, making it the opportune time for a merchant to enter the market. 

Governments across Latin America have also invested in creating more inclusive environments to support the growth of e-commerce. This can be seen in markets like Colombia where the government introduced three VAT-free days in June, July and November 2020. Out of the three days, two were focused on online sales in recognition of the potential of e-commerce to power economic growth. 

The VAT free days were a huge success, and each day PayU processed more than 81 million transactions, well above our daily average. For merchants, collaborations between private and public sectors present the perfect opportunity for merchants to expand their operations. 

Latin America is home to billions of potential customers and cross-border sales within the region are showing promising growth due to two key reasons. Firstly, consumer-facing players like Alibaba, Wish and Amazon have recognised opportunities for growth within the market and are becoming increasingly prominent. Secondly, the emergence of payments technology that enables global cross-border payments for online retailers with a single, simple API integration. For those that can leverage these technologies, cross-border sales will present tremendous opportunities. 

The future of e-commerce

The pandemic acted as a catalyst in accelerating online shopping behaviours, something that will continue to play out even as we recover from the pandemic. In fact, a survey conducted by UNCTAD found that more than half of respondents will shop online more frequently, regardless of the pandemic. 

As we look ahead, there will be an increase in the number of merchants expanding their reach in Latin America due to its exponential growth opportunities. But in order to do so, merchants must partner with payment providers that offer holistic solutions. A frictionless payment experience and local market expertise will help alleviate the stress of expanding across borders. For merchants that have the relevant market knowledge and technology, a seamless transition to cross-border sales is theirs for the taking.