Latin America presents quite peculiar example of a region, which contains a huge market potential combined with rapidly growing middle class, while still having the second lowest level of digital sales worldwide (Practical Ecommerce 2015). In 2000 only less than five percent of Latin Americans were online, while in 2015 over 50 percent of the region used Internet, which was in the same level as in Middle East and in North Africa (Suominen 2017). The majority of Latin American countries suffer from undeveloped fixed networks, as many countries have dominant operators that can’t be properly challenged by new competitors, due to weak institutional frameworks that block the expansion of services (OECD and IDB 2016). However, Internet penetration has been steadily increasing during the last decades in Latin America, as can be seen from figure 10. Due to constantly developing network infrastructure, the growth can still be expected to continue at its current rate, although it’s yet far behind the numbers in North America and Western Europe.
Figure 10. Internet penetration in Latin America from 2000 to 2015 (adapted Statista 2017b)
More important statistics for foreign e-commerce companies would be the rate of digital buyer penetration. As can be seen in figure 11, Latin America has quite equal penetration rates with Central and Eastern Europe, although the growth rate for Latin America is almost 10 %, while Central and Eastern Europe’s digital buyer growth rate is only 5 %. There’s also plenty of room for growth for retail e-commerce sales in Latin America, as in 2015 they only represented less than 3 % of total sales in the region. (eMarketer 2016)
Figure 11. Digital buyer penetration worldwide in 2016 (adapted eMarketer 2016)
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Latin America North America Western Europe Central & Eastern Europe
Asia-Pacific
Digital Buyer Penetration in 2016
(% of Internet users) (% of population)
Logistics costs are in relatively high level in Latin America, when compared to other regions worldwide. For example, DHL’s representative has stated that their logistic costs are around 15 percent of the cost of the sold merchandise, which emphasizes the importance of choosing the right logistics provider. (Entrepreneur 2015) Inadequate logistics networks decrease confidence to use the Internet for digital trade (Meltzer 2016), since companies have to struggle with time-consuming export procedures, which also discourages private sector to integrate into global supply chains (Ueki 2015).
Although most of the Latin American markets are centralized in their capital cities, total market penetration in Latin America is basically impossible without having several different wholesalers. While in Chile the capital city, Santiago, represents 90 % of the wholesale activity in the country, in Brazil the wholesale activity in Sao Paulo is only 30 % of the whole country. Also, having a competition within a certain market will improve the performance of other distributors as well. (Price 2016) According to Price (2016), Latin America has been defined as a logistical nightmare, where logistical hurdles are greatest among the emerging markets in EMEA and APAC, when trying to purchase a product outside of Latin America via internet. Rodriguez (2017) brought up a study conducted by the Argentine Chamber of Electronic Commerce in 2015, which revealed that as much as 34 % of all the e-commerce deliveries require more than two weeks to be delivered to customers.
Although the situation is slightly better in Brazil and Mexico, is the slow delivery also in a top three complaints in those markets as well. Online sellers don’t have the infrastructure to consolidate and distribute goods beyond first-tier cities, and most of them are unwilling to make any investments to solve this problem, as according to sellers the lackluster demand doesn’t justify required investments.
Even in the largest urban clusters, such as Sao Paulo, traffic is so overwhelming that next day shipping terms can be impossible to fulfill. Also, local distribution centers rarely operate on 24-hour shifts, mainly because of security concerns, but also due to costly overtime and lack of skilled personnel. This prevents carriers from picking up goods at night when there would be less traffic. (Rodriguez 2017)
Then again, zip codes and postal systems are constantly being improved across Latin America, as most delivery addresses are too unsafe to leave parcels unattended, which means that couriers are required to return several times in order to complete the delivery. Demand for logistical providers has attracted several start-ups and Uber-type companies to offer their services to e-commerce companies, and some of these startups have actually been able to create competitive advantage by providing both faster delivery and lower costs than their competitors. Also, these logistics companies can help e-commerce firms to deal with customs bureacracy, corruption and delays, which are major obstacles in cross-border e-commerce in Latin America. (Rodriquez 2017)
Chile has been sort of a trailblazer in Latin America with logistical solutions. DHL, global market leader in the logistics industry, has introduced several consumer-focused conveniences that can bring Chile to same category as other modern e-commerce countries. These conviniences include evening and weekend deliveries, tracking application, lower charges for lightweight packets, and possibility to have returns to be picked up from households. Soon all of these can be common services in all around Latin America, as DHL is constantly evaluating other markets such as Brazil, Argentina and Colombia. (Reuters 2017)