E-commerce booming in Latin America

E-commerce booming in Latin America

Stuck at home by the pandemic, millions of Latin Americans have put aside their apprehensions about buying online, thus making e-commerce flourish.

This boom is such that it has forced small businesses and neighborhood stores to integrate technologies or use modern communication tools to retain their customers.

“COVID-19 has been a trend accelerator, and in e-commerce it has been decisive. More than 10 million Latin Americans who had never made purchases online now do so regularly, ”Oscar Silva, an expert in global strategy for the consulting firm KPMG in Mexico, told AFP.

With a presence in 18 countries and a business model similar to that of Amazon or eBay, Mercado Libre is the major regional player in this online business.

As the Latin American economy collapsed, the Argentine platform doubled sales in the second quarter. The number of buyers increased 45.2% to 51.1 million.

In the meantime, its market capitalization has reached $ 55 billion, which puts it on par with Brazilian company Vale, Latin America's largest company.

“People were worried about fraud or that the product would not be as they expected. It is very likely that a high percentage of these customers will stay after seeing how easy and efficient online trading is, ”predicts Oscar Silva.

Survival

David Geisen, director of Mercado Libre Mexico, the Mexican branch of the platform, observes that “loyal users now buy in 12 days what they bought in 17 days before the epidemic, frequent users in 24 days what they bought in 79, and sporadic users in 29 days what they bought in almost a year ”.

In the early forties, sales focused on surgical masks, antibacterial gels, thermometers and oximeters. But little by little, they extended to goods and services.

The online consumer fever, fueled by fear of contagion, has even spread to very small economies like Cuba, with sales on the rise on the government platform “tuenvio.com”.

The KPMG specialist warns that many companies have gone bankrupt because they either did not offer online sales or were incompetent.

“The big platforms are the winners, but we're also seeing neighborhood businesses keeping their customers or getting new ones using something as simple as WhatsApp,” he explains.

Tax relief

According to Appsflyer, the download of “e-commerce” applications increased 93% in the second quarter in Latin America, with Brazil and Mexico leading the way.

The region's largest economy saw online commerce grow 56.8% between January and August, with a network of 135,000 new stores, which was key to boosting business recovery, according to the Brazilian E-Commerce Association.

Some governments are seeking to take advantage of this new market in order to mitigate the increase in public spending generated by the novel coronavirus.

In Brazil, the Ministry of Economy is seeking to apply a 0.2% tax on electronic transactions. In Mexico, it also intends to tax online sales.

This quest for new resources extends to online or on-demand audiovisual platforms, such as Netflix, which have also emerged from the crisis stronger.

Ecuador, for example, imposed a 12% VAT on them in September. Netflix's overall net profits increased 166% in the second quarter, compared to the same period in 2019, to reach $ 720 million.

As unemployment affects millions of people in Latin America, Sergio Garcia, 60, remains optimistic about his future after a year as a delivery man for a global e-commerce giant.

“With the pandemic, demand has increased a lot. If it doubles (at the end of the season), we'll see a 50% increase in wages, ”he hopes.

He earns about $ 0.30 per package delivered. “It doesn't sound like a lot, but it's more than in any other job.”

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