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What: Retailers scramble behind Amazon and MercadoLibre to capture their share of expanding e-commerce in Latin America. This happens despite difficult payment and delivery challenges.
Why it matters: Experts predict e-commerce trends will grow by 19% in the next five years. They see it rising well above the global average of 11%. The lack of brick-and-mortar retail outlets in Latin America actually plays into the hand of e-commerce retailers. That’s because it allows them to offer products to consumers outside of major cities who don’t have many shopping options.

E-Commerce Trends Heating Up

E-commerce trends in Latin America provide no place for the timid. The challenges are well-known. Experts say they include lack of infrastructure, consumers without credit cards or bank accounts, high rates of online payment fraud, and obstacles to delivering product—to name just a few.

But the barriers to success don’t stop leading players. For example, MercadoLibre is diving into the e-commerce market and thriving.

One expert remarks the challenges are “daunting.” But competitors like Linio are finding ways to outperform. They chase what Linio’s General Director Olivier Sieuzac says is a “massive opportunity” in expected e-commerce growth in the region.

Linio has learned it had to expand its online business model. That means beyond just selling product. The strategy now includes things like creating its own delivery fleet. Linio also sells its hard-earned expertise to brands like Aeromexico who create their own online retailing presence.

To succeed in Mexico, Linio built partnerships with VISA to prevent credit card fraud. Consequently, it also joined arms with third-party payment channels. They include the convenience store chain Oxxo. Linio aims to provide the unbanked with cash-payment options.

Mexico, according to Sieuzac, offers the “worst of both worlds.” Mexico suffers high levels of online payment fraud and a low level of cooperation from banks.

As a result, Linio developed a proprietary algorithm with VISA as a response to reduce credit card fraud. Consequently, Linio also now offers its own credit card with a loyalty program. The loyalty program awards cash back on purchases.

Linio also created its own fleet in Mexico to handle the delivery of over-sized items like refrigerators and other home appliances.

Infrastructure, payment obstacles

Lack of infrastructure in Latin America makes delivering product a particularly difficult part of the e-commerce business.

Logistics and related issues amount to 15 percent of the cost of what’s sold online—well above other regions, according to Miriam Dowd, Marketing Manager at FOCUSECONOMICS.

Merchants experience the impact of “limited” access to credit card-based payment methods. Banks often don’t allow debit cards to be used for online payments.

E-commerce in Latin America faces many challenges, the most daunting of which are logistics, traffic, and infrastructure. Regulations and rules vary among countries. Merchants have and limited access to secure, credit-card based payment methods,” Dowd explains.

Online sales are expected to grow by 19% in the next five years. As a result, that is well above the global average of 11%. They are foreseen to double in value to $118 billion in 2021.

But on the positive side of the ledger, experts say market penetration is low compared to other regions. As a result, that represents lots of opportunity. Consequently, the market also offers higher growth rates.

“Online sales are expected to grow 19% in the next five years – well above the global average of 11%. As a result, they will double in value to $118 billion in 2021. Consequently, two of the three fastest-growing eCommerce markets in the world are in Latin America. They are Colombia and Argentina,” Dowd said in an email to Portada.

E-commerce trends forecaster eMarketer found even with this expected high growth rate, nearly 75 percent of the market of 650 million consumers expected to shop online is untapped.

E-commerce trends working for e-retailers

MercadoLibre boasts status as the undisputed leader in Latin America. Its huge geographic footprint and logistics expertise “have helped it to hold the lead,” Dowd said.

Amazon leverages its international recognition to become a leading player in Latin America.

And for Linio, expanding its business model and offering consumers a trusted, predictable and “formal” online shopping experience proves critical to its success, according to General Director Sieuzac.

Linio seeks to set itself apart from other online retailers by rigorously vetting its product providers to make sure what they offer Linio’s customers meets certain standards.

Linio offers free returns in its strategy of building customers’ confidence.

“We’re not leaving customers alone in a face-to-face situation with the seller,” Sieuzac said.

Linio’s strategy provides its online expertise to brands. They then create their own online shopping sites, a key component of Linio’s competitiveness.

As a result, Linio entered into a partnership to build and operate Aeromexico’s Club Premier online shopping experience.

Mexico offers the worst of both worlds: high levels of online payment fraud and a low level of cooperation from banks.

Linio also partnered with the micro-financing company ConCredito. ConCredito provides a huge presence in rural zones not necessarily within Linio’s geographic footprint.

Linio publishes its catalog of products on ConCredito’s website “Creditienda.” Linio spokesperson Paulina Maza said the company supports the ConCredito e-commerce site with specific promotion campaigns. They include digital marketing, logistics, fast delivery of products, and returns.

What lies ahead

The lack of brick and mortar retail outlets in Latin America actually plays into the hand of e-commerce retailers. That’s because they can offer products to consumers outside of major cities where consumers don’t have many shopping options. Sieuzac told Portada, “It’s a massive opportunity. You have people that simply don’t have access to products, even from a normal shop.”

A “key component” of e-commerce growth in Latin America proves to be shopping online with a mobile phone. As a result, a report by yStats.coMobile commerce reveals experts expect it to increase at a faster rate than e-commerce.

Brazil offers the largest consumer e-commerce market in Latin America. The report found experts predict Colombia to show a 20 percent growth rate through 2021.

A summary of the report reveals experts predict: “Rising internet and smartphone penetration rates, greater online payment security and development of MCommerce to contribute to the growth of online retail sales.”

What: Chilean bricks-and-mortar retailer Falabella purchases Latin America online retailer Linio for US $137 million.
Why it matters: Online sales in Latin America will double to US $118 billion by 2021 and Falabella is preparing to be a major player, using its physical stores to key advantage.

Chilean bricks-and-mortar retailer Falabella is determined to be a major e-commerce player, and will likely use its physical stores to key advantage as it ramps up to compete with Amazon and MercadoLibre for online sales in Latin America. That’s how industry and regional experts explain Falabella’s recently announced purchase of online retailer Linio for US $137 million.

The word analysts keep repeating is “omnichannel.”

Omnichannel refers to the ability of bricks-and-mortar retailers to offer in-store pickup of goods ordered online.

It could become a key competitive edge for Falabella.

“This is congruent with a trend we are seeing of retailers getting smarter about e-commerce,” Lindsay Lehr, a senior director at the consultancy Americas Market Intelligence tells Portada.

One of the big stumbling blocks to e-commerce in Latin America is the inability of people to receive packages in their homes, which is why omnichannel purchasing is increasingly important, Lehr said.

The word analysts keep repeating is ‘omnichannel’.

Leveraging Stores to Boost Online Sales

Headquartered in Santiago, Falabella operates department stores, supermarkets, home improvement centers, malls and financial services in Argentina, Brazil, Chile, Colombia, Peru and Uruguay.

With the Linio purchase, Falabella’s online footprint expands to cover Mexico, Colombia, Venezuela, Ecuador and Panama.

The acquisition boosts Falabella to the #2 e-commerce spot in its home markets and begins the process of positioning it to take on MercadoLibre and the expansion of Amazon (Amazon Mexico’s Guillermo Rivera recently joined Portada’s Council System) in the region, Lehr says.

“They are getting prepared for what’s ahead.”

Betting on E-commerce

“The company is betting on e-commerce,” analyst and retailing expert Jorge Lizan tells Portada.

Even though online sales now only make up 14-15 percent of its business, Falabella is spending 80 percent of its development budget on the online channel.

Falabella will mine Linio’s database and leverage its e-tailing expertise to position Falabella to take on MercadoLibre and Amazon, Lizan says.

“Linio is very small. They didn’t acquire Linio for the size of the company or to be a big part of Falabella’s business. What Falabella is looking for in this acquisition is to get the infrastructure and expertise,” Lizan says.

Falabella will mine Linio’s database and leverage its e-tailing expertise to position Falabella to take on MercadoLibre and Amazon.

Getting ready to face Amazon

The Linio purchase is about protecting future market share from online competitors MercadoLibre, Amazon, Wal-Mart, and even Alibaba.

MercadoLibre is the undisputed leader in e-commerce in Latin America.

Amazon has taken second place in Mexico and reportedly has plans to expand its operations in Brazil. Its web services division has expressed a long-term interest in investing in Chile.

Wal-Mart is heavily invested in online sales in Mexico and Central America, according to Lizan.

Growing Digital to Offer More Products

With the permission of its shareholders, Falabella plans to raise US $800 million in capital to ramp up its efforts to go digital in Latin America.

“This increase in capital will allow us to accelerate our digitalization and grow regional services for our clients, offering our products across a diversity of channels,” President of SACI Falabella Carlo Solari said in an announcement of the Linio purchase.

“With this acquisition, the company advances its goal of being a leader in electronic commerce in the region,” said Falabella’s general manager Gaston Bottazzini.

Expanding product lines online

The Linio purchase gives Falabella something more than just an online presence. Online translates into the capability to offer customers a broader selection of products beyond the brands Falabella sells in its physical stores.

“They can have limitless numbers of brands which is something they can’t do in their bricks and mortar stores,” Lizan tells Portada.

Moreover, Falabella wants their stores to become fulfillment centers for online sales.

“The name of the game is omnichannel and will increasingly be in the future. Falabella’s brick and mortar presence will definitely give it an edge vs. MercadoLibre,” Lizan comments.

The name of the game is omnichannel and will increasingly be in the future.

Seeing a big online future

E-commerce in Latin America is expected to grow by 19% in the next five years – well above the global average of 11%.

Online sales in Latin America will double to $118 billion by 2021. And according to Lizan, retailing in Latin America is still under developed and under penetrated.

Falabella has the largest retail customer database in the industry; dominates its markets in key offerings such as grocery, home improvement and home and décor; and recently announced a partnership with IKEA in Chile, Colombia and Peru.

From 36,000 feet, the Linio purchase is “very small,” Lizan said. But the advantages on the ground are strategic.

“It’s a benefit for Falabella to have an e-tailer in their portfolio because they will learn from them and the learning curve will be shorter.”

“It is a very strong statement by Falabella.”

We are introducing a bi-weekly summary of the most exciting recent news in marketing technology and trends. If you’re trying to keep up, consider this your one-stop shop.

LATAM retailer SACI Falabella will purchase the online retailer Linio for US $138 million. Linio operates in Chile, Peru, Colombia, Argentina, Mexico, Venezuela, Ecuador, and Panama. E-commerce in Latin America is expected to grow by 19% in the next five years – well above the global average of 11%.

Investors will pour US $4.5 million into the influence marketer FLUVIP to help it grow in Spain, Latin America, and the US. FLUVIP uses machine learning and predictive artificial intelligence to measure the impact and cost of influence marketer campaigns on social media platforms.

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Compliance with the European Union’s General Data Protection Regulation (GDPR) is costing Fortune 500 companies US $7.8 billion, according to Fortune. A survey by PwC pegged the cost for 200 US companies of 500 or more employees at between $1 and $10 million.

A majority of US marketers view the European Union’s General Data Protection Regulation (GDPR) as a threat to their ability to target audiences. Digiday talked to 46 US marketers who said they were more concerned about restrictions on reaching key market segments than the cost of fines for noncompliance.

Conversions of inbound marketing leads into sales is a lot lower than you may think at just 13 percent according to a study by Implicit, as reported by PMG360. Look for a 20 percent improvement when you nurture inbound leads with personalization, targeted reach, lead scoring and timely response.

 

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