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Prior to pandemic ecommerce accounted around 5% of total resales in latam, and it increased to staggering 13%. Yet, even with this volume, the market size of $105B in 2020 was just a fraction of the US and Chinese markets. This indicates a vast untapped potential, with projections suggesting the e-commerce market in Latin America could reach $200 billion by 2025. Payment methods have evolved, with electronic payments transitioning from being a bottleneck to a booming sector. With investors taking keen interest, the region has seen significant funding, exemplified by Nuvemshop's 628.4 million USD raised Series E round in 2021. As Latin America continues its digital transformation, ecommerce stands out as a promising domain. 3 factors affecting the market potential of ecommerce in Latin America:
1. Increasing Internet and Mobile Penetration
One of the primary drivers behind the growth of ecommerce in Latin America is the increasing accessibility to the internet and mobile devices. Over the past decade, there has been a significant rise in internet penetration in the region, enabling millions of people to connect to the digital world. According to recent reports, Latin America's internet penetration reached 70% in 2020, showcasing the rapid expansion of the online population.
Simultaneously, Latin America has experienced a surge in mobile device adoption. With the growing affordability of smartphones and the availability of mobile data plans, more people now have access to online platforms and can conveniently make purchases through their mobile devices. This increased connectivity has fueled the growth of ecommerce, making it easier for businesses to reach and engage with a larger customer base.
2. Shifting Consumer Behavior
A notable shift in consumer behavior towards online shopping has taken place in recent years. Factors such as convenience, wider product selection, competitive pricing, and improved security measures have influenced Latin American consumers to embrace ecommerce as a preferred method of purchasing goods and services. With the ability to browse and shop from the comfort of their homes or on the go, consumers are actively seeking out online retailers to fulfill their needs.
The COVID-19 pandemic has acted as a catalyst in accelerating the adoption of ecommerce in Latin America. Lockdown measures and restrictions on physical retail spaces forced consumers to turn to online channels, further solidifying the importance and relevance of ecommerce platforms. This sudden surge in demand posed challenges for businesses unprepared for the volume of digital transactions, but it also highlighted the potential for growth and the need for further investment in ecommerce infrastructure.
3. Growing Digital Spending
Ecommerce growth in Latin America is backed by a significant increase in digital spending. As more consumers transition to online shopping, the region has witnessed a rise in the average transaction value and frequency of ecommerce transactions. Latin American consumers are becoming more comfortable with making online payments and are increasingly willing to invest in a wide range of products and services through digital channels.
An important factor contributing to the growth of digital spending is the expanding availability of payment options tailored to the needs of Latin American consumers. Alternative payment methods, such as local payment gateways, digital wallets, and cash-on-delivery options, have gained popularity, addressing concerns related to trust, security, and accessibility. This diversification of payment methods has played a crucial role in driving ecommerce growth by providing a seamless and trusted experience for buyers.
