Voice of the Industry

mCommerce disruption in Latin America: what's next

Tuesday 24 March 2020 08:56 CET | Author Mirela Ciobanu | Voice of the industry

As Latin America has increasingly started to focus on ecommerce, Geoffrey Michener, CEO and Founder of dataPlor, explores mobile commerce disruption in LATAM

Latin America has arrived on the ecommerce scene. With a population of over 640 million people and two countries that rank in the world’s top 15 largest economies, the regional market potential is substantial. In recent years, that market potential has increasingly focused on ecommerce. In 2019, Mexico saw the largest percent increase in ecommerce sales in the world, with Argentina also ranking in the top ten. Predictions for future growth are also positive: the annual growth rate predicted for the region is over 20%, nearly double the global average.

Estimates put the number of Latin Americans buying online by the end of 2019 at 155 million, up more than 23% since 2016. This is a significant increase and led primarily by mobile device usage. The retail revenue from mobile purchases alone reached USD 11.24 billion, which Statista predicts is on track to more than double and reach USD 26.8 billion by 2022. 

One of the factors permitting the increase in mobile commerce is that Internet access across Latin America has grown significantly in recent years, particularly through the use of mobile devices. In 2019, Latin America had the highest regional Internet penetration rate, with 73% of its population using the Internet. Studies predict that nearly 100% of the population will have Internet connectivity by the end of 2020 thanks to smartphones. The Latin American smartphone market is one of the fastest growing in the world, with predictions that 90% of all regional Internet connections will take place on mobile devices by 2022.  

Another factor facilitating the growth of mobile commerce in Latin America is the increase in digital payment options. Contactless payments are gaining traction in the region, and direct ACH (a digital debit transaction) is a common method of payment for anything, including bills, rent, and retail purchases. Local fintech is developing rapidly, with 703 fintech startups originating in Latin America, and global fintech giants are moving into the region to take advantage of the market. Stripe, for example, announced its launch in Mexico in August 2019. Beyond fintech, here’s a look at some of the other industries benefiting most from the rise in mCommerce in Latin America.

Transportation and travel 

Transportation and travel are top industries benefiting from the expanded user base reach that mobile devices provide. On-demand car services like Uber base their business model on applications for smartphone users. Brazil is the second-largest market for Uber in the world, and Latin America was the company’s most profitable region in 2018. Chinese taxi app Didi acquired Brazil’s largest local ride-hailing company, 99, in June 2019, and is aggressively expanding throughout Latin America. 

Spanish mobile app, Cabify, is another company operating in the region that partners with local taxis to provide rides. All of these mobility companies are a big part of the mobile commerce scene in Latin America, providing services through mobile devices and offering digital payment options. 

In addition to local transportation options, mobile commerce is affecting the Latin American travel industry. From 2016 to 2017, travel in Latin America generated USD 336 billion across the region, and the International Association of Air Transport (IATA) cites Latin America as one of the fastest-growing air traffic regions, with a growth rate of nearly 6% per year. 

Part of this increase in travel is a result of mobile devices: 40% of Latin Americans now book their travel via mobile. By facilitating search and booking through international and regional sites, such as TripAdvisor and Despegar, and providing easy online payment options, growth in Latin America’s travel industry is likely to continue. 

Digital marketplaces

Digital marketplaces make online shopping easier by providing a one-stop-shop for consumers. The dominant digital marketplace in Latin America is the Argentine giant, Mercado Libre. According to their 2018 Sustainability Report, mobile is the primary method for accessing the site, with six out of 10 users registering from mobile device, 57% of sales from the mobile app, and over 46 million downloads of the app that year. The marketplace is hugely popular, with  over 160 million visitors each month, nearly three times as many as its competitors.

Second in the running is Amazon, and the company is making efforts to grow its presence in Latin America. In 2019, Amazon began investing heavily in the region, opening new offices and distribution centres. In Brazil, they also launched their Amazon Prime subscription service, including Prime video and two-day shipping throughout the country. 

Mobile entertainment 

Many consumers are utilising their mobile devices to stream their favourite entertainment through subscription services. Netflix has taken note and is focusing on producing more Latin American content to engage local viewers, with plans to open an office in Mexico City and to spend USD 20 million making 50 new shows and films in Mexico this year. Netflix is predicted to nearly double the number of subscribers in the region, going from 17 million in 2017 to 26 million by 2024. 

One of Latin America’s leading sports streaming platforms, Fanatiz, just announced a USD 10 million Series A round of funding. They broadcast soccer matches from all the top Latin American leagues. Viacom, the company that produces Nickelodeon, Paramount Pictures, and Comedy Central, partnered with Latin American mobile provider Telefonica in 2019 to offer content streamed via mobile, and Argentina’s popular Cablevision television service also offers streaming from mobile devices. 

The music industry is also taking advantage of mobile commerce opportunities in Latin America, with Spotify growing and testing new products in the region. In 2019, the company did two rounds of testing for its Premium Duo subscription plan in 15 Latin American markets. 

Mobile advertising 

With most people connecting to the Internet through mobile devices, advertisers are turning their attention to mobile-friendly ads. Worldwide, investment in mobile advertising now makes up two thirds of advertising spend, and Latin America was line: spending two thirds of its advertising budget on mobile in 2019. In the coming years, the focus on mobile advertising is predicted to increase, reaching over 80% by 2023, nearly USD 10.5 billion in revenue. 

As part of this shift towards mobile advertising, the types of ads are also changing. Video ads are becoming more popular, with numbers tripling in the last two years, and further developments in advertising media for mobile can be expected in the coming years. 

mCommerce moving forward

Industries across the board are benefiting from the increase in Internet access, mobile penetration, and ecommerce throughout Latin America, and predictions only see increasing growth as a result. The future of ecommerce in Latin America is mobile, and companies are already jumping to get in on the action. 

About Geoffrey Michener

Geoffrey Michener, CEO and Founder of dataPlor, is a 2x founder and international business executive with over 10 years of experience solving complex problems in the big data, small business, and enterprise space.

 

About dataPlor

dataPlor is a unique company that helps global companies succeed in emerging markets by providing hand-collected and triple-verified micro business data.


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Keywords: ecommerce, Geoffrey Michener, dataPlor, mobile commerce, LATAM, Mercado Libre, digital marketplace, smartphone, Contactless payments, fintech, Cabify, Despegar, emerging markets
Categories: Payments & Commerce | Ecommerce
Countries: Latin America
This article is part of category

Payments & Commerce