Selling cross-border in LATAM: challenges and opportunities

Mobile and internet penetration in LATAM allows it to be one of the fastest and highest-growing regions during 2019. Opportunities are just around the corner, but LATAM is diverse and multi-faceted – which is why one needs to develop an idiosyncratic understanding before taking the best out of it.

International merchants can definitely benefit from the mobile and internet penetration. However, they face other issues when looking into LATAM: unbanked population, undeveloped ecommerce, tendency to use cash, not to mention some other operational barriers such as chargebacks limits imposed by acquirers.

Part of the mentioned diversity comes from the fact that the macroeconomic status of each market varies heavily from one to another. Even within the same market, fluctuations along short periods can be dramatic and many merchants (wisely) escape from having to open a local entity. Thus, for cross-border selling and buying, currency and taxes are usually the first issues to be considered, but there are much more. If you navigate through the FAQs section of many retailers, SaaS or streaming services, you will notice that the main concerns are usually the same:

a. How much will the items cost in local currency?

b. Do I need to pay taxes?

c. What payment methods do you accept?

d. Do you deliver door to door?

And of course, if one of these concerns is troubling the consumer, it is also an issue for the merchant that is either expanding to these markets or growing in its own region. However, there is a way to sort it all out.

Facing the challenges

Firstly, many regional payment processors are focusing on cross-border trade, not only making it easy for merchants to establish in the different markets but also solving the hustle that currency conversion means for consumers. Therefore, choosing these payment processors correctly brings the merchant closer to the potential buyers, which will certainly feel more comfortable if the price is displayed in the same currency that they handle in their everyday life. These payment processors also take into account two other extremely important consumer behaviours in LATAM: the preference for cash payment methods and the possibility to divide the cost of the purchase into instalments – as many as possible! Nowadays, we, the LATAM consumers, still use cash when we buy clothes, purchase food, and pay bills. When it comes to instalments, it could be said that splitting the price is one of our most entrenched habits, and international merchants must not be oblivious to it.

When buying goods from abroad, many LATAM countries tend to be protective of the local industry and so, taxes come to life and represent a burden for the consumer. There is no way to get rid of them, but you can make the process less painful by finding the right ally. Some companies are (luckily) committed to the user experience. They offer an integrated journey where the buyer gets the product online, and the price already paid includes taxes and shipping to their doorstep – avoiding lines and last-minute surprises.

The role of marketplaces in cross-border trade

Marketplaces, just as Mercado Libre, are playing an important role in LATAM’s growth. These kinds of ecosystems bring confidence to the consumers, since they can compare prices, access a major amount of deals, pay through a secure gateway, and be protected from fraud. It is worth mentioning that the most common type of fraud in the region is known as friendly fraud. It occurs when consumers buy online using their own credit cards but then request a chargeback from the issuing bank. To keep the chargeback level at its lowest, merchants need to be careful when it comes to promised shipping times, conversion rates, quality of products delivered, amongst others.

In addition, marketplaces help international sellers to be in the shopping window for LATAM consumers through platforms such as Mercado Libre Cross-Border Trade (CBT). Whether you are a North American, European, or Asian merchant, big or small, you can be a part of this virtual shopping mall.

There are two additional concerning points to take into account: language barriers and international settlement. The first usually discourages the LATAM consumer, who is typically hesitant when it comes to choosing whether to purchase online or not. So speaking the consumers’ language is always a plus. This is particularly relevant in Brazil, not only because it is the country that holds the highest amount of ecommerce sales (USD 24.23 billion) in LATAM, but also because of the Asian merchants that are present here, many of which had made huge (and successful) efforts to translate their publications into Portuguese.

On the other hand, international settlement is an issue of great importance for merchants outside of LATAM due to two main reasons: their bank accounts are abroad and they are in USD or EUR. So platforms like Mercado Libre CBT understand these pain points and guarantee publications in home languages and international settlement in USD, while we, the LATAM buyers, can still get our products in our local currency.

Finally yet importantly, using fulfilment centres enhances user experience by being able to purchase international products with local delivery.

Let us hope that more opportunities will come for LATAM, along with a bunch of challenges that will stimulate a constant improvement of the region.

This editorial was first published in our Cross-Border Payments and Commerce Report 2019 – 2020, which provides a comprehensive overview of the major trends driving growth in cross-border payments, cross-border commerce, and marketplaces.

About Cecilia González 

Cecilia González has worked in international business development for more than ten years, focusing on payments for the past four and helping international merchants of products and services to establish in Latin America. Until recently, she worked for Mercado Pago, the payment platform of Mercado Libre.