Latin American Online Retailing To Reach $1.28 B In 2001.

Online retailing in Latin America continues to develop and revenues are expected to reach $1.28 billion (U.S.) by the end of the year—more than double the $540 million in revenues achieved in 2000—according to a new report released today. The report is titled Online Retailing in Latin America 3.0: Breaking Constraints. It was prepared by The Boston Consulting Group (BCG) and sponsored by Visa International, Latin America and Caribbean Region.

Brazil continues to lead growth within the online retail market in Latin America, with $906 million in revenues predicted for 2001. The country has actually increased its share of the region’s overall online market from 54 percent last year to 62 percent in 2001. Mexico ($134 million), Argentina ($119 million) and Chile ($45 million) round out the top four major markets. While in 2000 only two online categories had revenues exceeding $100 million, in 2001 there were four. The largest is automotive, with direct sales likely to reach $504 million. Consumer auctions—the largest category in 2000—will follow, at $203 million. In third and fourth place are travel, at $140 million, and computer hardware and software, at $139 million.

In contrast to North American online retail trends, the online grocery category is comparatively strong in Latin America, especially in Argentina and Brazil, where many consumers are already accustomed to having groceries delivered to their homes. With sales estimated at $79 million by the end of 2001, however, the online grocery revenue estimates are still dwarfed by those of the top four. Still, the online grocery category is the only online retail segment this year with penetration rates comparable to those in the United States.

“In a sluggish local and global economy, it’s surprising to note just how much growth is occurring in the Latin American region, and this growth is led by incumbents using the Internet to create competitive advantage,” said BCG vice president Jorge Becerra. “In the automotive category, for example, manufacturers in Brazil have launched direct-to-consumer ventures with penetration rates—and gross sales—unmatched in any other market, making Brazil the world leader in direct online auto sales.”

According to the report, a select group of Web-based and multichannel retailers selling goods and services online are finding new opportunities within the increasingly competitive online retail landscape and are learning to penetrate their existing markets more effectively. A small number of leaders have found creative, alternative ways to use the Internet, such as stand-alone Web kiosks, to expand their online retailing reach to the majority of Latin Americans who do not have access to computers. Others are instituting secure payment systems to alleviate consumer security fears. In general, however, weaknesses in the offering and continued challenges with payment systems, fulfillment, and customer service continue to limit the growth of online retailing in the region.

“According to the study, 66 percent of online purchases are made with credit or debit cards, about half with Visa-branded cards,” said Mario Mello, executive vice president, Visa International, Latin America and Caribbean Region. “Visa has been in the vanguard in changing consumer and retailer misperceptions about credit card fraud in Latin America. For example, the Visa Authenticated Payment Program is a comprehensive e-commerce program designed to ensure safe and secure online payment transactions for merchants, consumers, and member banks. The Visa Secure Electronic Commerce program, which was launched in Brazil last year, is another tangible way to make using credit cards worry-free for consumers as well as online merchants. The success of the program in Brazil has made it possible for Visa to roll it out in Peru this year.”

To date, the solid growth of Latin American online retailing has been impressive, but for the market to develop further, the report urges online retailers to give consumers a richer, more focused, better-executed experience. In last year’s report, BCG conducted a “mystery shopping” exercise that found considerable room for improvement within the typical online shopping experience. The same exercise was repeated this year, with no significant overall improvement in three critical areas: payment, delivery, and customer service. For example 95 percent of sites accept credit cards, but to some extent both consumers and retailers continue to be wary of credit card transactions, despite the increasing use of secure systems and digital certificates issued by third parties.

Although it’s true that the Latin American economy has softened, especially in Argentina, growth prospects for online retailing next year are positive. The report cites several opportunities for growth, including the following:

With an underpenetrated population in Latin America, it is possible to bring more consumers online using Internet kiosks and other creative solutions to cross the digital divide in the region.

With online sales representing less than 1 percent across all retail categories, there is certainly room for growth, even if total retail sales decline.

Certain categories, such as consumer auctions, offer a bargain—an especially valuable proposition during adverse economic times.

The report concludes by outlining some specific strategic imperatives for online retailers to improve overall operational effectiveness. Among them are:

Focus efforts on specific value drivers

The Internet can generate incremental revenues by both increasing loyalty among existing customers and attracting new customers. It can also reduce the costs of order processing, customer service, and even the productive process by streamlining the supply chain. But it is difficult to do all of the above. Online retailers need to be specific and choose their strategy carefully.

Identify and target the appropriate market segments

Retailers must identify and seek out the consumers most likely to respond to the value proposition they have to offer.

Develop an integrated cross-channel view of their customers

Multichannel retailers must figure out how to serve their customers in a consistent, integrated fashion whether those customers are shopping online or in one of the company’s stores.

Closely manage discretionary spending

Companies need to think hard about new initiatives and make sure that their spending has a positive impact on overall profitability, either by improving online profitability, or by using the online channel to improve offline profitability.

For more information at http://www.visalatam.com