The future holds further growth and greater opportunities for companies in Latin America and the Caribbean as they continue to consolidate their position as major players in global e-commerce
E-commerce in the Southern Cone
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In recent years, a boom in e-commerce has swept the world, transforming how businesses operate and people shop.
The spread of e-commerce is hugely significant. According to the latest estimates, e-commerce sales in Latin America and the Caribbean will exceed US$117 billion by 2023 and are expected to almost double by 2028. This growth could potentially lower the cost of products for Latin Americans by increasing efficiency, cutting out intermediaries, and reducing transaction costs. It also gives consumers access to a greater quantity and variety of goods and services.
The region is still facing challenges: the data shows that domestic and cross-border e-commerce in Latin America and the Caribbean represent just 0.77% of GDP, one of the lowest shares in the world, compared to 3.11% globally. There are also significant differences between countries: Argentina, Brazil, and Mexico alone account for more than 70% of the region’s e-commerce.
To better understand the progress made by companies in this field in the Southern Cone, a new IDB report takes stock of the current status of this form of trade. The report is based on data on the adoption of e-commerce and online transactions, as well as a proprietary survey examining how companies in the five countries use e-commerce and the challenges they face in building their online sales. It also discusses the outcomes of specific government policies and makes several policy recommendations to boost cross-border online sales.
The survey led to some interesting findings:
- E-commerce is widespread: almost half of microbusinesses use a marketplace as part of their sales operations to individual consumers, while that percentage is around 70% for medium and large companies. Companies of all sizes, from small businesses to large corporations, are embracing the opportunity to reach consumers online.
- International expansion: One third of the companies surveyed that use marketplaces for sales report that they are expanding their operations internationally through e-commerce. This approach enables companies to enter new markets, increase their opportunities for growth, and diversify their revenue streams.
- Greater customer acquisition, revenues, export opportunities, and lower costs: whether through marketplaces or their own online stores, sellers report that e-commerce brings significant benefits in terms of new customers, sales, and export opportunities. They’ve also forged closer ties with local suppliers, which positively impacted their communities. About one-fifth of companies selling through online marketplaces have hired new services in their home markets, and one-fourth have increased the services they use as a result of selling online. In contrast, companies using social networks as a sales channel are less likely to see these benefits. However, even these businesses say that they have gained new customers, improved the customer experience, and increased sales to existing customers due to using these channels.
- Logistics challenges: 60% of companies selling goods say that high domestic logistics costs have cost them growth, while 57% attribute this loss to the quality of international logistics and 56% to the cost of these.
- Data movement and cybersecurity challenges: the top challenges for services companies are moving data across borders (64% of respondents), the quality of internet connections (60%), managing market access rules (55%), and cybersecurity (54%).
The survey reveals that e-commerce is a real success story in the Southern Cone. Businesses of all sizes are using this online revolution to expand their operations. However, the private sector’s logistical, regulatory, and data security challenges should not be overlooked.
The future holds further growth and greater opportunities for companies in Latin America and the Caribbean as they continue to consolidate their position as major players in global e-commerce.
For these reasons, the IDB is deeply committed to strengthening e-commerce in Latin America and the Caribbean. We firmly believe in creating and nurturing connections between Latin American and Caribbean companies and helping them find new business partners and export markets. To achieve this, we build business networks, create spaces for dialogue, and facilitate matchmaking among companies in the region. We also help generate empirical evidence to inform public policy. For example, we’ve carried out studies on logistical barriers to e-commerce, financial tools for businesses, and the challenges of online payments. We’ve also emphasized the importance of rules defining online intermediaries’ work and responsibilities and their impact on the digital economy, including creating and distributing third-party content used by platforms and access to this.
We also created ConnectAmericas, a regional and global platform that has become the region’s leading online network for entrepreneurs. It has more than 800,000 registered users and received more than 14 million visits. Online platforms like ConnectAmericas play a crucial role in reducing search costs, which makes it easier for companies to export. A study of companies using ConnectAmericas found that their exports increased by 17% after joining the platform.
E-commerce is not only a critical export channel for the region, it’s also a potentially significant growth engine for businesses.
In light of this positive outlook, we at the IDB will continue to work closely with the private and public sectors to foster this momentum. Our goal is to help build a more inclusive and developed region where e-commerce drives progress and prosperity for all.
