Latin American E-Commerce Market Faces Hurdles

The expected $8.3 billion e-commerce market in Latin America is not without barriers to success, according to research by Jupiter Communications.

Among the obstacles that companies must overcome to achieve success in the Latin American market are low credit card adoption and poor product fulfillment infrastructure, Jupiter’s research found.

“The growth we expect through 2005 is not just there for the taking,” said Lucas Graves, analyst for Jupiter’s Latin America practice. “Businesses that succeed in capturing those dollars will be those that apply innovative solutions to the barriers present in Latin America’s online markets.”

These barriers mask unexpected opportunities, and sometimes open the door to technologies and platforms that never reached their potential in more established Internet markets.

For instance, low PC penetration–a major barrier to Internet adoption in Latin America–will provide a prominent role for Internet access from alternative devices such as set-top boxes, creating new partnership imperatives for online business.

Similarly, the barrier of low credit card ownership across the region creates an opportunity for banks and other financial institutions to facilitate Internet commerce, which is a trend now beginning to emerge.

“First mover advantage and fast follower strategies won’t be enough here; explosive growth forecasts act as a powerful magnet drawing many U.S., European, and Latin businesses to this young Internet economy,” Graves said. “But so far too many companies are simply trying to replicate every business model dreamed up in the U.S. over last five years.”

Meanwhile, a poor delivery infrastructure in Latin America will reward online businesses that devise creative workarounds, such as piggybacking Internet commerce on existing retail outlets.

Jupiter’s research on Latin America shows that the online population will continue to grow at a rapid rate, with the majority of the estimated 66 million online users within Latin America concentrated in Brazil, Mexico, and Argentina.

Of those online users, approximately 34 percent will become online shoppers by 2005, up from 13 percent in 1999, with the purchase of online travel, personal computers, and groceries leading the way.

However, online penetration within the region will remain low, reaching a projected 12 percent of the population by 2005, highlighting the numerous challenges and opportunities that this market presents.