e-Commerce in Latin America: The perfect moment to get the fundamentals right
01 / 05 / 2020
Chances are that, so far, 2020 looks nothing like what you planned for. So if your plan was to start, grow or scale an e-commerce business in Latin America, what should you do next? By definition, black swan events - especially when they hit the entire world at once - have unpredictable consequences. But no matter what our “new normal” is going to look like, certain success factors for selling online in Latin America will not change any time soon.
Chances are that, so far, 2020 looks nothing like what you planned for. So if your plan was to start, grow or scale an e-commerce business in Latin America, what should you do next?
By definition, black swan events - especially when they hit the entire world at once - have unpredictable consequences. But no matter what our “new normal” is going to look like, certain success factors for selling online in Latin America will not change any time soon.
If your business has room for improvement in any of the following three areas, this might be the perfect moment to remedy that.
Inspire shopper confidence with a local language website
Don’t let language be a barrier to success. The importance of speaking to Latin American shoppers in their own language can hardly be overstated. At Worldline, we have seen many merchants try to start selling in Latin America with a website in English only: the results were as disappointing as they were predictable.
According to the EF English Proficiency Index, English skills are only slowly improving across the region. With the exception of Argentina, all major Latin American countries are ranked in the “Low proficiency” group. Unlike other regions, there is little variation between age groups in Latin America: young consumers aren’t any more confident in English than their elders.
Communicating in the local language is especially important at the payment point. Take extra care with the translation of every element of your checkout and payment process, to remove any friction and ensure a trust-inspiring and fluent experience for your buyers.
Of course, a local language website will also help you to be found by local shoppers in the first place: Latin Americans will not be using English to search for goods online, so if you rely on organic traffic at all, a local language website is key.
While Spanish is the region's lingua franca, to sell in Brazil you will also need a website in Portuguese. The languages might be similar, but they are different enough that Brazilian shoppers are likely to turn away if Spanish is the only option.
A high-quality website translation might be one of the best investments you can make for your Latin American business. If things are a little slow in other areas right now, spending that extra time to brush up your Spanish and Portuguese websites will set you up for future success.
Adopt the payment methods Latin Americans like to use
The second critical success factor for e-commerce in Latin America is to enable shoppers to pay with the local payment methods they prefer. And in most cases, that means something else than credit cards.
Many merchants optimistically enable payment in local currencies, sit back and wait for the sales to start rolling in. But very quickly, they discover two things:
Cart abandonment rates are dismal
Even when shoppers do complete their purchases, an appalling number of transactions are being declined.
What is happening?
The Latin American payment landscape is vastly different from what you might be used to in your home country and similar markets. Only one in three Latin American consumers owns a credit card, and many of these credit cards are only enabled for domestic use.
Moreover, even when cards are enabled for international purchases, cross-border transactions are frequently declined by the card issuer, especially when the currency request doesn’t match the issuing bank's local currency.
The majority of Latin American consumers prefer domestic payment methods, including when they shop online. Across the region, these methods represent close to 70% of all e-commerce spend. They comprise domestic credit and debit cards, prepaid cards, bank transfer solutions, merchant wallets, and more.
Since many Latin Americans do not have a bank account, a range of ingenuous cash-based payment methods also make up a substantial portion of e-commerce spend. Cash-based payments are an integral part of Latin Americans’ daily routine, and they are popular among consumers and merchants alike.
No matter what the near future holds: if your ambition is to be one of the e-commerce businesses that will thrive in Latin America in the years to come, getting your payment options right will be essential.
Solve your regulatory and fiscal challenges
New administrative headaches of all kinds may already be lining up outside your (home) office these days. So if immersing yourself in the fine print of Latin American tax codes is not in your weekend plans, we understand. The good news is that you do not have to.
In order to offer the right local payment methods and ensure sound acceptance rates, there used to be no alternative to having a local entity. While opening a local operation in one or more strategic markets may be the right decision for some businesses, it does add legal and fiscal complexities that not all merchants are able or willing to tackle.
Across Latin America, extremely complicated tax codes and business regulations make compliance very difficult. Taxes are one of the main reasons why Latin American countries generally score poorly on the World Bank’s Ease of Doing Business ranking. Of course, laws and regulations are also different from one country to the next.
Each country also has its own rules for how shoppers are presented with buying options and consumer protection information. Purchases must be validated against known export restrictions, and customers must be charged applicable taxes and regulatory fees.
To help international merchants enter Latin American markets without having to manage all this on their own, Worldline offers a streamlined, proven, and legally compliant business model for local processing, tax compliance and international settlements.
Our Money Remittance solution enables you to continue to trade cross-border, but with all the benefits of domestic processing. You can connect to all the relevant local acquirers via one single, integrated interface, and process payments across Latin America without needing to set up a local entity or even have a local bank account.
We will all be navigating uncharted waters in the weeks and months to come. But as we have seen, the foundations for a successful e-commerce business in Latin America will still be the same when the dust settles.
Worldline has been helping online merchants prosper in the region for more than a decade. Our local Latin American team knows these complex but promising markets inside out, and can guide you through the steps you need to take to set your organisation up for future success.
To learn more about optimising your payment strategy for successful e-commerce expansion in Latin America, download "The smart e-merchant's guide to unlocking profit in Latin America" or contact one of our friendly local experts today.