With rising markets, fast digitization, and recovering economies, understanding Latin America is fundamental to succeed when selling to the region.
In order to expand your company's operations in Latin America, first of all, it is necessary to understand your potential consumers well. By doing this, you will considerably increase the chances of business success when expanding operations elsewhere.
While geographic location may seem like a challenge, in reality it isn't — or at least it doesn't have to be. That's because, with the right partners, you don't need to open a branch in any of the Latin American countries to grow your business in this region.
In this post, you will learn more details about Latin America's potential for business and how the region’s consumers can be a differentiator in your expansion strategy. Keep reading!
Market trends in Latin America
According to a study carried out by BoaCompra in partnership with AMI, Latin America is one of the fastest growing regions in the world in terms of e-commerce and innovation.
Even with the hard blows dealt by the COVID-19 pandemic — which reduced the region's GDP by approximately 6% — there was major growth in e-commerce, as social distancing and other health measures imposed by the pandemic led consumers to migrate to digital commerce.
In 2021, many economies in the region started recovering; some countries, such as Argentina, Chile and Colombia, grew by more than 10% in the period.
In addition, the white paper points out that more than 50 million Latin Americans made an online purchase for the first time in 2020, and another 51 million did the same in 2021. This reinforces the idea that the Latin American population is increasingly connected and starting to buy more and more online.
In addition, the entry of new consumers into the digital market is expected to exceed 70% by the end of 2022, compared to 67% in 2021. In other words, the trend is for growth for those who want to take advantage of the opportunities in this growing market.
Consumption similarities in different Latin American countries
Before a company sells some kind of service or product, it is necessary that it has knowledge about the people who will possibly be interested in buying its items. Especially when we are talking about cross-border target markets.
To obtain useful information about these people, a consumer profile must be very well defined from the beginning so that this data generates value through the sales. Otherwise, the effort made in sales campaigns, for example, may not bring such interesting results, since the target audience is not well known.
Therefore, selling to Latin America is a great challenge, as the cultural, economic and political plurality means that each country has its own particularities. Understanding the consumer is essential in this region — in fact, dealing with this whole range of information will be the biggest challenge for anyone who wants to expand their business in this part of the world.
Despite this finding, Latin Americans have some very similar cultural traits. This is due to the fact that they have had their stories forged in similar ways and that they are currently experiencing major social and technological transformations at an accelerated pace.
As a region that is home to more than 610 million people (about 8% of the world's population), Latin America is undergoing an accelerated digitization process.
This opens up a lot of room for exponential growth in online sales, volume of money spent on e-commerce, use of digital products (such as store and digital banking apps) and mobile purchases, among others. E-commerce and the digital sector are growing at 30% a year, which shows how fast this landscape is changing.
Latin American consumers also have their particularities in relation to their shopping behavior, especially if we consider the most diverse means of payment available in these countries. From domestic credit cards to the habit of paying in installments, it is essential to understand how consumers in each Latin American country prefer to pay online.
In any case, Latin America has increasingly become the part of the globe that offers the best opportunities for doing business. Below, learn more about the profile of consumers in this continent's countries.
Who is the consumer from each Latam country?
The Latin American territory extends over more than 30 countries. Despite this, 93% of the region's GDP is the result of the sum of what just 6 countries produce, namely: Brazil, Mexico, Colombia, Argentina, Chile, and Peru. The population of these nations together makes up 88% of the human contingent in Latin America.
In demographic terms, it can be said that Brazil and Mexico are the most populous, with a contingent of 213 million in 2020 and 129 million in 2021. The data is from the aforementioned study by BoaCompra, in which an analysis is made of the region's growth potential, especially in e-commerce.
Even with the catastrophic effects caused by the COVID-19 pandemic around the world, there was an acceleration in the use of technology in Latin America, which meant that millions of people were digitally included.
Considering only the six largest markets mentioned above, about 77% of the population of these countries have at least one smartphone, having the same percentage of people with access to the Internet.
Even with all this change, the use of technology was already growing a lot before the pandemic even emerged. In other words, the health crisis only intensified the processes that had already been happening in recent years.
A common characteristic among Latin Americans is the constant use of social media. Instagram, Facebook and TikTok are the most popular platforms among those connected to the Internet. In addition, Argentina, for example, has almost 88% of its population already connected to the worldwide network.
If we compare with the rest of the world, Brazil, for example, is the fifth largest nation in terms of number of social media users, with 166 million people in 2021. In fact, in the coming years, it is estimated that this number will jump to 180 million users — which will represent 85% of the adult population.
Below, check out other characteristics of Latin American consumers regarding the use of technology.
As already mentioned, the implementation of new technologies in Latin America was already happening even before the pandemic emerged. This shows that the region as a whole is keeping an eye on what's new and wants the next step to be taken towards a more technological and innovative Latin America.
For example, with the implementation of 5G, people will have access to services that were not possible before due to technological limitations. Consequently, subscribing to streaming video or music services, for example, will be even more common precisely because of this technological advance.
With consumers having the power to choose, it will be even easier to offer services that were not possible before. This technological aspect of Latin Americans only tends to strengthen, especially due to the continuous use of mobile devices to shop online, social media, and video games.
Rising mobile purchases
In countries where state regulation is very strong and taxation on products and services follows inflexible laws, consumers have little choice but to look for items that are cheaper and more practical. This is the case in Latin America.
Since electronic products such as branded personal computers and other items are expensive, especially due to the fees paid on imported products, mobile devices such as smartphones become the most affordable option for consumers.
As a result, most Latin Americans use their smartphones for different purposes: using social media, participating in livestreams, playing games, listening to music, watching movies via streaming, among other things.
In addition to entertainment, Latin American consumers also use their smartphones to shop online. In fact, in 2021, about 65% of online purchases were made through these devices. By 2025, it is estimated that 78% of purchases will be made through them.
This justifies the need for businesses that offer a user experience where e-commerces is responsive and agile, from product selection to payment. This is the trend that will follow in the coming years.
The use of personal computers to shop on the internet is still common, even if smartphones are the reality today and in the near future. Even so, doing business in Latin America requires care regarding a good experience for consumers.
Therefore, offering websites that are fully responsive, that is, that work well on both large (PCs) and small (tablets and smartphones) screens should be the norm. Latin American consumers need this flexibility because it's so easy to move from a site that doesn't offer a good experience to one that does — after all, everything can change with just the touch of a screen.
Another point to consider is that consumers will hardly change from their mobile devices to a personal computer when they want to buy something. If social media, streaming services, games, and financial services are available in the palm of your hand, why bother opening a computer screen?
Latin Americans are flexible, but they prefer to have a personalized and practical user experience. Therefore, focusing on mobile devices is the best option when expanding its operations in the region, especially with regard to Brazilian consumers, who are among the biggest users of such devices.
E-commerce is there to stay
With the emergence of the pandemic, borders between countries were almost completely closed around the world. This led to the airline industry and, consequently, tourism to have immeasurable losses.
Cross-border purchases also plummeted, remaining at a near-zero level during 2020 and 2021. In 2021, international e-commerce started to recover, especially because of high consumer interest in international brands and electronic games.
The segment is recovering very well and it should grow 34% a year in the coming years, which is even faster than domestic commerce.
On the other hand, domestic e-commerce in Latin America grew approximately 121% during this period, moving US$180 billion due to the high demand generated at the time.
This trend is expected to continue for years to come, as merchants around the world are partnering with companies specializing in localization and offering local payment methods so that Latin American consumers can enjoy their games without major worries.
In addition, another feature that Latin Americans have been adopting in recent years is the use of instant payment methods. This is due to the increase in the number of digital banks that have entered the market in recent years and the increasing insertion of the population into the financial system. The launch of Pix in Brazil also contributed to the phenomenon, leveraging the instant payment revolution in the region.
A lot still needs to be done in Latin America, but the next few years are very promising for those who want to expand their operations in the region without having to open a branch in one of their countries.
How BoaCompra helps you sell to Latin America
BoaCompra by PagSeguro is an international payment platform that facilitates the operation of merchants from all over the world in Latin America through local payment methods. With BoaCompra Payment Processing Solution, you can offer more than 140 payment methods and local currencies without any hassle in 17 Latam countries.
With BoaCompra, it is possible to expand to Latin America without the need to open a branch locally. Combining our technology and expertise, which includes local and full-time customer support, your company's international growth becomes more viable and easier.
Regardless of the strategy adopted, understanding the importance of the profile of Latin American consumers is essential. This is because the particularities of each country cannot be ignored, since this population is very diverse in terms of economy, politics, and culture.
For this, establishing a partnership with those who understand the subject well is a great advantage for those who want to explore this region and get ahead.
Learn more about our services and discover how to expand your business in Latin America. After all, this region of the world has great potential. Contact us to find out how we can help, by clicking below!