E-tailing grows in Latin America, despite obstacles

Online retailers in Latin America need to improve their payment systems, customer service and order fulfillment operations, and increase their product variety, according to a study released last Tuesday.

The Boston Consulting Group Inc. (BCG) this year found “no significant overall improvement” among online retailers in Latin America from last year in the areas of payment systems, customer service and order fulfillment, the consultancy said in its third annual study about online retailing in the region.

“Few sites offer a really world-class end-to-end shopping experience,” the report reads.

A big part of improving the shopping experience is knowing the likes, dislikes, needs and concerns of one’s customers, an area in which many online retailers in Latin America aren’t doing as well as they should.

“Most online retailers in Latin America make no concerted effort to identify and target their best potential customers – including those who may not currently be online – or to structure their offerings to meet customers’ needs. To achieve long-term success, online retailers must understand the specific needs of their target consumer and tailor their offerings accordingly,” the report reads.

If vendors improved the online shopping experience in Latin America, buyers would spend more than what they currently spend, BCG concluded. A small, select number of online merchants are reaching out to buyers who don’t have PCs by establishing Web kiosks in public places, a move that gets high marks from BCG for creativity and business-savvy. Others have increased sales by beefing up security, another important issue for buyers in Latin America, where “to some extent, both consumers and retailers continue to be wary of credit card transactions” BCG said in its report.

Despite the still sub-par shopping experience customers are faced with, online retail sales are expected to more than double in 2001 from last year in Latin America, to US$1.28 billion from $540 million, a 137 percent increase, according to BCG’s study, which was sponsored by Visa International Inc.’s Latin America and Caribbean unit.

Yet, the $1.28 billion figure represents less than one per cent of total retail sales in Latin America, leaving much room for growth and providing a big incentive for online retailers to improve the shopping experience for users, BCG said.

“For the market to develop further, online retailers need to give consumers a richer, more focused, better-executed experience. What constrains the future of Latin American online retailing in the near term is not so much a lack of consumer demand – or even of Internet access. It is rather the inferior quality of today’s offerings,” the report reads.

The largest business-to-consumer segment is automotive, with an expected $504 million in revenue in 2001, most of it coming from online sales of cars in Brazil. BCG reports that General Motors Corp. has had the biggest success so far in this segment, thanks to its decision to sell its new Chevrolet Celta economy car in Brazil at a discount over the Internet. This initiative “has driven the vast majority of that model’s volume online and should generate more than $400 million this year” in Brazil, the report reads.

Online consumer auctions are expected to close the year at $203 million, followed by sales of travel-related products and packages ($140 million) and computer hardware and software ($139 million).

Brazil is expected to end the year with $906 million in online retail sales, about 71 per cent of the region’s total. M