TL;DR: There's definitely room to make more money inside the e-commerce industry in LatAm, even years into the pandemic. And here's why:

1. Latin America's still a blue ocean market for e-commerce. 
2. Latin America has a young population and it loves mobile phones. Cheers to that!
3. To no one's surprise, the pandemic was a game-changer. But these changes have come to stay.
4. The electronic payment market not only stopped being a bottleneck to LatAm's e-commerce but it's also booming.
5. Can you smell it? It's the cash flow fragrance. Funding opportunities are out there – for those who wanna work.

The covid-19 pandemic accelerated the global e-commerce market – you, me, and the rest of the world probably know that already. But here's something you might not know yet.

Markets where online shopping had been more consolidated from the start, like the US and China, are facing a prospect of saturation soon. In comparison, Latin America looks like a vast treasure chest at the end of the rainbow.

LatAm was the fastest-growing e-commerce market in the world in 2020, with 37% growth. But even after this boom, the market size (US$ 105B) still represented only 19% of the US market (US$ 538B) and 8% of the Chinese market (US$ 1,344B) in 2020.

In other words: there's definitely room to make more money, even years into the pandemic. Why? We showed you the whole landscape of the future of e-commerce in the region on our The LatAm Tech Report, which you can download for free. Here's a glimpse of that.

There's still a blue ocean for e-commerce

Think of that gentrified neighborhood in your city that, not so long ago, you did not dare to walk and night and didn't attract the attention of people with deep pockets, from tourists to real estate investors.

This was how e-commerce in Latin America looked like a few years ago: quite limited, while other geographies and industries drew more attention and generated more revenue.

The rapid growth of the LatAm e-commerce market since the pandemic has awakened deep pockets to the region's potential. This segment's market will reach US$ 200 billion by the end of 2025, while it represented only US$ 58 billion in 2019, the last year before the pandemic.

You might be thinking that other regions have also grown their e-commerce markets. And you're right. But here’s the secret sauce: the e-commerce penetration in the region is still relatively low. It should reach only 11,7% by the end of 2022, while the US percentage was 20,8% in 2021 - a little behind the impressive Chinese penetration rate of 27,7%.

That means: saturation is not on the horizon for whoever invests in the sector here. If LatAm catches up to the same kind of penetration as USA or China, we're talking about trillions of dollars of value creation, our friend Julio Vasconcellos from Atlantico shared on the Latitud Podcast.

Part of this value is already being created. Insider Intelligence found out that three of the 10 fastest-growing retail e-commerce markets will be in Latin America in 2022: Argentina, Brazil, and Mexico. The three had annual e-commerce retail growth beyond the world average (9,7%), with Argentina reaching an impressive 25% of annual growth, the research reports.

What about the coming years? According to Mordor Intelligence, the Latin American e-commerce market is the global leader in e-commerce growth and is expected to grow by 19% between 2022 and 2027, surpassing the global average of 11%.

We have a young population, and it loves mobile phones

In Latin America, smartphones are cheaper than desktop computers. This explains why 43% percent of people in Latin America and Caribe have access to residential broadband, while 57% of the population are mobile internet subscribers, according to GSMA research. 

After the pandemic, smartphone usage evolved until phones became Latin Americans' preferred way to shop. Mobile's share of all e-commerce sales was almost 60% in 2021. 

And that's not only because, as we said, phones are cheap and people have them more than desktop computers. When it comes to user experience, buying on mobile can be easier than on desktops.

Since most smartphones are personal devices, consumers can load and save their card information, connect with digital wallet apps, and use biometric identification. Shopping can also be more "impulsive": a purchase can be made anywhere, everywhere.

It's also relevant to add that Latin America has a population structure slightly different from other areas of the world. It has a higher percentage of young people, often familiar with the internet and influenced by web content. The rate of adults over 50 years old is only 23.4% in LatAm, while it represents 39.5% of the population in Europe and 35.9% in the United States.

This combination of rapid and massive adoption of smartphones, preference for mobile shopping, and the presence of so many digital natives (or almost so) in the consumer market makes Latin America even more interesting for those investing in e-commerce. 

It also makes it essential to think about localized strategies, so that the whole buying online process is as engaging and easy as possible for LatAm consumers. 

Didn't catch that? Here's an example. A survey conducted by All iN Social Miner in the last year pointed out that 76% of Brazilian consumers use social networks to search for items to buy. Therefore, the social media presence and the investment to better appear on search engines are even more important, and need to be paired with specific tactics. 

The influencer market is one of these tactics. Lu, the virtual influencer of the Brazilian retailer Magazine Luiza, is the biggest virtual influencer on the planet, with 6 million followers on Instagram (until December 2022), and proved to be an excellent bet from the retail enterprise.

On the other hand, you can't forget the basics. Gen Z won't forgive you if you trick them with glitz and glamour, but offer poor service. Providing a good experience is even more important than prices.

Online store apps can be a safe shopping space for many customers and should provide a smooth UX. 66% of online shoppers believe that a good navigation and order tracking experience is crucial for them to buy in the same place again, while only 50% mention the prices.

The pandemic was a game-changer. But that's just the start

Many Latin Americans indeed tried online shopping for the first time during the covid-19 pandemic: more than 10 million consumers made their first digital purchase in 2020. In April 2020, right after the pandemic started, e-commerce revenue increased 230% in the region.

But here's what's important: there's no way back. Yeah, the pace of market growth won't probably be the same as during the pandemic. But at least 30.5% of Brazilians are expected to shop online at least once a week after this is all over, according to IDC.

Big players are already using their time effectively. "Amid the growing e-commerce market and the fact that more shoppers are expected to enter the industry over the next few years, e-commerce giants are investing billions of dollars in the country to further strengthen their position in the Mexican e-commerce industry", BusinessWire points out about Mexico.

The same applies to Brazil. "The Brazilian B2C e-commerce industry has become a battleground for global and local players", BusinessWire also highlights. "Over the next three to four years, Brazil is expected to be the key growth market for international firms as more mature markets such as Europe and the United States reach saturation."

In The LatAm Tech Report, we've outlined both big players and startups that are surfing that virtual wave on six different segments: online merchants; marketplaces; vertical marketplaces; social commerce; aggregators; technology enablers; fintech e-commerce enablers; and logistics providers. 

Our compiling starts with big companies such as Magazine Luiza and Stone, goes to unicorns like Loggi, Olist, Nuvemshop, and Rappi, and finishes with rising startups such as Amaro, Chiper, Floki, Frubana, Morado, and Tul.

The e-payment market went from bottleneck to boom

Online payments used to be a massive bottleneck to e-commerce in Latin America – but that has changed.

A big step was taken due to the covid-19 pandemic: many Latin Americans were forced to enter the bank system to receive financial aid from local governments, reducing the unbanked population to 40 million people in Argentina, Brazil, and Colombia. Also, the expansion of fintech companies allowed many customers to finally request tax-free credit cards, an item that used to be prohibitive or at least avoided by many. 

Be it by governmental programs or by the expansion of fintechs, the opportunity for shopping virtually was opened to many people. According to an IBS Intelligence survey, 74% of respondents in Latin American countries said their payment habits have changed permanently since the pandemic outbreak. Findings also revealed that 15% of LatAm respondents used eCash in the last month compared to 9% across Europe and North America. 

As you can see below, the chosen methods of payment in LatAm e-commerce are now varied. And although all the progress in digital payments, more than 5% of customers still pay in cash when the product is delivered.

This growth in electronic payments should continue beyond the worst moments of the pandemic, just like the general e-commerce expansion. In Brazil, the volume of transactions with credit, debit, and prepaid cards, both in person and remotely, grew 36% in the first quarter of 2022 compared to the same period last year, reaching R$ 758.6 billion, according to a new report from Abecs (an electronic payment industry association).

And there’s something more disruptive than card adoption going on, as we've outlined in The LatAm Tech Report. Payment methods such as mobile wallets or BNPL (Buy Now, Pay Later) are becoming more popular and offering new possibilities to customers. 

There's also our dear, dear Pix. This immediate bank transfer system became a non-bureaucratic payment method in Brazil, requiring only a bank account to make real-time non-charged transfers to anyone who also owns an account, from big retail chains to small merchants. 

Other similar initiatives have flourished in Latin American countries. In Mexico, CoDi was launched in 2019. It’s a digital payment platform that offers QR code payment, NFC technology, links, and text messages. Colombia has Transfiya, while Peru has Yape and PLIN.

Can you smell it? It’s the cash flow fragrance

As you might have noticed, we portrayed a realistic scenario of the LatAm e-commerce market in the near future, based on a lot of data. And it turns out the landscape's really positive, and you can see that investors are optimistic with reason.

E-commerce has been one of the focus verticals for venture capital investors in Latin America, either by local or international funds. According to LAVCA, investments in LatAm startups reached a record US$ 15.7 billion in 2021, with fintech and e-commerce responsible for 64% of that total.

‍Every other day, there was a record of capital raised in the LatAm e-commerce sector in 2021. The graphic below shows the accumulated result:

A good example of successful funding is the e-commerce platform Nuvemshop. Based in São Paulo, the company announced in 2021 a US$ 500 million Series E round of funding, only five months after a US$ 90 million Series D, placing a US$ 3.1 billion valuation on the company. 

"With 650 million consumers, Latin America is not only a huge market, but it is the fastest-growing e-commerce market in the world," said Matt Gatto, managing director at Insight Partners, one of Nuvemshop's leading investors. "By offering its powerful and easy-to-use platform, built and tailored specifically for Latin America, Nuvemshop is uniquely poised to continue to lead the region's digital transformation."
What about right now?, you might be asking. The LatAm Tech Report shows that the lucky ones appear to be the fintech e-commerce enablers – companies that facilitate e-commerce transactions, such as the electronic payments segment.

In the medium and long term, other players that might be the apple of the VCs' eyes are e-commerce aggregators, social commerce players, environmental-friendly logistic providers, and e-commerce startups that benefit from network effects (more about that last one on our podcast with Pete Flint and James Currier, both from the venture capital fund NFX).‍

Wanna join big players, unicorns, and rising startups as the next bet for e-commerce in the region? Check out the full insights, including all the challenges you might face when taking advantage of all the opportunities LatAm's e-commerce presents, on the full version of The LatAm Tech Report.