Empty streets in the city of Bogotá, Colombia.
Streets in the city of Bogotá, Colombia. Stores closed due to isolation measures against COVID-19. Photo: Juan Camilo Jaramillo / Shutterstock
Economy

Consumer behavior will never be the same after COVID-19

Digital shopping and payments solutions are right now the best alternative during the isolation measures, and according to experts from AMI, these solutions are here to stay

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The world was taken over by COVID-19 pandemic, and isolation is an effective response to “flatten the curve”, i.e., reduce the contagion pace. As the United States becomes the new epicenter of the disease, and China resumes its activities – the industrial sector is already at 90% of its capacity –, the largest Latin American economies try to avoid the coronavirus escalation with more and more restrictive measures.

At home, Latin Americans, especially the ones with higher income, are betting on online shopping, deliveries and digital payment methods as never before. Last week, for instance, the Brazilian card acquirer Cielo saw the transactions with its link payment system increase by 200%

READ MORE ABOUT COVID-19 IMPACTS IN LATIN AMERICA

Even those not used to this new way of consuming digitally are learning how to use the smartphone to meet day-to-day needs. At the same time, it is natural for people to personally seek more sustainable consumption, even after the pandemic. After all, they are learning that they can live with less.

This is also leading small and medium-sized entrepreneurs, from branches as diverse as restaurants and furniture stores, to find for new ways to serve their customers, mainly online. And this new consuming behavior is here to stay. This is the opinion of experts from the consultancy Americas Market Intelligence (AMI)

“We can expect a boost in everything digital right now. Some of this consumer behavior being introduced right now will stick and cause sustained growth through this year and the next year,” said Lindsay Lehr, AMI’s expert on payments, who has been following the evolution of e-commerce in Latin America since 2015.

She also stated that remote working will likely be boosted too, as well as the necessary digital tools for it, such as softwares, open source solutions, cloud services, and so on.

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This is the most disruptive event in this industry. Over the past eight years, e-commerce has grown regionwide between 19% and 25% year through year. For this year we’re expecting a decline of 12%. Travel, retail and digital goods, however, will all behave differently

Lindsay Lehr, AMI’s expert.

And what is going to happen is a change in the distribution of e-commerce expenditure. “Travel is going to experience the biggest hit, falling almost to zero in April, and slowly recovering throughout 2020, but still being negative at the end of this year. We’re expecting that it will take around two years for Travel to fully recover”, she added.

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In a forecast that considers the expenditure pattern of January 2020, the expert says that by the end of this year digital goods are supposed to double its share in e-commerce sales in Latin America. Retail, in its turn, will have recovered by 2021, growing to similar rates to 2019 (see the estimates below). 

Source: AMI.

For 2021, the expectation is that e-commerce will grow 23% in Latin America. “Overall, the market will achieve only half the rate that we’ve expected to be achieved compared to our pre-epidemic forecast,” said Lehr.

Source: AMI.

At times like these, it is also important to learn from the past and from other countries. According to AMI’s managing director John Price, it was during the SARS epidemic in 2003 that the Chinese people really learned to buy online. That year, Alibaba grew 50%.

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Price said that between January and February this year, during the peak of the coronavirus epidemic in China, online sales grew by 22% in the country. Pharmaceutical, hygiene, cleaning and food products drove this growth. At the same time, the country saw the sales of its travel industry fall 95%.

Digital goods, which has been one the most promising segments in e-commerce in Latin America in recent years, is already telling a more positive story.

According to Price, the sales of the communication tool Microsoft Teams‘ jumped 100% in China, and Zoom usage was up 30% worldwide. Rappi, the Colombian delivery app that operates in eight Latin American countries, saw its sales jump 40% in the first two weeks of March. On the other hand, Uber sales are projected to go 70% down in the U.S. in March.

It’s important to notice that even at a time like this there is room for better services, and healthy competition. “Grocery stores, restaurants and bars are looking for the first time to online sales (as their main operation), and they may not be happy with the 37% margin charged by some delivery apps. They are pulling their own solutions. There will also be a lot of room for competition,” said Price during AMI’s webinar.