What You Need to Know to Launch Your Business in Latin America
So you are reading this post because you have identified the need to expand your business beyond its current state. You read everything about every emerging country out there, and Latin America’s e-commerce star market, Brazil, caught your eye, correto?
You’re muito certo (quite right). Brazil is responsible for almost 45% of the e-commerce sales in Latin America. But since you’ve set your eyes in this part of the world, I invite you to think of Latin America as one, because that’s what we’re able to deliver: one single market of half a billion people with one single payment solution. EBANX most successful merchants like Aliexpress, Gearbest, Banggood, Spotify and Airbnb have adopted this vision, naturally, recognizing the particularities of each country, especially when it comes to payment methods and communication.
To be successful selling to Latin America, businesses must make small or bigger efforts to adapt to local market practices. Here are some essential points to consider to successfully launch your sales in Latin America before Black Friday starts!
Latin Americans love foreign products.
Products of foreign origin benefit from a very special positioning in the minds of Latin Americans. They are regarded of higher quality than locally produced goods, they even provide status. Also, Latin Americans by default consider that purchasing directly from abroad is cheaper than purchasing those same products in their country through the traditional distribution channels.
Latin Americans understand they’ll wait a bit for their purchase to arrive.
Latin Americans that buy internationally plan their international purchases. Parents buy 3 month baby clothes for their newborns. They purchase their kids’ stationery months before school starts, nonetheless it is very important that the price is worth the wait, that is how international stores compensate for the longer period for purchases to arrive.
Custom taxes bother them, but that won’t keep them from purchasing.
Yes, custom taxes are a problem that bothers everybody that purchases abroad, but Latin Americans will not generally blame your store. The vast majority understand that taxation at customs is beyond your store’s control. It’s government policy that you cannot circumvent. Make sure this message is crystal clear on your website.
Brazilians, for instance, keep purchasing because even when a 60% import tax applies for purchases over USD 50, in mostly every case these products are still cheaper than if acquired locally. Taxes in Brazil are very high.
Sell like a local.
People keep paying with cash
In 2009/10 Latin America entered the digital economy. At the time only 25% of the population was banked, smartphones were a luxury and so was the internet. But things changed very fast. As ecommerce broke through all income levels, online stores adapted cash payments that were used for physical purchases to enable every Brazilian to purchase online, otherwise, using only credit cards, the attainable market would be minimal.
As the access to banking services remained unchanged, new payment methods for the unbanked emerged and digital features were added to cash payments. Today Latin America boasts a 60% index of banked population and a similar internet penetration rate. Around a third of Latin Americans have credit cards but only half of them can transact internationally. The payments landscape has changed radically indeed, but cash payments remain strong and they will not go away anytime soon.
Credit cards are important too.
Sure, so many Latin Americans pay with cash payments for their online purchases, but it is very important to understand that a good portion of online shoppers buying cross-border are indeed upper middle class citizens with international credit cards available, and prefer this payment method. However, credit card laws in many countries like Brazil do not block the exchange rate to the day of purchase, credit card issuers use the exchange rate of the credit card statement’s closing date, so shoppers are afraid of FX fluctuations. Local acquiring solves this problem since your customers pay in reals, they will not be affected by currency fluctuations.
Promote credit card payments for special promotions.
Cash payments do not perform well for limited time sales and promotions. Customers usually have 3 days to pay for a purchase, some might forget to pay their voucher, or may have purchase remorse if they don’t pay right away. With credit card payments this doesn’t happen since the payment is captured at the moment, on the go, leaving no time to re-think the purchase.
And finally, Latin Americans pay in installments.
Installments are a very curious cultural purchase behavior. In all Latin America, people are used to purchase a product and pay it throughout the year, in 2x, 3x, 4x up to 24x in countries like Mexico. This enables Latin Americans to expand their consumption. In Brazil 79% of all purchases are done with installments. Whether your store should offer installments depends on the the average ticket. Installments are used in higher average tickets, USD 50 is a reasonable starting point to offer installments.
Ready to sell globally like a local to Latin America? How about starting with Brazil? We’ve got some more tips that you will find useful: