Latin America's Ecommerce 'Hidden Gem'

China may have the largest online population in the world, but a much smaller country south of the equator could also offer an interesting opportunity to expand online.

Cyber Monday
Cyber Monday

“While the absolute number of consumers is higher in China, from a behavioral perspective, online shopping is much more wide-spread among online users in Chile,” says Hana Ben-Shabat, a partner at A.T. Kearney, a consulting firm that advises retailers on overseas expansion.

As the developed world teeters on the brink of recession , global retailers are expanding online as a cheaper way to tap growth in emerging markets. In lieu of brick and mortar stores, companies like Wal-Mart Stores , Gap and even high-end retailers like Louis Vuitton Moët Hennessy and Neiman Marcus are building brand awareness in emerging markets.

The value of China’s online market totals $23 billion, second in the world behind the U.S., earning it the No.1 spot on A.T. Kearney’s Ecommerce Index of top 10 emerging markets. Chile’s online market, by contrast, stands at $749 million.

“There's a big discrepancy in terms of the size of the online retail market, but when we look at online penetration and percentage of people who are actually active online, the percentage of people who shop online is highest in Chile,” says Parvaneh Nilforoushan, the study co-author.

For every 10 people online in Chile, seven will buy something online. Compare that to three in 10 Chinese Internet users making online purchases.

In fact, A.T. Kearney dubs Chile the “hidden gem” of Latin America. The average Chilean household has four credit cards and spends $158 per year online; China’s average is $17 per year online.

What’s behind that gap? Lower Internet usage among China’s large, rural population and infrastructure challenges outside its urban centers stymie China’s full, ecommerce potential. Plus, Chile boasts strong technology infrastructure, which stretches the divide even more.

“You can have high broadband penetration, adequate regulation and safe online payment mechanisms, but if the country's infrastructure is not as developed, you can't actually deliver the goods,” says Ben-Shabat.

So what’s Chile’s online retail look like now?

Local retailers Falabella and Cencosud dominate the market, with a combined 39 percent online market share. Meanwhile Wal-Mart holds 20 percent online market share and has publicly vowed to become Chile’s largest online retailer within five years.

But to compete on the local level, say the study’s authors, global retailers must not only understand their customers within each market, but also offer something unique.

-By Natalie Erlich

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