How global digital commerce companies can compete with local giants, attract more vendors and increase local audiences in Latin America
See what Shopee, AliExpress, Amazon and Shein have been doing to thrive in Latin America and overcome local competitors.
João Paulo NotiniMarch 15, 2022
According to Americas Market Intelligence (AMI), e-commerce in Latin America (LatAm) is expected to have a 31% annual growth until 2024. By that year, the market would be generating a volume of around USD 611 billion.
Although the numbers are very promising, competition is fierce. Local and international marketplaces are in the battleground to increase their market share and thrive in the region. Thus, a recent trend has emerged. Now, global digital retailers, like Amazon, Shopee and AliExpress, are going local, while powerful local e-commerces such as Americanas, Casas Bahia, and Mercado Livre are going international. What does that mean? Marketplaces hybridization.
If you are still confused, don’t worry. We will unravel the concept of marketplace hybridization and dive deep on what global digital commerces have been doing to overcome the local competition, attract more vendors and increase local audiences in LatAm.
The current scenario
A study conducted by EBANX and Crawly, analysed different marketplaces in Brazil (half of them international and half local), in early September 2021 – AliExpress, Shopee, Amazon, Mercado Livre, Americanas and Casas Bahia. The goal was to check the first hundred product pages in each website (as the most relevant products are within these pages), and divide all products and sellers into domestic or international origin.
A total of 750,000 items, sold by more than 230,000 sellers, were considered in the analysis and it was found that global marketplaces are ahead of local ones. Why? They have much more local sellers and local products in their platforms than what local players have in terms of international products and sellers.
This movement is called marketplaces hybridization, and the idea is to connect the experience of shopping nationally to buying internationally.
“At the end of the day, through technology, everyone can be domestic, everyone can be international – so there is not so much a divide. It is a two-way street.”, said Lindsay Lehr – Payments Practice Leader at AMI (Americas Market Intelligence) in an interview to our Beyond Borders study.
Now, by looking at the following charts from Similarweb in regards to leading shopping apps, and Statista data about monthly website visits, we can see that global digital commerces such as Shopee, AliExpress, Amazon and Shein have been performing very well in the region.
Leading online marketplaces in Latin America as of April 2021, based on number of monthly visits (in millions)
After this overview, you are aware that global digital commerces have been winning the race in LatAm. But, how they have been doing it? Well, let’s have a look at Shopee, AliExpress, Amazon and Shein and get a glimpse of their hybridization strategies.
Shopee is a global Singaporian technology company and online marketplace that achieved a very fast success in terms of market penetration and expansion in LatAm. Founded in 2015, the company started its operations in the South Asian market, before arriving in LatAm in 2019.
Shopee’s arrival in LatAm was marked by the launch of its localized e-commerce platform in Brazil. Two years later, it expanded its operations to Mexico, Chile and Colombia, becoming one of the fastest-growing e-commerce players in the region. More so, Shopee has more domestic sellers in Brazil than cross-border vendors and it has been increasing local audiences fast.
Last year, according to Similarweb, Shopee’s website were expanding almost 900% in Brazil, when considering online traffic. Meanwhile, in Mexico, the shopping app has been taking local players out of the top 10. So, you might be wondering: how is the company has been competing with local players and achieving such a success?
Well, to put it simple, Shopee invested heavily on mobile-first and localized business strategies, consequently building a successful hybrid operation.
First of all, as reported to LABS, Shopee planned to increase investment towards a sustainable ecosystem which is focused on local communities, companies and users. On top of that, according to Felipe Feistler (Shoppee’s Business Manager in Brazil), the company adopts, for each market, a customized and localized strategy, ranging from marketing and product selection, to logistics.
“We allow our users to buy from our sellers from all over the world while we help our local vendors make their business grow” said Feistler.
Despite investing in the local business ecosystem and attracting local vendors, Shopee focuses on one of the strongest trends of LatAm’s e-commerce: online mobile purchases and discounts. As reported by Infomoney, being mobile first wasn’t new for Shopee. Why? When the company started its operations in the South Asian market in 2015, its platform was primarily launched as a mobile app.
In 2010, Alibaba group – the leading online retailer in China – created another business: AliExpress. The idea was to allow only small and medium sized Chinese-based companies sell on the platform to customers all over the world. So, expanding worldwide, AliExpress started its operations in LatAm around a decade ago and became a top 5 leading shopping app in key LatAm’s markets as per Similarweb’s ranking.
Last year, the e-commerce giant has opened a platform to local sellers in Brazil (for the first time in the Americas), with very competitive rates and free shipping for national orders over BRL 50.
Ken Huang, (Head of Latin America at AliExpress) explained at our Latin America Summit Podcast, how the company has succeeded in being ahead of its local competitors and thriving in the region. According to him, AliExpress already had a competitive advantage since it aligns low cost with a great product diversity. Thus, the goal in LatAm was to connect local consumers directly with Chinese factories, eliminating middlemen and any additional costs in between.
Recently, AliExpress saw opportunities in having an hybrid operation. They started investing heavily in their local business, supporting local sellers to digitize their products and selling online.
One of the advantages of a localized platform is that, previously, AliExpress operated only with US dollars and Euro. Now, Brazilian local sellers, have the option to transact in BRL and avoid currency exchange risks.
Furthermore, according to Huang, AliExpress has been really committed about improving local experience for its customers, as well as making all transactions more convenient, free of frauds and as fast as possible.
The company has also started offering popular local payment methods to compete with local players. In Brazil, for example, AliExpress included PIX – a very popular instant payment method among Brazilians – and installment payments (ranging from 6 and sometimes even to 12 months) without interest rates.
The global tech company from Seattle-USA has been for a long time a relevant online retailer in LatAm due to cross-border purchases. However, in 2015, it launched a local platform in Mexico and, to keep up localizing its operations in the region, in 2017 it was Brazil’s time to have a local platform.
Nowadays, Amazon has consolidated hybrid operations in both conuntries and, according to Statista’s ranking of leading online marketplaces in LatAm, in terms of monthly visits, the company occupies the second spot.
“Amazon has done an excellent job of awareness in Latin America. In countries like Mexico and Colombia, it already appears in the second position in terms of share of visits, loosing only to Mercado Libre”, stated Juliana Quarantani Junkes, Sales Director at Similarweb to our Beyond Borders study.
Euromonitor’s analysis of Amazon strategy towards LatAm has shown that the company focused on offering more local payment methods and delivery options to consumers in Mexico and Brazil – the only countries where Amazon has localized operations. – The global giant has already, for example, a partnership with OXXO payments in Mexico, and accepts PIX in Brazil.
At the end of the day, Amazon is developing its own ecosystem in Mexico and Brazil and attracting local vendors through incentive programs where these sellers can sell more and ship to the USA, for example.
From the consumer’s side, the tech giant has already launched subscription services through Amazon Prime (which includes Prime Video and Prime Music) in both markets. There is also a one-day delivery option which is free if the shopper is an Amazon Prime subscriber, and the goal is to keep introducing new features and services to enable a similar experience to what is offered on Amazon’s platform in the USA.
Shein is a Chinese online fast fashion retailer which was founded in 2008. According to Daxue Consulting, the company is the largest cross-border fast fashion e-commerce in China and has operations in over 200 countries, including most Latin American ones.
Although Shein doesn’t have local sellers on its platform, it competes well against local players and knows how to attract the local audience. How can we prove that? Downloaded Apps! As shown on Similarweb’s ranking previously in the article, the company appears among the top 10 most downloaded mobile apps in Chile and Mexico. Moreover, it was the most downloaded fashion app in Brazil in 2021.
Despite focusing on a mobile-first user experience through apps, Daxue Consulting observes several successful strategies that have been adapted and applied by Shein within the Western countries.
First of all, Shein’s goal is targeting the Gen Z audience, which includes price-driven customers who want a wide range of products. The company’s platform, despite offering a great variety of low cost fashion apparels and constant discounts, also focuses on making the shopping experience fun. Differently from most local competitors, Shein’s platform is constantly updating its product stock, so shoppers are constantly surprised by new items and discounts.
Finally, when it comes to marketing, the company bets on a strong social media presence. Shein focuses on less popular influencers to promote the brand and heavily relies on campaigns in social media platforms such as Instagram, YouTube and TikTok.
Wrapping up all winning strategies
As you have seen so far, global tech companies are flocking and expanding their operations in LatAm by applying similar hybrid strategies to overcome local competition, attract vendors and increase audiences. So, to make it even more clear to you, we have listed these strategies below and elaborated them based on our cross-border and local payments knowledge:
- Developing local platforms: if a global digital commerce company wants to compete head to head with local players, then developing a localized platform just like Shopee, AliExpress and Amazon did, is crucial. These platforms are designed to support the local language, currency, payment methods and much more.
- Offering local payments: the increasing hybridization of global marketplaces has a key backbone: payments. Bear in mind that about half of all Latin Americans are unbanked, according to the World Bank. So, if an e-commerce relies only on traditional payment methods such as credit cards, it will be losing a great share of their potential shoppers. On the other hand, offering local payments, which includes alternative payment methods, are very important to increase local audiences and attract local sellers.
- Enabling a single checkout: the idea is enabling a single checkout to shoppers, independently if they have placed products from domestic and international sellers in the same cart. Global companies that offer single checkouts generate a much better shopping experience although several processes must be adapted, including: payment splits, local and international remittances, payouts to both national and cross-border sellers, and intricate reconciliations.
- Performing local payouts: when global digital commerce businesses invest in the local ecosystem to attract and support local sellers, it is very important for them to perform local payouts. This means that they will be paying their Latin American providers, suppliers and partners in their local currency and payment preferences.
- Investing in logistics: there are delivery preferences for each country in LatAm and knowing them helps to overcome competition. However, one thing is clear: the quicker and cheaper shoppers receive their products, the better it is. So, investing on optimized local logistics, such as Amazon with its one-day delivery, or AliExpress with its free-shipping deal, creates a great local competitive advantage.
- Being mobile-first: according to our Beyond Borders study, after analysing 15 markets in the region, almost 60% of LatAm’s e-commerce total volume would be paid through smartphones in 2021. This means that online mobile purchases have surpassed desktops and digital commerce, especially the global ones, must have a mobile-first approach if they want to succeed in the region.
- Having a localized marketing approach: just like all examples that were cited in this article, global digital commerce companies must have a customized and localized marketing approach. This includes adapting communication to the local language and deeply understanding the local audience preferences which includes: cultural habits, popular social media channels, local holidays and key special shopping dates to launch campaigns, and much more.
Global digital commerce businesses willing to compete against local players in LatAm must be aware of the key takeaway here: applying proper hybrid strategies through localized financial processes and an optimized shopping experience.
You have also seen how some global players have been ahead of local ones in the region so, we would like you to takeaway the following statement from our CPO (Chief Product Officer), Ariel Patschiki:
“Not only the shopping experience improved, in terms of logistics, payments, inventory – but the level of trust in these retailers also increased. Maybe, in the near future, consumers will not even be concerned about where the product is coming from, if it’s imported or not. Because the level of trust in these international companies will be extremely high.”
Are you willing to have a deeper look on what is going on in Latin America? Then, you can’t miss our notable annual study: Beyond Borders 2021 | 2022: How digital payments and e-commerce are gaining traction in Latin America.