Building customer loyalty in e-commerce in Latin America

Download the Global Merchant's Guide To Latin America November 2021, focused on e-commerce payments in Latin America

Consumers from across Latin America have flocked to merchants and e-commerce marketplaces over the past year for their daily purchases – many participating in e-commerce for the first time.

Latin America’s e-commerce ecosystem remains diverse, however, and consumers in each country have very different payment needs from each other, according to Camilo Riveros, chief innovation officer for Chile, Colombia and Argentina. at Dafiti, a Latin American e-commerce merchant of general clothing. The company serves Argentina, Brazil, Chile and Colombia. Each country has a distinct economy and its own set of banking and payment tools available to consumers.

“In our company, we saw that two of our countries were growing strongly, but not the other two, and [this] actually depends on the situation and social and economic cycles [within] every country, ”Riveros told PYMNTS in an interview.

Transparent support for consumers’ specific online payment preferences is a necessity, so e-commerce players who treat Latin America as a cohesive domain will be at a disadvantage. Rather, the success of online merchants in the region depends on the pace of developments in digitization and financial inclusion in each country they aim to serve.

Meet the unique payment needs of each consumer

The online shopping space in Latin America is becoming increasingly competitive as new players enter the region, Riveros explained, and attracting the attention of regional online consumers is becoming increasingly difficult now that companies no longer have a captive audience. Consumers who have been sequestered inside are eager to shop in person, pressuring e-commerce players to gain their trust.

“I think electronic commerce [space] takes on new challenges now because… Latin America is open again, ”he said. “Normal retail trade [channels] are back in place, and we have seen that the countries [such as] Chile which was developing a lot in e-commerce now [are] doesn’t grow that much because people… want to go out. They want to go out window shopping and go to a mall.

Supporting familiar payment methods is a way for e-commerce players to gain an edge by creating new and sustainable growth. Dafiti offers cash on delivery for purchases in Colombia, for example, said Riveros, as cash on delivery remains one of the most popular forms of payment there, even with the expansion of access. financial and digital. At one point, cash on delivery accounted for 60% of Dafiti’s transactions in the country. This can be attributed, in part, to a lack of banking access in this market.

“Although [eCommerce in] Peru has grown a lot, for example, the economies [such as] Colombia and Peru are still very [informal] savings, ”he said. “So they depend a lot on cash, [and] it could become a barrier for people to actually use e-commerce because… they are not part of the digital world.

The familiarity of cash with consumers in these markets is also an important factor in its endurance. Many customers want to be able to verify the product they viewed online when picking up, for example, or may not yet have full confidence in e-commerce marketplaces, Riveros noted. Platforms looking to earn this crucial trust for loyal customers must therefore ensure that they can support localized payment preferences while keeping a close eye on popular emerging payment methods. These include mobile wallets and online payout solutions, which seem to combine the best of both payment worlds – old and new – for budding digital shoppers in Latin America.

Make room for digital payments

Smartphone penetration is slowly increasing across Latin America, as is internet access, increasing the ability of consumers to take advantage of new and emerging payment methods. Mobile wallets, already widely available in some markets in the region, could see rapid growth in countries still heavily dependent on cash, in large part due to the value of trust.

Mobile wallets have the advantage of allowing consumers to send payments through a trusted third-party intermediary rather than directing them to an unknown e-commerce website, Riveros explained, making these tools potentially more attractive to consumers. consumers in certain markets. Google Pay and Apple Pay, for example, are currently not available in Colombia, but supporting them when they arrive will be a must for Dafiti, as consumers in the market are experimenting with emerging payment tools even as they cling to it. cash.

“We have to see what works for each country, how the banking system is… developed and [whether] we can [offer] different types of products that will provide better and more tailored services to our customers, ”said Riveros. “I think the most complex [market] … It’s Colombia because now the economy is more and more digital, so that changes a lot, but the money is still on the table. “

Future e-commerce players will therefore need to monitor the evolution of digital purchasing and payment preferences in each of the region’s unique markets. Finding a way to smoothly support a growing array of payment methods across the region is the next big challenge for digital merchants serving Latin America.

Joseph P. Harris