The growth of electronic commerce in the region will require the use of technological tools that can optimize the operation, logistics and guarantee users the security of their transactions. And, now, artificial intelligence is emerging as the preferred tool for companies to achieve many of these objectives.
Tools such as conversational sales via WhatsApp, Facebook chat, chatbots or machine learning algorithms that offer personalized product recommendations based on the customer's browsing and purchasing history are just some examples of how Latin American e-commerce has been able to take advantage of technology. to consolidate its growth.
According to Statista Digital Market Insights, at the end of 2023 the Latin American and Caribbean e-commerce market exceeded a retail sales value of US$117 billion. And, by 2028, it is estimated that this figure will almost double, exceeding US$205 billion.
Although its unexpected rise occurred after the Covid-19 pandemic - between 2020 and 2021, online sales grew an annual average of 30% in the region - technological advances and innovations have played an important role in this online boom. , as well as improving the shopping experience. By 2024, growth of 5% is expected, according to IDC.
The balance, so far, is positive. In Mexico, during the first half of 2023, a 23.3% growth in e-commerce was observed , with the second quarter being the one that contributed the most to growth, according to the NIQ Ebit – Webshoppers study. During the first half of last year, January, February and April had growth above 20%. And June was the most important month of the first half of the year, with growth of more than 50%.
Other markets deserve honorable mentions, despite their difficult economic situation.
This is the case of the Argentine e-commerce industry, which in the first half of 2023 invoiced 125% more than during the same period in 2022, above inflation (115% annually), according to the Mid Term 2023 study, prepared by Kantar Insights for the Argentine Chamber of Electronic Commerce (CACE). The report also indicates that six out of 10 companies showed greater growth in sales from their digital channels over physical ones.
The other side of the coin is Chile, with a more mature e-commerce industry and, at the same time, with greater challenges. After years of significant increases, retail sales in e-commerce faced a complicated 2023. Despite the boost of “Cyber” and “Black Friday” , online retail sales closed last year with a contraction of 20.1 % in that country.
The National Chamber of Commerce (CNC) of Chile attributes this contraction to the drop in sales of non-essential goods in the retail sector - which is a difficult time in this country. Thus, although this would be due in part to the comparison base, it would also be attributable to lower family consumption.
LONG WIND BET
Beyond the nuances described in Latin American countries, the trend is consistent. Growth opportunities and projections are strong. Proof of this is that, now, it is expected that by 2027 there will be around 388 million online buyers .
The commitment to technology is long-term. “Over the next five years, Latin American companies are expected to dedicate more than 25% of their IT investment to AI initiatives, generating an increase in the rate of product and process innovation. The good use of AI and automation (RPA) will respond to needs for workflow optimization and customer satisfaction. This, combined with good data management that ensures reliability and objectivity, will allow brands to improve their income,” says Diego Galeano, account manager of the Argentine software firm Baufest .
For Maite Aranzabal, professor at IE University , technology has enabled the conversion of data into action plans that allow personalized offers, launching offers appropriate to a market or customer group. It has also improved the supply chain and delivery logistics and product returns, while AI and machine learning allow the automation of tasks and improved customer service. “In general, it allows the improvement of the customer experience thanks not only to better use of data, but also because it offers more and new functionalities and the possibility of interacting through different interconnected channels (omnichannel),” says the academic.
Today, technology plays a key role in the digital strategy of retailers and pure players .
“It not only impacts the customer experience through personalization and efficiency in navigation and purchasing, but also the operations and logistics of the companies. In data analysis, facilitating a deep understanding of customers, trend prediction and informed decision making, and in the field of payments and security, with secure and convenient methods,” says Yerka Yukich, executive director of e-commerce at the Santiago Chamber of Commerce (CCS) .
ONLINE RETAIL
Retail has probably been one of the main beneficiaries of the explosion of e -commerce . Boston Consulting Group (BCG), through its research “Winning Formulas for E-Commerce Growth,” projects that this channel will represent 41% of global retail sales by 2027. This is a significant jump from 18%. registered in 2017, Latin America being one of the regions with the best prospects.
BCG divided the CPG and retail companies that participated in this research into groups of “winners” (companies that reported post-pandemic growth above 30% annually and are confident of experiencing the same growth or highest through 2027) and “laggards” (organizations that reported post-Covid-19 growth of 10% or less per year and lack confidence in their future e-commerce growth). The “winners” represented 27% of the retailers and 20% of the consumer goods companies, while 21% of the retailers and 25% of the CPGs surveyed were classified as “laggards.”
At the regional level, retail companies have reinforced their omnichannel strategy and strengthened their teams by hiring e-commerce and logistics executives . The rearrangement of executives has been constant in the retail and e-commerce sector . For example, in its attempt to become an Amazon-style marketplace , in 2021 the Chilean conglomerate Falabella recruited the former director of Mercado Libre for the Andean region, Jaime Ramírez, as regional CEO of Falabella.com. Mercado Libre's counterattack was more forceful. That same year, the Latin American e-commerce giant removed 10 managers from Falabella, Ripley and Cencosud.
But just adopting technology and recruiting specialists is no guarantee of a successful strategy. Proof of this are the disparate results obtained by large regional retailers . “Technology is a means, but it also requires leadership, agile organizations, aligned processes and a customer-focused business culture. Pure players also benefit from technology when developing a strategy. The great advantage of these business models is that their cost structure is lower than an e-commerce with physical facilities. This allows you to direct your spending towards activities that allow you to attract more customers. Like retailers , pure players have to be monitoring their customers. We have seen how omnichannel generates new purchasing behavior, which forces pure players to use different technologies in order to remain competitive,” says Sergio Cuervo, professor of the ESAN Master's in Marketing .
Access the PDF of the e-commerce Special from the February edition of AméricaEconomía here.
Beyond technology, what is relevant will be the synergy between strategy and decisions about your technology adoption. “I have had to review projects where the technology decision had a very short-term vision and a tool with limited capabilities was chosen that slowed down the digital development of the business. Which entails making a reinvestment to maintain growth,” says Nilo Alfaro, Head of VTEX Perú .
THE REIGN OF AI
All the specialists consulted for this article agree that AI is the key technological tool to promote and consolidate e-commerce in the nearest future. Above all, taking into account that in Latin America the conversion rate of visitors to online stores generally does not exceed 1.5%.
According to a McKinsey study, companies that invest in AI-powered personalization can increase their revenue by up to 40%. But the impact of AI goes far beyond hyper-personalization. “Without a doubt everyone should start investing in AI. Not only to not waste the great opportunities that are already within reach, but also to begin walking a path towards maturity. AI is a technology of which we still do not know the limits, but we do know that whoever is late in its implementation will be too far behind,” says Galeano.
For Helmut Cáceda, president of the Peruvian Chamber of Electronic Commerce (Capece) , AI can play an important role in logistics. This is because delivery time is the Achilles heel of many companies. “Before, to balance a thousand deliveries a day, many specialized people were needed. Today, artificial intelligence can optimize all routes in a second. This also impacts the sustainability of the planet by producing fewer carbon emissions, with more efficient shipping and, at the same time, less traffic in large cities,” adds Cáceda.
Another key point is to eliminate inefficiencies in the digital ecosystem that serves the entire e-commerce value chain . “The disorganized and disconnected growth of each of the components in the chain negatively impacts the ability to respond to consumers, costs and the experience of all those who interact.
with the value chain. Areas such as logistics, stock management and after-sales/returns are at the top of consumers in our region,” says the Baufest executive.
However, although AI is experiencing a period of peak, e-commerce firms have not yet exploited it according to the scope that this technology can offer them. For Cuervo, from ESAN, given the accelerated massification of technological tools, augmented reality would be the next step. “Businesses are expected to further incorporate augmented reality to improve the online shopping experience. “Real-time shopping is another great opportunity. What we are looking for is to simplify customer purchases, interact in real time in order to improve the consumer experience,” says Cuervo.
SECURE PURCHASE
The advancement of electronic commerce goes hand in hand with the increase in methods used to commit transaction scams. According to the Global Ecommerce Payments and Fraud Report, carried out by the Merchant Risk Council - an NGO made up of various members of this industry globally - phishing is the most recurring type of scam and by June 2023 it had affected 43% of e- businesses. commerce , compared to 35% in 2022.
Among the attacks, in Latin America the most common is the so-called card testing , a modality under which the fraudster checks if a stolen debit or credit card is still active before using it and has its funds. In Mexico, for example, 26% of consumers have experienced payment fraud in the last year, according to the 2023 Retail Report, presented by Adyen, a technological platform that allows companies to accept payments through e-commerce .
Losses due to cyber fraud in online purchases are multimillion-dollar. Telecommunications market research firm Juniper Research estimates that global e-commerce losses will exceed $48 billion in 2023, up from $41 billion in 2022. It also estimates that, from 2023 to 2027, global e-commerce losses This fraud will amount to US$343 billion. “Cyber fraud is one of the main barriers today in electronic commerce to make it secure and gain consumer trust. New and more advanced technologies appear every day, although fraud is also becoming more sophisticated. Different or multiple authentication systems are used, data tends to be encrypted through artificial intelligence and machine learning , and anomalous patterns and behaviors that could indicate fraud are detected. User education in safe practices on how to operate and pay in digital environments is very important,” says Aranzabal, from IE University.
Faced with growing cybercrime, some companies are taking action on the matter. For example, Mercado Libre has incorporated several levels of security into its platforms, both web and mobile, and has a team of specialists in charge of permanently optimizing its systems to prevent and detect any type of fraudulent operation. “We have advanced technology that analyzes more than 5,000 variables per second to validate each transaction and offer our users a secure environment, supported in turn by our Protected Purchase program. For us, data protection and the prevention of cyber fraud is a priority and our Fraud Prevention team makes use of the most modern technologies to ensure users the best experience in all transactions carried out," they say from the Argentine company. .
Cuervo, from ESAN, points out that investing in technology to minimize fraud and cyber attacks is a success factor for any electronic commerce. And, to do this, there are several elements that must be considered. You must invest in security measures, have robust and updated security systems ( firewalls , antivirus, intrusion detection programs). “In addition, computers must be protected with strong passwords that are updated regularly,” adds the teacher. While, for Alfaro, companies should look for suppliers with appropriate certifications, both for payment methods. All this so that companies can guarantee their clients that they have sufficient control mechanisms to protect their sensitive information.
