Online retail giant Amazon.com, based in Seattle, Washington, announced plans this June to open operations in Brazil, making it one of the largest North American Internet stores to enter Latin America.
Though Amazon plans to make only its digital content available in Brazil (a huge portion of the company’s revenue comes from the sale of e-books) they hope to phase in physical products eventually as well, making it a potential game changer in a surprisingly empty market sector.
Netflix made waves last year when they began offering access to their streaming movie library in South America, including in Colombia, but the once-mighty online movie rental service has since struggled both in the U.S and abroad.
Nowhere to go but up
Online purchases represent a growing trend in Colombia, and the nation’s government has expended considerable resources courting ecommerce businesses and expanding connectivity.
“Electronic commerce has an increasing impact on the economy and the tendencies of people, allowing decreased costs both for producers and consumers,” said Lorenzo Villegas of the Colombian Chamber of Electronic Commerce, while noting that recent free trade agreements could help jumpstart the sector as well.
Indeed, currently tepid investment in digital commerce in Colombia seems surprising given the overwhelming growth of the nation’s economy in virtually every other sector. Very few businesses allow customers to make purchases online in Colombia, while consumers in North America and Europe stand poised to eliminate physical forms of payment almost entirely– even trading credit cards for smart phone apps.
The problem seems not to lie in a lack of connectivity, as Colombia is consistently ranked one of Latin America’s most highly digital countries, with more than 5 million broadband connections as of May 2012, according to the Ministry of Information and Communications Technology (MinTIC).
That connectivity can hardly be considered universal, however, as more than 65% of Colombian Internet-users are below the age of 35, and a whopping 96% of online time is spent on social networking sites; far and away the most popular use of the Internet in the country.
Increasingly connected, increasingly commercial?
Online shopping, by contrast, lags far behind, in no small part due to Colombians’ persistent mistrust of non-cash forms of payment and a wariness of dealing with distant merchants. Other barriers include poor shipping infrastructure, relative lack of access to credit, high import costs for foreign purchases and the prevalence of pirated media and counterfeit goods.
Also notably absent are homegrown applications that can benefit small businesses by making their enterprises more accessible. “The barrier keeping small and medium-sized business from going online is the lack of applications. They simply don’t exist and, for that reason, we have programs to create incentives their development. Colombian talent ought to be developing these applications,” noted Diego Molano, head of MinTIC.
Keenly aware of the lack of options available to business owners, Latin American e-commerce pioneer and online marketplace Mercado Libre recently announced a program offering small businesses in Colombia a free year of access to sell their products in personalized stores through the website, providing a simple avenue for entrepreneurs to grow accustomed to online sales with minimal risks and virtually no additional costs.
“This agreement will allow small businesses to utilize information technology to reduce production costs, increase sales and make their enterprises more efficient both at a regional and national level,” said Jacobo Cohen, vice president of legal and government affairs for Mercado Libre, one of a handful of large e-commerce companies to find success in Colombia.
Much work remains, however, for Colombia to catch up with its neighbors and the rest of the world. Latin America in general boasted an impressive 42% growth in e-commerce between 2010 and 2011, particularly thanks to Argentina, Chile, Brazil and Mexico. Globally, Goldman Sachs estimates that e-commerce could be responsible for as much as US $2 million in sales every second in 2012.
Compared with those numbers, Colombia lags woefully behind. Of the 42% regional growth in the sector, the Andean nation contributed only 2%, for example. Nonetheless, an optimistic perspective simply suggests that the nation remains tantalizingly untouched by an absurdly lucrative industry.
And optimism appears to be the best approach, given that the increasing prominence of e-commerce is all but inevitable in Colombia, which remains despite some daunting challenges a nation wide open for brave and visionary Internet entrepreneurs.