A growing number of U.S. online retailers and consumer brand manufacturers are taking that challenge on by setting up shop and selling online in Latin America.
Mark Brohan , Research Director
It wasn’t quite the same as graduating from the e-commerce school of hard knocks, but after six years of trial and error Tradercom USA Inc. has learned some valuable lessons about what works—and what doesn’t—in selling online in Latin America.
In 2006, Tradercom CEO Federico Torres set out to build an online retailing business in Latin America from a base in the U.S. To carve out a niche in Latin America’s growing business-to-consumer e-commerce market, which eMarketer estimates will grow about 110% from $29.70 billion in 2011 to $62.42 billion in 2016, Tradercom (No. 206 in the 2012 Top 300 Latin America) had ambitious plans to build a web store in multiple countries and offer steep discounts on well-known American products such as Fossil watches and Weber grills that are not always available through merchants in Latin America.
But selling online in a foreign country is never easy, especially in Latin America, a fast-growing and still-developing e-commerce arena where U.S. merchants face several substantial barriers to entry, including big tariffs and government red tape, sketchy local delivery options, and plenty of cultural differences. “There is a huge opportunity for U.S. web merchants such as us to develop a significant e-commerce business in Latin America, but there are significant challenges that we had to work our way through.” Torres says. “It took us a long time, lots of patience and a willingness to always try a new approach to build up a steady base of shoppers.”
Today Tradercom is an established and growing online retailing company. The e-retailer carries a web inventory of about 100,000 SKUs and sells online in Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Venezuela. Sales for the web-only retailer are on track to reach $8 million in 2012, double its 2011 sales.
Tradercom is one of a growing number of U.S. online retailers and consumer brand manufacturers setting up shop and selling online in Latin America. The market already includes 25 U.S. companies ranked in the Top 300 Latin America, which in 2011 had combined web sales of $1.43 billion, up 32.4% from $1.08 billion in the prior year.
And more North American online retailers are seriously eyeing Latin America for a new international opportunity or expanding their existing base of operations. For example Apple Inc. (No. 11), which has been selling computer hardware online in Latin America for several years, in December 2011 launched an iTunes store with a catalog of 20 million song titles for Brazil and 15 other countries in Latin America.
Consumers in Latin America also are big fans of mobile commerce and social media, and looking to conveniently shop online for the products they can’t find in local stores, says Kent Allen, principal and founder of The Research Trust, a San Francisco-based e-commerce and retailing industry research firm with clients in the U.S. and Latin America. “There’s only a handful of global e-commerce markets left where there are still lots of ground-floor opportunities to be the next category-killer web store, hot niche player or even the next Amazon, and that’s Latin America,” Allen says. “E-commerce in Brazil, Mexico and other parts of the region are still in an early growth stage and that’s attracting the attention of lots of U.S. merchants.”
But U.S. web merchants must overcome a unique set of challenges to sell successfully online in Latin America, especially with logistics, shipping and dealing with complex tariffs and other red tape that can vary widely from country to country. Tradercom has labored for six years to identify and overcome fulfillment, delivery and customer service challenges in Latin America. It has engaged local shipping partners, built a shopping cart that tells customers in each country and in their native language upfront what the expected shipping and tariff fees will be, and developed alternative payment methods.
When Tradercom began operations in 2006 among the company’s first moves was to partner with a Miami import, export and wholesale company with strong ties to consumer brand manufacturers and 25 years of experience in shipping U.S. orders to several Latin American countries. “We had the e-commerce expertise to build the multiple international sites and systems we wanted, but they had the expertise to get us the best deals on local and international shippers, and deal cost-effectively with the tariffs and red tape that can differ significantly by country,” says Torres.
All orders to Latin America from Tradercom are fulfilled and processed at a Miami distribution center. Prior to any final pick, pack and ship, all orders are reviewed and checked to see that all international shipping and tariff requirements have been met. Once the package is ready, the order is shipped and the customer is sent an e-mail notification with shipping details and an expected delivery date. If there are any problems, another e-mail is sent notifying the customer of the problem and the available options, including canceling the transaction and returning the shopper’s money.
Over time and working closely with its import and export partner Tradercom has developed a network of big and small shipping companies, including DHL International GmbH. Tradercom also has worked closely with DHL and its other carriers to develop sophisticated software programs that help Tradercom develop the most economical shipping rate for each order, monitor the status of each delivery and even develop local deliver routes that avoid high-crime areas. “Big shipping companies will charge up to $50 per pound to deliver to the biggest Latin American cities, and small couriers are cheaper but typically have very low service quality,” says Torres. “We’ve kept shipping costs lower by combining services of our logistic partners and creating integrated systems software that allow for a smoother tracking experience.”
For the first time the Top 300 Latin America is available in three formats: print, digital and in English as part of the all-new and completely updated Top500Guide.com. Information on how to order the Top 300 Latin America Guide is available here.