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M-commerce in Latin America
Opportunities, best practices and case studies
May 2016
2
Size, segmentation, growth
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In 2016, Mobile Commerce Totaled $5bn in Latin AmericaWhen tablets are removed from the analysis, the m-commerce market is smaller than at first glance
• Most estimates claim the mobile channel represents ~20% of all e-commerce in LatAm.
• These figures are misleading, however, because tablets alone represent an estimated 15%.
• The tablet is used as an alternative to a home computer. It does not mean the user is actually mobile. A mobile user requires different features and products to engage in m-commerce.
Projected e-commerce in Latin America, 2015-2019 billons USD
Sources: eMarketer, Gestión, El Financiero, La Nación, interviews, AMI analysis
*Excludes travel services and event tickets
$18
$6$4 $2 $2
$7
$3
$1$1
$0.2 $0.3
$3
$1.8
$0.4
$0.3
$0.1$0.3
$1.0
Brazil Mexico Colombia Peru Argentina ROLA
PC Tablet Cell phone
$38$50 $59 $69
$81$10$12
$14$17
$19
$4
$5$6
$8$11
2015 2016 2017 2018 2019
PC Tablet Cell phone
CountryMobile penetration of e-
commerce,Excluding tablets, 2015
Brazil 8%
Mexico 5%
Colombia 5%
Peru 3%
Argentina 5%
E-commerce by country*, 2015, billons USD
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M-commerce by Verticals: The Case of BrazilM-commerce in retail faces large barriers. Services and digital goods are prime opportunities
*Includes tabletsSources: E-bit, interviews, AMI analysis
Brazilian e-commerce, billons USD, 2015
Key verticals
• Digital goods and services have the greatest potential in the m-commerce channel.
o They reach 30% e-commerce penetration
o They represent the convenience and on-demand economy
o Consumption is often on-the-go and immediate
• Purchases in retail and tourism require a greater time investment
o To promote m-commerce in these verticals, merchants must offer creative incentives
$10
$6
$3
$2
$1
$1
Retail Tourism Digital goods andservices
PC Mobile*
Transport Delivery Entertainment Education Telecom
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M-commerce Growth: Full Speed AheadWhile e-commerce growth is starting to plateau, m-commerce is still in early stages of development
Growth, CAGR 2015-2019
Sources: eMarketer, Gestion, El Financiero, La Nación, interviews, AMI analysis
E-commerce
M-commerce
15%
25%
18%
37%
20%
41%
30%
55%
15%
40%
Growth drivers
Smartphone penetration growing
at 12% annually
Limited access to broadband and Wi-Fi
High cost of PCs; low cost of handsets
Sales via Whatsapp/social
media
Growth of key verticals
Creative merchant solutions
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Barriers to SuccessFear of fraud and low banked rates are major challenges. This creates opportunties for innovation.
Barrier Opportunity for
Fear of fraud
• Consumers believe purchases made on a mobile phone are less secure than those made on a computer
• Merchants• Card networks• Banks• Gateways • Technology companies
Limited access to payment methods
• Credit card penetration varies from 32% in Brazil to 12% in Peru • Alternative payment providers
Fear of “wasting” data
• 95% of mobile subscriptions in LatAm are prepaid
• Consumers don’t want to “waste” data on online shopping
• Mobile operators• Merchants
Lack of mobile sites/apps
• Few merchants in LatAm have mobile websites. Even fewer have apps
• Developers• Payment gateways
Inconvenience
• Extremely low conversion rates (1-2%) due to lack of tools to faciliate entering in payment information
• Aquirers• Payment gateways• Digital wallets
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Optimizing Payments for theMobile Channel
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Banked vs. the UnbankedSmartphone penetration is growing more rapidly than the banked rate, creating two key consumer segments
Banked
Unbanked
25
124
192
223
39
54
2015 2019
Sources: The World Bank, eMarketer, MasterCard, GSMA, AMI analysis
Financial inclusion in Latin America, millions of people, ages 15-65
Smartphone users Feature phone users Implications
• Nearly all banked Latin Americans use smartphones. They are the target population for m-commerce.
• The unbanked who use smartphones is the consumer groups growing most rapidly – 12% annually
• This group often wants to access m-commerce but cannot do so for lack of a payment method
Totals 204 / 277 175 / 116
Totals
220 / 240
192 / 172
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Smartphone User Profiles – Two Distinct GroupsBanked smartphone users need advanced features to improve conversion. The unbanked need alternative payment methods designed specifically for them
Banked Unbanked
Characteristics
• Ages 18-40 years old• Urban• Live in central, traditional
neighborhoods• Professionals• Have a PC and stable access to Wi-Fi• Have post-paid phone plans• Use credit cards• Use a wide array of smartphone
features
• Ages 18-40 years old• Urban• Live in city outskirts • Work in the informal economy • May not have a computer• Have limited access to Wi-Fi. Depend on
data plan• Prepaid cell phone plan• Use cash• Use smartphones primarily for
communication and social media
Annual growth
3% 12%
Relevant verticals
• All segments, especially taxis, home delivery, education
• Entertainment• Mobile downloads• Bill pay• Mobile top-ups• Small business uses
Relevant m-commerce functions and products
• Digital wallet• Personalized online store• Recurring payments• One-click payments
• Prepaid solutions • Alternative payments• Free access to mobile sites• Purchasing via social media
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Credit and Debit Card Penetration, 2014
Being banked is often not enough to access m-commerce. In some markets, credit is the only viable m-commerce payment method.
Credit Debit
32% / 60%
18% / 27%
14% / 30%
12% / 21%
28% / 54% 27% / 44%
Sources: World Bank
Delivery services, digital downloads, games, and entertainment are attractive to SES B-and C, who currently cannot consume via the mobile channel
Due to limited access to payment methods, m-commerce is only available to SESs B+ and A
Offering additional payment options is an opportunity to increase the size of the pie
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Cash Maintains a Strong Presence in E-CommerceFor m-commerce to reach scale, the market needs alternative payment options for the mobile channel
CountryCash payment pentetration of all e-
commerce salesCash payment providers
Brazil 25%
Mexico 22%
Colombia 34%
Peru 33%
Argentina 40%
Sources: E-bit, PayU, AMPICI, El Tiempo, interviews
• Cash payments are popular in e-commerce, even among banked shoppers• Most relevant in retail, tourism, home delivery• But cash payments are not a practical option in many cases – low ticket items, on-the-go goods and
services• There is ample room to develop new products, including prepaid mobile wallets and cards
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Among the Banked, Mobile Conversion Is Still a Problem Merchants need advanced technological features to promote conversion
Why? Inportant for which verticals
Tokenization • Facilitates ‘one-click’ purchasing
• Retail• Cuponeras• Event tickets• Transportation• Entertainment
Recurring payments • Enables automatic billing • Subscriptions, entertainment
Digital wallets
• Saves payment information for future uses• Enables the use of an alternative payment
card if the preferred card is declined• All verticals
Alternative payments
• Provides an alternative option when the user is afraid of entering his/her cc information online
• Average tickets USD 20+
Mobile web sites and apps
• Mobile sites reach a wide audience, representing 60% of merchants’ e-sales
• Apps have higher conversion and are useful to promote loyalty
• All verticals
Payments via Whatsapp/social media
• Have become a key customers service channel
• Ideal for merchants without a website
• Small companies
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Leading Payment Service Providers (PSPs)Selecting the right gateway or payment service provider is a costly but worthwhile process. Merchants must seek advanced m-commerce functions to maximize conversion
To maximize m-commerce sales
Merchants should seek PSPs who:
Offer tokenization
Have the fewest number of steps to complete a transaction
Offer transparent checkout and SDK for apps
Process transactions locally and offer local, alternative payment methods
Have higher than average mobile penetration of their overall volume
Offer integration with digital wallets
Have experience in the most relevant segments for m-commerce: entertainment,
taxis, games, etc.
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38 3218
80
61
2
14
8
4
Brazil Mexico Argentina
Emerging Payment TechnologiesPayment innovation will drive m-commerce growth
Sources: Visa, El Universal, El Financiero, El Economista, Folha, Infobae, La Razón
Digital wallet
Country Providers
Trends
• Visa reports that Visa Checkout results in an 86% approval rate (globally) by providing enhanced security and convenience.
• Competition in payments will become more intense as more players enter the market.
• PayPal and MercadoPago are current leaders, but there is significant opportunity to capture market share.
Social media users
Payments via Whatsapp
Country Provider
Millions of people, 2015
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Success factors – Case studies
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Case study: NetshoesThe first online store globally to offer free access to its mobile site
Sources: MUV Mobile
What is Netshoes?
• Online clothing and sporting goods retailer, with annual sales of $500+ million
• 2009-2015 CAGR: 52%
• Mobile channel represented 46% of traffic on its website in 2015
The problem: Factors limiting mobile conversion
The solution: Free web access
70% of Brazilian cell phones are on a prepaid plan
120 million Brazilians do not have data at least one day per month
Highly social: Brazil is the third market worldwide for Facebook and Instagram
Brazilians don’t want to “waste” data on online shopping
Netshoes collaborated with MUV Mobile, Brazilian mobile marketing company
Negotiated with mobile carriers
Launched free web access campaign
Leveraged ‘Black Friday’
Transferred the cost of data from the user to the merchant
What did they do?
% of web visits represented by mobile
10%
46%
2014 2015
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Netshoes: The resultsThe success of offering free web access will spark a growing trend
81% 81%80% 80% 76% 73% 75% 75%
19% 19%20%
20% 24% 27% 25% 25%
Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16
% of mobile, visits to Netshoes.com
Wifi Data plan
Sources: MUV Mobile
• Free web access will become more common• Emergence of platforms to facilitate negotiation
with telecoms• Growing competition will drive prices downward
TrendsImpressive results
• Average time spent on mobile devices 80%• Number of transactions in the mobile channel 80%• Revenue in mobile channel 60%• Conversion rate 60%
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Case study: BQuickA Mexican logistics company leverages the mobile channel
Sources: BQuick
Performance
300% growth in 2015
330 affiliated merchants
Database of 25,000
consumers
100,000 orders
delivered
Future opportunities
• Offer deliveries for e-commerce
• Create a food delivery marketplace
• Automate merchant payouts
What is BQuick?
The merchant receives an order
for delivery
Merchant enters order into the
BQuick platform
BQuick locates the nearest driver and sends an alert via the BQuick app
Driver picks up the order and delivers to the customer
The merchant monitors the
delivery in real time
• Mexican start-up founded in 2014 • B2B, multi-merchant delivery • Owns a fleet of vans, motorcycles and electric bicycles • Drivers are employees• Serves restaurants, pharmacies, supermarkets, convenience stores, laundromats, and offices • Guarantees delivery in under 45 minutes in six Mexico City neighborhoods
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BQuick: Future opportunities BQuick payments take place offline – a quintessential example of m-commerce in the region
Credit card Cash
60% 40%
BQuick is a perfect example of m-commerce in transformation. The service functions in the mobile channel, but payments are transacted offline.
Market size of food delivery, cities in Mexico, billions USD
$6.9$7.6
$8.3
2016 2017 2018
Payment methods, % of total BQuick sales How do payments work?
Today, orders are placed online, but the payment still takes place in person
Cash is still prevalent, even though BQuick serves only affluent neighborhoods
Huge opportunities Unmet needs
A PSP to process payments online
Provider of payouts to merchants
Education to merchants and consumers
Incentives to promote electronic payments over cash
Sources: BQuick
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Conclusions
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Conclusion: M-commerce, a green market with local peculiarities
Mobile commerce in LatAm is in early stages of development. There is significant room for innovation and disruption
Digital goods and services are the verticals that most lend themselves to m-commerce. Retail and other segments have larger barriers.
M-commerce in LatAm is in a phase of migration. A large share of payments still take place offline.
Shoppers need a better user experience via advanced m-commerce features.
M-commerce is inaccessible to the underbanked. But the underbanked with smartphones represent the fastest growing consumer group.
P2P payments via smartphones has not yet reached Latin America in any large capacity. This represents both a need and opportunity.
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About AMI
AMI is Latin America’s leading independent market intelligence consultancy
Our founding partners helped pioneerthe field of market intelligence in Latin America
Our consultants have advised over ½ of the region’s100 largest strategic investors over a span of two decades
AMI consultants have conducted close to 2,000 clientengagements in Latin America since 1993
Our consultants have worked in everymarket in Latin America
Our holistic approach to market intelligence is unique.We combine market research, competitive intelligence,
political analysis and economic forecasting in our studies.Few others do the same in Latin America
Lindsay Lehr, Senior Director+1 (305) [email protected]
