eCommerce: engine of growth for FMCG industry in Latin America

 

 

Online sales for FMCG categories keep accelerating their growth in Latin America and are already increasing 5 times faster than the rest of the channels.  Despite still being a small portion of the business, the difference in performance vs offline channels turns online sales into a significant engine of growth for brands. Projections signal that for 2021, eCommerce will represent at least 20% of FMCG’s sales growth.

 

A channel in full expansion

Past years results show that online channel has been growing 5 times as fast as the offline channels. Several studies and our own projections signal that this growth, far from decelerating will deepen its growth trend. There are several FORCES OF CHANGE that are already present in our markets that have major influence in eCommerce development. Lets review the most important next:

  • Shopper is ready… and increasingly so.

On the one hand, how ready shoppers are and their acceptance of this type of shopping method. In our region, consumers show the highest percentage worldwide of openness to FMCG online shopping. In addition, every year more than 10 million Centennial consumers enter the economically active population and Latin America registers 20% more Millennials than any other region in the world.

 

  • Mature technological infrastructure

Internet Access is already above 60% in LatAm and is even higher in the main cities, above 80%.

 

  • Brick & Clicks strong commitment

Every major global and local retailer has declared their intention of leading the development of online sales. In line with these statements, several moves towards accelerating and strengthening their capabilities in this area have occurred. You just need to take a look at the latest news to confirm how serious these declarations are: Walmart’s acquisition of Jet.com and, more recently, of Corner Shop in LatAm. Carrefour signing a global Alliance with Google and Casino conforming an important multitask team both in Colombia and Brazil are just a few relevant examples worth mentioning.

 

  • Last Milers disruption

The emergence and fast expansion of Last Milers is helping surpass the main issues that appear as barriers for eCommerce growth in the region: through them, delivery time and costs are drastically decreased, payment methods are expanded to include all population that does not operate through banks or credit cards (more than half) and trust is significantly increased since it is a very close shopping experience.

Today Last Milers operate in the region’s main countries from Mexico to Argentina, covering the cities that represent more than 32% of LatAm population.

 

  • Giants bet on eCommerce

Both Amazon on a global level and Mercado Libre regionally have stated that FMCG would become one of their main engines of growth during the following years. In line with this, both players have made huge investments and adjustments to their value proposals in order to become leaders within the industry.

Though they still have a long way to go until their value proposal becomes competitive vs the already established players, they have a huge base of unique users already incorporated in their ecosystems. Mercado Libre only has more than double the unique users of all the Brick & Clicks combined in the region!

 

Concentration of players, an intrinsic characteristic of online sales

Players concentration is a typical characteristic of the online channel and it differs a lot from the offline landscape. This confirms that scale is a fundamental factor for success online and will be even more important in the future.

Numbers are conclusive.

  • The 10 main Brick&Click platforms account for more than 60% of users.
  • 4 regional players (WM, Carrefour, Casino y Cencosud) concentrate +40% of users in LatAm
  • Across all markets, there are two players that represent 70% or more of FMCG online users.

 

How does online shopper behave?

The average latin american user visits supermarket platforms twice a month, which generates a total of 83 million visits to these type of web pages during that given period. During each visit, users spend a bit more than 3 minutes and visits an average of 5 pages. Argentina leads these indicators with the highest frequency, number of pages and time per visit in the region. This translates into the highest FMCG eCommerce development in LatAm.

Retailers capabilities are constantly improving

Regarding the capabilities that each platform manages, these have improved significantly. Most of them support Hero Images, offer cross selling and can use videos. There is, however, a huge opportunity in the use of checkouts since less than 1% of the platforms offer additional products when checking out. In terms of fulfillment, the vast majority of platforms offer delivery in less than 24 hours and the average cost is around USD 4. Mexico and Colombia are the countries which offer the best equation in terms of cost and delivery time. Retailers have also expanded payment options to be able to include a higher portion of population. A lot of them are including alternative methods such as click and collect or external payment method like Pago Facil.

 

Challenges ahead for the industry

The acceleration of online sales growth represents, without a doubt, a huge opportunity but, at the same time a major challenge for the FMCG industry.

We know that for many companies solving the dilemma of having to allocate resources and energy to a business that is not as big or representative today but with the potential of changing the rules of the game in the near future is not minor.

It means having to attend the multiple priorities that the current business presents while building capabilities for tomorrow. It is like having to change the turbine of a plane in full flight!

However, we are convinced that the organizations that are able to incorporate eCommerce in their strategic agendas for the following years will be the ones able to maintain, or even increase, their relevance within the market in the near future.

From our point of view, the debate should not be whether to do it or not but rather how to make it in the most efficient way possible.

Here at BeOn we are more than willing to help the industry with this challenge.