The strength of e-commerce

Relax… Those who feared that the developing e-Commerce business in LAC was going to be another victim of the

global financial crisis, can release a sigh of relief. The Internet as a distribution channel of products and services continued to grow despite the collapse of economic indicators around the globe. According to a study conducted by AméricaEconomía and commissioned by the payments company Visa, eCommerce to consumers (B2C) grew 33.2% in 2009 representing US$21.175 billion in Latin America & the Caribbean. In 2010 forecast of another 27% is expected by the end of the year bringing the total close to US$28 billion in B2C.

In the midst of a season filled with decreasing economic and financial indexes, the growth was expected. eCommerce reflects a profound change in the way consumers relate and behave with companies that provide them with products and services. These behavior trends experience little impact from the negative GDP reports or confidence decline of international investors in the market.

To see it a different way, despite the market stagnation, many of the fundamental components that drive eCommerce continue developing. PC and Broadband penetration grew at a rate of 20% & 15% respectively (at the end of 2009, there were 150 million PC users and 40 million with access broadband in the region). Simultaneously, access to a variety of payment methods was available

Driven by Brazil, tourism and by determined retail merchants, electronic commerce continues to grow in Latin America.

PICT

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ES: P

ATR

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[Special report : e-commerce in Latin

AmericaJune 2010]

Scattering beans around the World

The click that allows your ecommerce business to be taken to any part of the world, resulted very true for Costa Rican of Café Britt. Actually,, 95% of the USD$5.1m of coffee this famous Central American brand sold over the Internet, has a US & Canadian destination. “We expect a

tourist that travels to Costa Rica have a cup of coffee on the flight, arrive at the airport, by chocolate and bags of Café Britt as gifts, and take a discount card for future on-line purchases” says Pablo Vargas, Executive President of Café Britt who mentions that marketing and international

logistics are fundamental to his operations. Café Britt has ongoing agreements with FedEx and DHL and has established a customer service center in San Jose whose staff is university graduates and bilingual and is able to service clients around the globe. “Even though we are a small country, through the Internet we are able to offer

excellent service and a very positive shopping experience – offering on-line chat assistance, direct customer service via phone, and response via email within 2 hours” says Vargas. Having seen the on-line business grow from 15% annually, Vargas expects10% expansion in 2010 from International sales. While electronic commerce remains small in the country and only a few players with nominal sales (primarily supermarket chains from the US), Vargas says that many coffee companies have looked into commercializing their products through the Internet. Most have these efforts are short-lived when results are not quick to come by. “That is not how it works – positioning in the Internet is a long strategy” says Vargas. “You have to invest for the long term, focus, and be willing to invest many resources”.

as banking service was used by more and more people.

And that’s not the end of the story. Airlines and large retailers began offering increasingly more sophisticated offerings which paved the way for small and medium businesses to perfect their on-line business models. Demand also grew by a generation being educated on-line, joining the labor force, and able to satisfy their consumption needs via the Internet. The perception of security also improved (see graphic) which facilitated the move towards on-line purchases. “In Latin America, we finally reached a critical mass of users so that many business models on the Internet can rapidly produce revenue”, says Alec Oxenford, founder of the online auction house DeRemate.com (purchased by MercadoLibre.com), who is currently the head of OLX.com, an online service for free ads with a global presence.

Another observation drawn from the study was the unbalance growth that was experienced. In several markets, the market crisis was a justification to postpone the technological and logistic investments that were necessary to improve their on-line business models. This decision impeded the growth of products and services acquired through this channel. An example of

CLICS & MONEYTotal spending in e-commerce B2C in Latin America (US$ millions)Source: América Economía Intelligence

MAturINg MArkEtSB2C as % of PGBSource: América Economía Intelligence

BrazilMexico Latam

Chile

2003

0,9%

0,5%

0,7%

0,3%

0,1%

0,8%

0,4%

0,6%

0,2%

0,0%2005 20082004 20072006 2009

0.14%0.19%

0,11%

0.07% 0.07%

0.20%

0.33%

0.32%

0.10%0.13%

0.18%

0.30%

0.84%

0.54%

0.52%

0.36%

0.42%

0.26%

0.11%

0.05%

0.09%0.13%

0.18%

0.24%0.27%

0.35%

0.64%

CafeBritt.com

0.52%

this, were the retailers in Colombia and Peru who showed significantly lower growth rates. The Colombian group Éxito, the biggest retailer in Colombia,

is only now making the investments necessary to develop their on-line business in 2010 (see The Role of the Owners case).

30.000

20.000

5.000

25.000

10.000

15.000

02003

1,866.4

4,885.0

2005

15,645.0

2008

3,042.1

2004

10,572.5

2007

7,542.5

2006

21,774.9

2009

27,597.9

2010p

34,497.3

2011p

in order to become stronger in the area of e-commerce. For example, Walmart, which landed on the Brazilian e-commerce market in October 2008, states that it aims at doubling its digital sales in 2010. They are focusing their strategy on variety. The current offer is 10,000 items, classified in 11 categories, but the company wants to reach 100,000 items, divided in 21 sections by the end of this year. Walmart also has virtual stores in other countries, such as Chile, under the name of Lider, and in Mexico, with Superama -but both of them only sell groceries. Carrefour Brazil, which has just launched its e-commerce portal, has a similar plan (see The Advantage

The advantage of being last

In Brazil, the fierce battle in the arena of electronic commerce (see main article) has intensified with the arrival of global players competing with the locals who currently dominate the market. Wal-Mart joined the on-line battle

in October 2008, and now it’s the turn of the French chain Carrefour, which inaugurated its e-commerce operation in March, along with the announcement of a rather ambitious goal: to take fifth place among the e-commerce players in Brazil by the end of 2011. “Being the last to join has its benefits”, says Rodrigo Lacerda, director of marketing for the network. “We can design the site based on a good diagnosis of everything that is going on, understanding the needs of the consumer and the latest trends, and offer a more differentiated solution”. With a hefty investment of US$ 27 million, the group’s portal was developed in seven months, using all of the concepts of the Web 2.0: users can get information about products through descriptive videos, reviews written by other users, as well as blogs, chat rooms, and social networks. Among other differentiated services, Carrefour’s virtual store in Brazil offers extended warranties for products and after-sales service. The Brazilian platform, which is the first to be launched by the French company in an emerging country, will serve as a model for companies in other countries, such as Argentina, Colombia and China.

of Being Last chart).What is really interesting in Brazil

is what might happen with Pão de Açúcar. This Brazilian retail giant has recently acquired its rivals Ponto Frio and Casas Bahia and has become not only the leader in retail sales, but it also reached an attractive position in e-commerce. This company, which at the end of this survey was experiencing a review process of its merger with Casas Bahia, decided to concentrate the sale of hard goods via the Internet with a new player called Nova PontoCom. With an estimated sales volume of US$1,000 million for 2010, the operation was launched already occupying second place in the

In other countries, the decrease in tourism – a consequence of the financial crisis and the swine flu- hindered higher growth levels, one of the most important drivers of commerce activity in the Internet. The case of Mexico is crystal clear; tourism accounts for nearly 70% of B2C transactions.

RETAILERS ON THEOFFENSIVE!In order to have a better understanding of the explosive growth of this channel, you must take a look at Brazil. Not only is it the biggest country in Latin America, Brazil also has the highest usage indicators in the region. An advantage that grew in 2009 with the arrival of 4.4 million new Internet users to the country, which contributed to elevate B2C figures over US$13,000 million - nearly 61% of all e-commerce focuses on consumers in the region. “Our conservative growth estimation is 30% annually in this segment until 2016”, says Gerson Rolim, executive director of Camara-e.net, the association that brings together Brazil’s e-commerce operators.

Rolim is not alone in his optimism about Brazil. It so happens that the big retailers have dramatically increased their technological and logistic bets

Carrefour.com.br

CONfIDENCE gOES hIghHow do yo perceive security in the operations that you realize in the internet? Only High and Very High, as % of totalSources: AméricaEconomía readers survey, May of each year

20082010

80%

40%

60%

20%

70%

30%

50%

10%

0%

ARgE

nTIn

A

COST

A RIC

A

PAnA

MA

BRAZ

IL

ECUA

DOR

PERU

VEnE

ZUEL

A

BOLIV

IA

CHILE

PARA

gUAY

COLO

MBIA

MExIC

O

URUg

UAY

LATA

M

On the logistics of social networks

If you take a close look at Falabella’s annual report, the Chilean department store, you won’t find any references to its web site. nothing! no business plan - not a single number. Sources within the

company explain that this secrecy is due to success: the advantage that Falabella.com holds over its competitors is so large, that the company doesn’t want to make any effort to reveal the drivers of its good results for this channel. “It’s considered to be confidential information”, says Ricardo Alonso, general manager of Falabella.com, who nonetheless admits that sales through his web portal are higher than for any Falabella store in the country. Sources close to the company say that the company’s internet sales represent 57% of those for the entire retail industry, and this market share can be confirmed by comparing on-line traffic data gathered by sites such as Alexa.com and googleTrends.com.

Estimates by informed market sources show that Falabella.com brings in 9% of the entire sales volume for the chain in the country, which is roughly US$ 142 million. Alonso won’t confirm those numbers, but he does provide a little more information about key factors for Falabella.com. “The buying experience is crucial”, he says. According to Alonso, just having a good on-line catalogue isn’t enough. Logistics is also central to the user experience. “It isn’t just about having delivery trucks, but also about having intelligent routing systems, systematic integration for

tracking orders on-line, and cargo loading systems, he says. One key area where many have failed is in reverse logistics:

the process that lets a buyer return an unsatisfactory product. “It’s a tremendously complex process, but not doing it well, can kill an e-commerce business”. In Chile, as in most of Latin America, there are no logistics services suitable for electronic commerce that permit round-the-clock deliveries at reasonable rates, for all types of goods.

So Falabella has had to put together its own model, following the example of successful e-retailers in the USA and Europe, which Alonso is always visiting. Another basic factor is continuously observing the user. “We are always watching and measuring what the user is doing on the site - everything”, he says. The continuous observation strategy even extends to social networks. They have created a social networking committee to take advantage of these two-way communication channels with customers, such as Facebook and Twitter, where they conduct a lot of activities and promotions for their followers. In addition to Chile, Falabella.com also operates in Argentina, and will soon open in Colombia and Peru, where the current sites are only informative, not transactional.

demand is not yet there. In Colombia and Peru, the investment by retail operators is recent and is dominated by a few players. Only Chile, the second country which features more maturity in e-commerce in the region, displays significant developments in a sector dominated by Falabella.com (see From Logistics to Social Networks case) - Cencosud, Ripley, Sodimac and LaPolar have significant presence.

THE BEACON FOR SMALL AND MEDIUM COMPANIESTo be a relevant player in the area of e-commerce, it requires a good deal of investment in technology and logistics in order to have an efficient distribution process for the products sold. It is impossible to reach sales of US$100 million unless there are substantial and sustained financial commitments from one or various players.

Small sized companies can get good results as well. As search engines become the main research tool for Internet users, small businesses start having as many chances as big chains when the time comes to make a purchasing decision. This is further facilitated by sites like MercadoLibre.com, a portal that came to life offering consumers the possibility to auction their merchandise. Now, 90% of its sales have a fixed price and 80% are new goods. This shows the large presence of small scale businesses on that platform.

One of the positive side effects of e-commerce is that it generates incentives for those companies that operate informally to enter the legal world. This is the case with Mercado La Salada, an important textile center in Buenos Aires, which released MercadoLaSalada.com, or the Las Malvinas technology fairs (Malvinasperu.com) and Computiendas

Falabella.com

Brazilian e-commerce segment just behind B2W (the consortium formed by the integration between Submarino.com and Lojas Americanas). Unfortunately, B2W has seen its advantage dwindle two years in a row since 2009 experiencing growth below the industry average and reducing its market share from 60% to 47% in Brazilian retail. B2W will invest around US$100 million in technology in 2010 to reverse the trend.

A novelty in Brazil: for the first time, home appliances appear among

the best sellers bought online. Sales grew by 137% from 2008, and are positioned just behind the traditional categories, like books, newspapers and magazines subscriptions, and personal care products (health, beauty and medicines).

Brazil’s retail outperfoms other Latin American markets. In Mexico, elpalaciodehierro.com is the leader, though it’s a market that has not yet bet big on this channel. In Argentina, there are successful models, but the

The role of owners

The owners’ vision and support for electronic commerce is essential for creating a successful strategy. Just ask the executives of the internet unit at the Colombian grupo Éxito (the largest retailer in the country) which was bought by the French supermarket chain Casino in 2007.

Casino operates affiliates in various countries around the world, among them Brazil. “We started our on-line operation in 1998, but it was a small and rather un-ambitious unit, working out of a tiny office inside the company”, says Eduardo René Miranda, Head of Electronic and Home Commerce at grupo Éxito. “But today, since Casino took over, we live and breathe Internet”. An important part of this change in mindset was the experience provided by Casino from its on-line portals in Europe and Brazil where its affiliate, the Extra chain of department stores, operates the Extra.com.br portal. Having direct access to the experience of models in countries with socio-economic situations similar to that of Colombia, drove more purpose into the group, which is now preparing a series of investments for renovating its on-line sales channel - particularly in the technological area where there are several bottlenecks at the moment. “… the fact is that we have to step up. Annual Internet sales at Éxito were in the region of US$ 15 million in 2009, barely 0.8% of the sales of the entire group. Sales through Extra.com are around 5% of the total sales of the affiliate”, says Miranda.

(Computiendasperu.com), in Peru. “Small and medium size businesses have much to gain with electronic commerce because of its visible benefits, potential to access to new markets and the dynamic nature of the channel that’s so similar to their business models” says José María Ayuso, Global Products Executive from Visa. “In those countries with more robust financial and technological infrastructure we can already find many success stories”.

GOODS THATGO ACROSS BORDERSAn iPad, an Android cell phone, or the latest PC by Sony: Perhaps, they are not available yet at your local store, but

you can purchase them directly from the US, at the most popular websites, like Amazon or eBay. This type of online shopping where consumers go for products which are unavailable at e-commerce sites in their countries is significant. As a matter of fact, it is one of the aspects of e-commerce

2005 2006 2007 2008 2009

BRAZIL 2,269.9 3,540.5 4,898.7 8,572.6 13,230.4

MÉXICO 567.1 867.6 1,377.0 2,010.0 2,624.9

VENEZUELA 253.4 489.6 821.5 787.8 906.1

ARGENTINA 281.3 378.1 561.5 732.8 875.0

CHILE 242.8 471.8 687.5 919.5 1,027.9

EL CARIBE 387.0 565.0 660.0 754.9 868.1

COLOMBIA 150.3 175.0 201.3 301.9 435.0

PUERTO RICO 344.0 384.3 445.0 489.8 587.8

OTROS 131.3 164.8 203.0 260.9 306.5

CENTRAL AM. 189.2 359.9 499.0 563.9 637.2

PERU 109.1 145.5 218.2 250.9 276.0

LATAM + CARIBE 4,885.0 7,542.1.8 10,572.5.1 15,645.0 21,774.9

tOtAL e-consumptionSelected countries/regionsIn US$ millions US$Source: América Economía Intelligence

Grupo Éxito

with the highest growth levels. Despite the costs of logistics and

Customs, there are an ever rising number of Latin American consumers who are using the Internet to shop for products that are not found in their countries. “When the iPhone was released in 2007, we received an enormous quantity of orders for the new gadget from Latin America”, says Paul Gartland, CEO at SkyBox, a logistics company based in Miami which receives goods bought in the US and sends them to their Latin American buyers. “In 2009, we made 150,000 shipments for products from the US to Latin America - a rise of 18% in 2008, despite the crisis”.

Because of its logistics integration with the US, Mexico is the country

where most purchases in American stores originate. Many Mexicans shop directly from Amazon and eBay, not having to go through an intermediate service. Industry experts estimate that this volume represents a third of the whole e-commerce in Mexico. Actually, the direct competition from the US is one of the factors which have inhibited Mexican companies from growing in e-commerce.

In Central America and the Caribbean, there are also shoppers in foreign sites due to their proximity to the US, and their reduced markets. These consumers are used to shopping at international sites and speak English making the purchase even more natural.

If there ever was a country well-

Brazil does the 61% of the

whole B2C in the region

The monthly purchase

The H1n1 swine flu was good for business at LeShop.com.ar. The portal was created in the year 2000 for the purpose of becoming a center for selling food and groceries on-line to eliminate the need for consumers to go to the supermarket. The business swelled

when the swine flu pandemic quarantined the main cities of Argentina in July 2009. Many people chose to buy their daily needs over the Internet, with LeShop being one of the favorite sites, causing a growth rate of 50% last year. Achieving this rate in a market that is still wary of e-commerce was due to two fundamental factors: its own logistics and its personalized customer service. “We understand that, in order to increase our market share and build up customer loyalty, these two factors are the key to building confidence – it allows us

to have a personal service and break the barriers of distance that are inherent to the virtual business” says gonzalo Tomás Benítez, executive director of LeShop. The “internet supermarket”, as the company calls itself, is said to have 35% market share among on-line supermarkets, an industry which was estimated

to be worth some US$ 65 million in 2009. This company, which replicates the Swiss company with the same name, has a portal that simulates a stroll through the supermarket - even down to the isles and shelves. The objective is to facilitate a change in habits at the time of doing the household shopping. For this, they assign a personal advisor to each customer who introduces himself by name and can be consulted regarding any concern, order change, or special requirements. “We want the buyer to feel the warm and pleasant service of the typical corner store because the customer who buys over the internet is a demanding customer who values quality, timeliness, and the precision of each order”, says Benítez.

BrAzILIAN pOwErhOuSETotal spending in e-commerce per countrySource: América Economía Intelligence

BRAZIL

CHILE

COLOMBIA

MExICO

PERU

PUERTO RICO

VEnEZUELA

CEnTRAL AMERICA

ARgEnTInA

CARIBE

OTHERS

61%

5%

2%

12%

1%

3%

4%

3%

4%

4%

1%

Leshop.com.ar

known for its international shopping, it is Venezuela. In 2007 the Venezuelan government allowed a US$1,500 credit limit (the Cadivi allocation) to whoever wanted to use make purchase via the Internet with their credit cards. The Cadivi allocation caused a lower exchange rate (subsidy) for Internet transactions causing a massive shift to international transactions via the Internet. The

International shopping is about a third of the whole e-commerce done in Mexico.

government not surprisingly, reduced that limit to US$400, increased the official exchange rate and toughened

the requisites to access those dollars, all of which reduced these operations.

However, if international purchases drop in Venezuela, they go up in Brazil. Even though some tariffs on electronic products may reach 100%,

the exchange rate enriched Brazilians have taken advantage of the higher value of their currency to buy on the Internet many of the products that are not available in their country. According to Camara-e.Net, in 2009, Brazilians spent US$620 million through by this mean, 30% higher than in 2008.

Cross border purchases is a 2 way street: many immigrants to the US have replaced the cash they send to their families in their countries of origin and prefer to shop directly in the e-commerce sites where their relatives reside. This has

made stores like TiendasElektra.com, which belongs to the Salinas Group in Mexico, and PriceSmart in Central

America and the Caribbean, develop special services for those international shoppers.

FLYING HIGHMuch of the e-commerce’s momentum in the region is being led by the tourism industry, especially airlines. This drive has nothing to do with revolutionary offers from low cost airlines, like Brazilian Gol, Volaris in Mexico or Aires in Colombia. In the past few years, the biggest effort has come from long established players which have made great investments to encourage the direct sales of tickets through the Internet. The Chilean originated Lan, with its website, Lan.com, has been one of the most aggressive players in this battle: by offering strong promotional campaigns in order to attract travelers to buy directly on its portal and bypassing any agency that gets a commission on the sale of tickets. In the region, the

Fans’ euphoria

The Aerosmith concert in Colombia was scheduled for May 20, but in Eduardo Olea’s office in Bogota, the frenzy began long before. To be more precise, it started at exactly 0:00 on Saturday March 13, when concert ticket sales opened on the

Tuboleta.com portal, owned by Colombian company Coltickets, of which Olea is the research and development manager. “At that instant we had 85,000 people fighting for 10,000 tickets, from their computers... at one point there were about 110,000 people.”, says Olea. “There were too many hits, too much information, and the system went down for a while”. He recognizes that euphoria for the concert overwhelmed the portal’s technological and payment systems, which is why they are now making significant investments in strengthening their computer system so it can handle such large volume of transactions. The on-line business actually consists of managing euphoric runs. “Internet is the preferred channel for buying tickets for large events with great expectations, such as soccer finals and major concerts, where everyone wants to buy the best seat before everyone else”, he says. And he should know, since his company is the principal ticket sales organization in the country. They also have presence in Peru and Ecuador and sell through various channels: two in-person channels (with 70 points of sale, as well as various ticket booths at theaters and stadiums) and two remote channels (telephone and internet sales). Of the total number of tickets sold by Tuboleta in 2009, 49% went through remote channels while 22% of the total was by Internet. However, the most expensive tickets are sold by Internet. While the average price of all tickets sold through all channels is US$ 15, the average for those sold through Tuboleta.com is around US$ 30. In 2009, the total for tickets sold by the on-line channel was around US$ 20 million. The Colombian company also has ticket sales in Ecuador however, internet ticket sales are almost irrelevant unlike In Peru, where the business is growing. “In Peru we sold 10,000 tickets in 2009 and this year we expect to sell around 15,000, but the channel in that country is barely 25% of the remote channels”, says Olea.

TuBoleta.com

COMpuLSIVE CONSuMErSHave you shop through the internet in the last 30 days? Only positive answers, % of the population.Source: TGI/KMR

8,0%

4,0%

60%

2,0%

7,0%

3,0%

5,0%

1,0%

0,0%ARgEnTInA CHILE MExICO VEnEZUELABRAZIL ECUADORCOLOMBIA PERU LATAM

2,8%

3,4%3,1%

6,14%6,58%

2,94%

3,75%

3,07%

1,96%1,62%

2,76%

0,28%0,71% 0,94%

1,78%

2,63%

1,75%

2,40%

1,00%

1,77%1,34%

3,72%4,01%

4,28%

1,89%1,81%

7,21%200720082009

are no physical goods to be delivered – it simply relies on the consumer’s trust, as the purchase involves high ticket items. An average ticket in the tourism industry is worth US$900 for a seat on a plane, and US$400 for hotel reservations, according to Despegar.com’s figures, which requires high credibility and reliability rates to make the transaction.

BOTTLENECKSDespite its high growth, Latin America

remains predominantly an offline region many people still not using banking services. Many factors remain which must evolve to reach the e-commerce levels in more developed countries. For instance, there are challenges to be resolved in the IT mechanisms of transactions in many countries, which results in additional redtape or complications for online operations.

Logistics and mail services are also highlighted as important obstacles for the completion of projects. Brazil as an

Brazilian airline Gol is still the airline which features the most sales on the Internet with over 90% of its revenue being generated through this channel (though many of them cannot be considered direct, as they are made by the travel agencies themselves using the airline’s portal).

The novelty however, is that there are small and medium companies from the industry sector which are starting to use e-commerce successfully to make their transactions. It may be a company that provides transport to tourists on the Mayan coastline in Mexico, like CancunTransfers.com, or a resort in the Caribbean, or a hostel in Machu Picchu. “Nowadays, 70% of hotel reservations are carried out online”, says Alvaro Dago, director for Latin America of the Intercontinental Hotels Group, which includes brands like Holiday Inn. “Although brand loyalty is relevant in this industry, Internet has allowed smaller companies to become well-known and gain positions”.

The travel industry for the most part, does not have the logistical problems of online retailers primarily because there

Agency take-off

Use sales prices as if they were a traditional consumption product. This was one of the ideas of Despegar.com when it launched its Despegar.com Outlet Hotels initiative, after it convinced a group of hotels in the tourist areas of

Argentina to reduce their rates by 50% and anticipate sales for the January-February 2010 season sales through the portal. This isn’t an isolated idea: a few years earlier, the on-line travel agency, which was founded in the nineties, sought to increase the market share of hotels and tour packages in its sales portfolio. They understand they needed to aim for a higher value sector, such as the sale of hotels and tour packages either from external tour operators or set up by themselves. “The idea is that in a few years, this will account for 50% of our sales”. Even though airline tickets account for 80% of their transactions in the tourism industry, they no longer offer the profit levels of a few years ago since the airlines are trying to use Internet to strengthen their own direct sales models and have reduced commissions to agencies. This type of change has generated a lot of pressure in the travel agency industry. “It’s a business that continues paying only if you are big”, says Argentinean Cristian Vilate, co-founder and VP of Hoteles Despegar.com for Latin America. “That’s where we have the advantage since we are currently among the largest three travel agencies in the region and we will soon be number one”. The company is actually experiencing very high growth rates of around 90% annual, which allowed it to close 2009 with a transaction volume of approximately US$ 500 million (the base over which they receive commissions) - they expect to close 2010 with sales of around US$ 900 million. “For the year ending in April, sales totaled around US$ 700 million”, says Vilate. Despegar.com has put efforts into Mexico and Argentina, then Brazil, Chile, and then Peru, Colombia, Central America and the Caribbean, where they just recently started operations. In all of these areas they have taken advantage of the scales provided by an industry that is still highly fragmented. The Brazilian market, where they operate under the brand name “Decolar.com.br”, is their largest market accounting for more than 40% of their entire businesses. In that country, they are surpassed only by SubmarinoViagens.com, the tourist branch of the Brazilian giant B2W. Mexico is its second market, representing 20% of all sales, then Argentina with 15%.

Despegar.com

exception, which has a high-level mail service, the countries in this region have inefficient and costly mechanisms for distributing goods. These inefficiencies make it necessary for many companies to set up their own logistics. In the US this practice is unimaginable, where firms like DHL, UPS and FedEx are the stores’ best partners.

Furthermore, significant investment has to be made in technology for companies to offer services that really generate a differentiated user

ELECtrONIC MONEYPrefered payment system online Fuente: TGI/KMR

80%40% 60%20% 70%30% 50%10%0%

CREDIT CARD 75%

13%DEBIT CARD

3%TRAnSFER

1%CHECk

7%CASH

experiences when compared to traditional shopping. This, in addition to the distrust felt by a large number of people, creates obstacles. However, they can be overcome and each new

progress will make it possible to expand the volume of goods and services which are moved by our economies along the most efficient information highways.

METHODOLOGY Estimates by AméricaEconomía Intelligence in preparing this study for the years 2008 and 2009 were based on information provided by the official sources for each country (e-commerce chambers or associations).The information was categorized and supplemented with industrial analysis and financial reports from large companies and experts, and two surveys: the TGI 2009 survey by KMR, which was conducted on a representative sample of 24,433 interviewees in eight countries across the region during 2009, and a survey conducted on-line last May by AméricaEconomía, of 2,300 readers.

For those countries which do not have organizations that estimate these purchases, AméricaEconomía

Intelligence prepared its own estimates by taking into account other variables related to electronic channel sales. For the purposes of this study, we defined “consumer e-commerce (B2C)” to be those commercial transactions which are conducted over the internet, and which end with at least a purchase order whose final recipient is a private individual. With that definition, we included transactions executed between consumers and retail companies, tourism companies and airlines, between consumers (C2C), and also transactions with the government (on-line tax payment). The amounts in dollars were obtained using the exchange rates for the last day of each relevant year.

The English version of this document was edited by Visa.