Starting an online business in Latin America can be a challenge given that the business landscape can vary from country to country.

Entrepreneurs might have heard the news about how Latin America (LATAM) is looking better by the second, but they also must be ready to be met with adversity.

Weighing in all the pros and cons of starting your own online business in Latin America albeit a seemingly rudimentary step will lead you to some 'deal breaker' variables when crafting your strategy.

As such, let’s look at them beforehand and then establish some entry guidelines for your business to be able to fully capitalize on Latin America’s untapped potential.

FairPay | Latin America Payment provider

Reasons to Start an E-Commerce Business in Latin America

Latin America is brimming with diversity. With around twice the population of the US, its 626 million residents are spread over 33 countries, meaning that new, vast, untapped markets are bound to be unlocked.

In fact, giants like Amazon are still struggling to compete with local solutions like MercadoLibre. As a point of reference, Mercadolibre boasts a market share close to what Amazon has in the US.

However, a key point here is that the Latin American landscape in terms of marketplace and e-commerce, in general, seems to be expanding at a staggering rate, unlike the US.

Growth looks promising but the party might just be getting started as forecasts point to massive developments for e-commerce retail sales in Latin America from 2022 to 2025.

Latin American Mobile User Rates Are Going through the Roof

Major drivers behind the e-commerce boom in Latin America are its social developments, meaning that internet access is becoming widespread and reliable.

The number of unbanked in Latin America is also shrinking at a fast rate.

Accordingly, Latin Americans are getting increasingly connected and certainly hungry for products which in turn means that there are massive opportunities for global companies to settle themselves.

Moreover, the COVID-19 pandemic pushed towards greater social isolation and fueled the rate of LATAM’s digitalization.

Brazilians, for example, spend the most time online, but all LATAM countries show high up in the ranks which track the average daily time spent using the internet.

The boom happened not only in e-commerce but also in terms of cryptocurrency ownership as seen here:

As e-commerce begins to challenge brick-and-mortar stores in Latin America, it is important to highlight that even though Latin Americans are deeply fond of having unrestricted access to international brands, even giants like Amazon haven’t settled themselves in the region.

This leaves ample opportunities for those who wish to pursue them, meaning first mover advantage might be a crucial element at play.

As such, savvy e-commerce players might see their golden opportunity here to line up front and center and reap the benefits of this unprecedented expansion in the region. However, it’s not all sunshine and daisies.

Why Not Start an E-Commerce Business in Latin America

Opportunities seem to be around every corner of Latin America, however, each of those corners might be in a different country.

Diversity makes room for opportunity, but as we know, each country will have its own methods, legislation, industry regulations, preferences, customer journeys and so forth.

As such, for each country, you will need to be scrutinous as special considerations within it and its industries might be needed.

Economic and Political Volatility in Latin America

Latin America’s key element for growth in the upcoming years will be the development of the region, especially when it comes to infrastructure.

Brazil and Mexico spearhead this, making the regional outlook look promising, but the political mishaps in Latin American countries are certainly well documented.

Countries like Venezuela have become unstable and while others have their own inherent challenges, this shouldn’t deter you from establishing your business in LATAM, especially if you have a solid viable strategy. However, there are still other things to consider.

The Need for Latin American Payment Processors

Latin America’s unbanked are slowly becoming a thing of the past, and its economy is prospering, however, a considerable number of people still prefer their known local payment processors or plain old cash.

It is of the utmost importance that you partner up with the most suitable payment processor for your business needs.

With a still considerable number of unbanked, it is only normal that the region has below-average credit and debit, card users.

In Mexico, for example, this stems from the deep-seated institutional mistrust as 97% of the country’s population has access to banks but only around 39% actually have an account. As such, if you solely rely on credit card payment processors you might be in trouble.

Accordingly, you should familiarize yourself with each country’s most popular payment methods and be ready to offer a wide range of options at your checkout (even crypto).

Logistics and Infrastructure in Latin America

In what concerns logistics and infrastructure in Latin America, you might still be met with an inconsistent landscape. The issue is aggravated even further when trying to ship to more remote areas far from the big metropolitan cities.

The silver lining is that Latin America is making a massive effort in improving its networks. Taking all of the pros and cons into consideration, it’s now time to finally begin crafting a strategy.

How to Start Your Online Business in Latin America?

Diligence is key. Starting an e-commerce business in Latin America, much like in any other place requires effort and commitment. Here’s a logical approach with a step-by-step guide.

Finding Your Niche

Embracing Latin America’s natural diversity will quickly lead you to your niche.

However, you will be met with customs, trade agreements, regulations, and so forth… Given the attrition battle that one faces when exporting, the very nature of what you are selling will determine how far you can expand.

Is There Demand for Your Product in Latin America?

After figuring out if you can effectively sell internationally, you will logically want to find out if there is demand for it.

As such, a key element in your strategy should be finding out if people in Latin America have shown a demand for your product (don’t leave substitute products out of the equation, especially if they are local and cheaper).

You can gouge product popularity on platforms like MercadoLibre, but there are reputable companies which can provide you with detailed information regarding consumers (like SIS International and EuroMonitor, for example).

One Country at a Time

argentina

It is most prudent to start out with a single country instead of trying to take on every single one at the same time.

You can narrow down your choice in a straightforward way: look towards establishing a foothold in a market which has solid growth projections.

Learn to distinguish between fact and fiction because you will most likely see that the landscape has completely changed and LATAM has upped its e-commerce game since the pandemic.

Meet You Business Needs in Latin America

If you are starting or expanding your e-commerce business to Latin America, two quintessential elements of your strategy will be your website and your banking.

As such, it is important to understand if a build-from-the-ground solution is necessary, or if a simple marketplace integration in an existing platform will suffice.

There are several solutions available, all of which have inherently different layers of complexity.

As for payment methods, we cannot stress this enough: LATAM countries can widely differ in terms of payment preferences.

Depending on which country you will be targeting, aim for the right solution for your business, a payment processor which operates in said country and has in-depth experience and an impeccable track record.

Logistics in Latin America

A major hurdle that businesses need to overcome in LATAM will be setting up their logistics.

Costs are often high and even while operating in a single country, the fulfilment methods can widely differ from one region to another.

Much like in the previous topic, you will need to partner up with a company which has consolidated itself within the country because reliability is key.

Don’t Underestimate Latin America

Latin America’s potential albeit hard to tap into is certainly worth the effort as the region will greatly reward your efforts in the future. First mover advantage might be key, but it is important to weigh everything in before committing to a move.

As the technology boom unfolds and even cryptocurrency payments become a daily occurrence, one thing is certain: the best time to establish your business in Latin America was yesterday, the next best one is right now. Don’t miss out.

Starting an online business in Latin America can be a challenge given that the business landscape can vary from country to country.

Entrepreneurs might have heard the news about how Latin America (LATAM) is looking better by the second, but they also must be ready to be met with adversity.

Weighing in all the pros and cons of starting your own online business in Latin America albeit a seemingly rudimentary step will lead you to some 'deal breaker' variables when crafting your strategy.

As such, let’s look at them beforehand and then establish some entry guidelines for your business to be able to fully capitalize on Latin America’s untapped potential.

FairPay | Latin America Payment provider

Reasons to Start an E-Commerce Business in Latin America

Latin America is brimming with diversity. With around twice the population of the US, its 626 million residents are spread over 33 countries, meaning that new, vast, untapped markets are bound to be unlocked.

In fact, giants like Amazon are still struggling to compete with local solutions like MercadoLibre. As a point of reference, Mercadolibre boasts a market share close to what Amazon has in the US.

However, a key point here is that the Latin American landscape in terms of marketplace and e-commerce, in general, seems to be expanding at a staggering rate, unlike the US.

Growth looks promising but the party might just be getting started as forecasts point to massive developments for e-commerce retail sales in Latin America from 2022 to 2025.

Latin American Mobile User Rates Are Going through the Roof

Major drivers behind the e-commerce boom in Latin America are its social developments, meaning that internet access is becoming widespread and reliable.

The number of unbanked in Latin America is also shrinking at a fast rate.

Accordingly, Latin Americans are getting increasingly connected and certainly hungry for products which in turn means that there are massive opportunities for global companies to settle themselves.

Moreover, the COVID-19 pandemic pushed towards greater social isolation and fueled the rate of LATAM’s digitalization.

Brazilians, for example, spend the most time online, but all LATAM countries show high up in the ranks which track the average daily time spent using the internet.

The boom happened not only in e-commerce but also in terms of cryptocurrency ownership as seen here:

As e-commerce begins to challenge brick-and-mortar stores in Latin America, it is important to highlight that even though Latin Americans are deeply fond of having unrestricted access to international brands, even giants like Amazon haven’t settled themselves in the region.

This leaves ample opportunities for those who wish to pursue them, meaning first mover advantage might be a crucial element at play.

As such, savvy e-commerce players might see their golden opportunity here to line up front and center and reap the benefits of this unprecedented expansion in the region. However, it’s not all sunshine and daisies.

Why Not Start an E-Commerce Business in Latin America

Opportunities seem to be around every corner of Latin America, however, each of those corners might be in a different country.

Diversity makes room for opportunity, but as we know, each country will have its own methods, legislation, industry regulations, preferences, customer journeys and so forth.

As such, for each country, you will need to be scrutinous as special considerations within it and its industries might be needed.

Economic and Political Volatility in Latin America

Latin America’s key element for growth in the upcoming years will be the development of the region, especially when it comes to infrastructure.

Brazil and Mexico spearhead this, making the regional outlook look promising, but the political mishaps in Latin American countries are certainly well documented.

Countries like Venezuela have become unstable and while others have their own inherent challenges, this shouldn’t deter you from establishing your business in LATAM, especially if you have a solid viable strategy. However, there are still other things to consider.

The Need for Latin American Payment Processors

Latin America’s unbanked are slowly becoming a thing of the past, and its economy is prospering, however, a considerable number of people still prefer their known local payment processors or plain old cash.

It is of the utmost importance that you partner up with the most suitable payment processor for your business needs.

With a still considerable number of unbanked, it is only normal that the region has below-average credit and debit, card users.

In Mexico, for example, this stems from the deep-seated institutional mistrust as 97% of the country’s population has access to banks but only around 39% actually have an account. As such, if you solely rely on credit card payment processors you might be in trouble.

Accordingly, you should familiarize yourself with each country’s most popular payment methods and be ready to offer a wide range of options at your checkout (even crypto).

Logistics and Infrastructure in Latin America

In what concerns logistics and infrastructure in Latin America, you might still be met with an inconsistent landscape. The issue is aggravated even further when trying to ship to more remote areas far from the big metropolitan cities.

The silver lining is that Latin America is making a massive effort in improving its networks. Taking all of the pros and cons into consideration, it’s now time to finally begin crafting a strategy.

How to Start Your Online Business in Latin America?

Diligence is key. Starting an e-commerce business in Latin America, much like in any other place requires effort and commitment. Here’s a logical approach with a step-by-step guide.

Finding Your Niche

Embracing Latin America’s natural diversity will quickly lead you to your niche.

However, you will be met with customs, trade agreements, regulations, and so forth… Given the attrition battle that one faces when exporting, the very nature of what you are selling will determine how far you can expand.

Is There Demand for Your Product in Latin America?

After figuring out if you can effectively sell internationally, you will logically want to find out if there is demand for it.

As such, a key element in your strategy should be finding out if people in Latin America have shown a demand for your product (don’t leave substitute products out of the equation, especially if they are local and cheaper).

You can gouge product popularity on platforms like MercadoLibre, but there are reputable companies which can provide you with detailed information regarding consumers (like SIS International and EuroMonitor, for example).

One Country at a Time

argentina

It is most prudent to start out with a single country instead of trying to take on every single one at the same time.

You can narrow down your choice in a straightforward way: look towards establishing a foothold in a market which has solid growth projections.

Learn to distinguish between fact and fiction because you will most likely see that the landscape has completely changed and LATAM has upped its e-commerce game since the pandemic.

Meet You Business Needs in Latin America

If you are starting or expanding your e-commerce business to Latin America, two quintessential elements of your strategy will be your website and your banking.

As such, it is important to understand if a build-from-the-ground solution is necessary, or if a simple marketplace integration in an existing platform will suffice.

There are several solutions available, all of which have inherently different layers of complexity.

As for payment methods, we cannot stress this enough: LATAM countries can widely differ in terms of payment preferences.

Depending on which country you will be targeting, aim for the right solution for your business, a payment processor which operates in said country and has in-depth experience and an impeccable track record.

Logistics in Latin America

A major hurdle that businesses need to overcome in LATAM will be setting up their logistics.

Costs are often high and even while operating in a single country, the fulfilment methods can widely differ from one region to another.

Much like in the previous topic, you will need to partner up with a company which has consolidated itself within the country because reliability is key.

Don’t Underestimate Latin America

Latin America’s potential albeit hard to tap into is certainly worth the effort as the region will greatly reward your efforts in the future. First mover advantage might be key, but it is important to weigh everything in before committing to a move.

As the technology boom unfolds and even cryptocurrency payments become a daily occurrence, one thing is certain: the best time to establish your business in Latin America was yesterday, the next best one is right now. Don’t miss out.