Online sales soar around the world at the end of the revolution | 2021-01-27
Years from now, when the impact of the pandemic on global businesses is analyzed, it is likely that the most lucrative change will be how it has pushed – or indeed pushed – massive markets in the modern era of commerce. electronic.
In many countries, online shopping had not been easy due to underdeveloped infrastructure and consumers’ reluctance or inability to use banking and electronic payments. It has stalled growth in much of the world, but the disruption of COVID-19 has forced rapid change.
Take Mexico, where less than half of adults have bank accounts and less than 5% of retail sales were online before the pandemic – a third of the global average. Lack of access to banking services and mistrust of the financial system have left it sidelined from the online boom that is happening in Europe, China and the United States. Mexican businesses reacted on the fly, causing a 54% increase in web sales, and accelerating the online ecosystem by several years. This kind of upheaval has also taken place in other major economies, such as India, Russia and Brazil, which have been slow to engage in e-commerce.
One of those new online shoppers is Miriam Sota, a 39-year-old woman from Mexico City. She had been very careful with her personal details after her credit card details were stolen and used to rack up a hefty bill. Fear of releasing her financial information kept her off the web until COVID-19 hit. That’s when she needed a filter for her fridge and, as a last resort, went online where she found one on Amazon. Today, she is converted and even does her shopping online, in large part thanks to new services that allow cash-to-cash orders.
“I had never bought anything online before the pandemic,” Sota said. “I have always been very suspicious.”
COVID-19 has accelerated the shift to e-commerce everywhere, but it has the potential to be much more lucrative in countries where many more people are developing the habit online for the first time. In India, for example, e-commerce only accounted for 6.5% of the market last year, less than a quarter of the rate in China. And some of those markets are more fragmented and up for grabs because there are fewer dominant companies.
To keep pace, retailers in these markets are catching up with their global competitors by creating more secure payment systems, expanding distribution to speed up delivery, and expanding customer service to platforms like Facebook and WhatsApp. MercadoLibre, Latin America’s largest e-commerce retailer, has gone so far as to use its own planes to cut shipping times as online sales increase in the region.
Within Walmart Inc., the world’s largest retailer, its Mexican unit tripled its online revenue in the third quarter, eclipsing a 79% gain for the US division. At Home Depot Mexico, e-commerce growth has overtaken its US parent company. Website traffic more than doubled with 70% of its online customers being new.
“I have seen an evolution” with people putting aside their fears about e-commerce, said Erika Diaz, vice president of online, marketing and special services for the Mexico division of The Home Depot. To ease the transition, the company now allows customers to purchase items on the web and then pay for them at a store, including cash. It also doubled the number of online customer service representatives and expanded online chat functionality. “We have adapted our business to the new standard. “
Russia has been breeding ground for an e-commerce boom for years, with almost as many internet users as the UK and Germany combined, according to Euromonitor International. But these two countries each have more than twice the size of online markets because, just like in Mexico, a preference for cash and an underdeveloped distribution network have hampered growth.
But COVID-19 quickly changed Russia. Established companies like Wildberries and Yandex NV, roughly owned, and startups flood the market with investment as the pandemic brought about 10 million Russian consumers online for the first time, according to Data Insight. Businesses have increased their offerings, such as online grocery shopping, and have reduced delivery times. All of this helped boost online sales by 45% last year when its overall retail market contracted, according to Euromonitor. Sign of the frenzy, the e-commerce operator Ozon Holding PLC went public at the end of November and the stock has already jumped by more than 40%.
“The pandemic is seen as a turning point in the development of e-commerce,” as Russian companies offer more secure payment systems and faster execution, said Marija Milasevic, consultant at Euromonitor. “Russia still has enormous potential for growth. “
Room to grow
In Brazil, online sales jumped 66% in 2020 – more than double the rate in the United States, according to Euromonitor. In response, mainstream retailers, like Via Varejo and Magazine Luiza, are using messaging platforms like WhatsApp to run promotions and complete deals, according to Goldman Sachs research. The chains are also testing live streaming to sell merchandise and are starting to ship orders online from stores – a common practice in other markets.
India has been an even bigger prize, given that it has over 1 billion people and the third largest retail market in the world, just behind the United States and China. The obstacles are even greater there with only about half of households connected to the Internet. According to Goldman, the country’s online market is expected to nearly triple to around $ 100 billion by 2024, driven by grocery orders and the push from industrial giant Reliant Industries Ltd. – the largest company in the country – in technology and e-commerce, according to Goldman.
In Mexico, the government had laid the groundwork for abandoning cash by building an infrastructure for electronic payment systems. It probably helped when the stores got dark. The same goes for making it easier to use money online. Retailers like Amazon now sell prepaid cards in convenience stores that can be used for shopping on the web.
“It was a big hurdle for e-commerce in Mexico,” said Daniela Orozco, who leads research for the Mexican Association of Online Sales, or AMVO. “Just two years ago, you could only make an online purchase with a credit card. “
Online migration has been “a silver lining” in the COVID-19 era, said Patricia Canavan, senior vice president of international and retail operations at Authentic Brands Group, which bought the brand last year Forever 21 which has stores in Mexico. One measure taken is to work with local partners to speed up delivery by using warehouses closer to densely populated areas.
Of course, the growth of e-commerce can also reduce profit margins, as it means retailers have to spend more on shipping and building distribution networks. And shoppers have been found to make less impulse purchases online than in-store, which means missing some sales.
But with COVID-19 still raging, businesses have little choice to join an online wave helping the industry post historic gains. In Mexico, Liverpool’s El Puerto, which operates department stores and a clothing chain, nearly quadrupled its e-commerce in the third quarter. Grupo Sanborns, the retail conglomerate owned by billionaire Carlos Slim, has experienced a similar boom. MercadoLibre increased its turnover by 85% during the same period, thanks to its Mexican division which more than doubled its sales.
“The growth of our Mexican business has been remarkable,” said Pedro Arnt, chief financial officer of MercadoLibre, on a earnings conference call in November. And there is a “great opportunity that still awaits us”.