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CONSUMER GOODS & RETAIL

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Argentina E-Commerce
by EOS Intelligence EOS Intelligence No Comments

Argentina’s E-commerce Growing at an Explosive Rate, but Not without Challenges

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Argentina is the fastest growing e-commerce market in Latin America with a booming m-commerce segment. Blessed with high internet smartphone penetration rates, the country sets stage for plentiful e-commerce opportunities. However, Argentina is still battling high inflation and low economic growth rates, a fact that bleaks growth prospects of e-commerce market. Much like its regional neighbors, Argentina is also plagued with logistics and payment issues, and resolving these challenges is the need of the hour.

This article is part of a series focusing on e-commerce in LATAM, which also includes a look into e-commerce market in Mexico and Brazil

What is pushing the meteoric growth?

Home to MercadoLibre (Latin America’s most popular e-commerce site), Argentina, is one of the most prominent e-commerce markets in Latin America, known for its outstanding growth rate – between 2018 and 2022, e-commerce market is expected to increase by 83% to reach US$ 19 billion.

Strong connectivity is one of the key supporting factors powering the e-commerce market. Argentina benefits from incredibly high internet penetration rate of more than 80% and one of highest numbers of mobile Internet users in Latin America. Further, the country’s growing young, Internet-savvy consumer base, with sufficient disposable income, is also driving e-commerce sales.

What is holding back Argentina’s e-commerce market?

Logistics

The most significant barrier restraining Argentina from becoming Latin America’s e-commerce leader is logistics. To begin with, quality of roads in certain neighborhoods of various cities, even in the capital city of Buenos Aires, is not suitable for swift deliveries. An average delivery time for packages to reach shoppers is about seven days, which is not a convenient wait time and could dissuade shoppers from ordering online.

An average delivery time for packages to reach shoppers is about seven days, which is not a convenient wait time and could dissuade shoppers from ordering online.

Most logistics companies are unable to deliver as quickly and reliably as e-retail demands. Adding to the list of logistics and infrastructure insufficiencies is the unfinished GPS mapping, owing to confusing address systems and missing postal codes, thus, making deliveries an even more cumbersome task. With the current state of logistics, Argentina secured 61st rank (out of 160) in the Logistics Performance Index in 2018, lagging behind its fellow competitors (in the e-commerce space), Brazil and Mexico.

Payment methods

Online payments can be challenging in Argentina, particularly, for making purchases on international retailers’ websites. More than 50% of Visa and MasterCard cards provided by local banks, cannot be used on international websites. This is a major operational hurdle for international e-commerce retailers, who have to set up other payment methods.

More than 50% of Visa and MasterCard cards provided by local banks, cannot be used on international websites.

Moreover, with exorbitant credit card interest rates (according to the Central Bank of Argentina, credit card interest rates lie between 36% and 111%), customers have become vary of shopping online.

Additionally, debit cards comprise a negligible share of Argentinian e-commerce spend, as they can only be used on limited e-commerce websites, thus, limiting use of this crucial payment gateway.

Distrust

Another key challenge is distrust among several Argentinians toward e-commerce websites, especially when it comes to billing and payment transactions. Some customers are also hesitant to provide card details for online transactions with protection of information being their primary concern.

With no proper legislation in place, trust in the e-commerce marketplace is hard to build. Argentina does not have a comprehensive regulatory scheme governing e-commerce, rather it has just a few regulations that are applicable to e-commerce.

The country also does not adhere to any standard international e-commerce model such as UNCITRAL model law on electronic commerce by the USA or Directive 2000/31/EC (Directive on electronic commerce) of the European Parliament. Without any robust regulation in place, consumers would neither feel protected nor be certain regarding action being taken in case of unlawful activities.

Economy

Argentina’s economy is shackled with sky-high inflation rate (second highest in Latin America in 2018) and depreciating currency against dollar, thus, dampening economic growth prospects of the country. Poor economic conditions have taken a toll on all economic sectors, including e-commerce. High inflation rate has decreased purchasing power of consumers, who have become cautious shoppers.

Opportunities still exist

Nonetheless, outlook for Argentina’s e-commerce market is quite positive, with key e-commerce players craving for attention from Argentina’s proliferating online customer base.

Argentina’s e-commerce market is endowed with opportunities arising from growing m-commerce and social-commerce segments.

Argentina’s e-commerce market is endowed with opportunities arising from growing m-commerce and social-commerce segments.

Smartphones are increasingly becoming the key mode to reach consumers in Argentina, with consumers preferring to use mobile devices for accessing internet over stationary computers or laptops. The use of mobile phones for searching products before purchase is a common habit in Argentina. To tap this opportunity, businesses are increasingly focusing on building mobile-friendly websites – as of May 2018, 74.3% of businesses adapted sites to mobile phones (compared with only 10.4% in 2017).

Another trend emerging in the market is that of social shopping (shopping influenced by social media), fueled by growing social media engagement among Argentinians – as of January 2018, about 76% of the total population were active social media users. E-retailers are now using social networks to interact with shoppers, particularly the young demographic, and also to promote products. As of May 2018, 73.5% of businesses used social media to engage with shoppers and the most preferred sites were Facebook and YouTube.

Argentina’s E-Commerce Growing at an Explosive Rate, but Not without Challenges

EOS Perspective

Argentina’s e-commerce industry has reached a stage where consumers, particularly the young demographic, are slowly beginning to embrace online shopping as part of their daily lives, however, there is still scope for a lot of development for wider adoption. While Argentina’s e-commerce market is dynamic and growing, it could benefit from certain improvements, particularly in terms of payment methods, logistics, and building consumer’s trust in online shopping.

Payment methods need to be kept up to date with requirements of businesses and consumers, and steps are being taken for its betterment. Better logistics is a requisite for online retailing to function properly. In the era of one-day deliveries, a week’s wait time in Argentina is too long, and retailers are looking to resolve this issue.

MercadoLibre, the largest e-retailer in Argentina, has taken giant leaps for betterment of both payment mechanism and logistics. The company introduced a digital wallet, Mercado Pago, through which both debit and credit card payments can be processed. The digital wallet can be used in physical stores as well. Customers can scan QR code on items using MercadoLibre or Mercado Pago apps and choose preferred mode of payment.

Further, MercadoLibre has been adopting various measures to improve logistics. Through Mercado Envios, the company takes care of package shipment and delivery, as the seller only has to take the package to nearest dispatch center of MercadoLibre, and from there onwards MercadoLibre ensures seamless package delivery. Mercado Envios ascertains that the package reaches customer in the shortest time possible and allows tracking of shipment by both seller and buyer. MercadoLibre’s another program, Mercado Envios Flex, guarantees deliver of packages within 24 hours, but it is limited to Buenos Aires for now.

Undoubtedly, customer service and shopping experience need to be revamped, which could help in building customer’s trust as well.

Undoubtedly, customer service and shopping experience need to be revamped, which could help in building customer’s trust as well. The e-commerce platforms could use foreign digital expertise to develop websites that are safe for billing and money transactions. Moreover, online merchants need to understand that a transaction is not complete when a customer purchases product online, but when the package is received by the customer. To be able to gain customer’s confidence, merchants should take end-to-end responsibility, be transparent in communication by clearly stating the delivery timelines or any additional charges that are applicable, among others, before the payment is made.

Nonetheless, Argentina is slowly making progress and is on track to uphold its position as one of the e-commerce giants in Latin America. Despite being the fastest growing e-commerce market in Latin America, Argentina is still behind the two e-commerce powerhouses, Mexico and Brazil, at least as of now. However, the country definitely has the potential to give them both a tough competition with its e-commerce and m-commerce markets growing at exponential rates.

by EOS Intelligence EOS Intelligence No Comments

High Production Costs Dampen Camel Milk Market Potential

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Over the past few years, dairy-caused allergies and the growing debate regarding the inherent benefits and disadvantages of consumption of cow milk and its products have made consumers look for alternative sources to traditional dairy products. One product that has been growing in popularity owing to this is camel milk. Deemed to be the most expensive milk in the market, camel milk is known to have several medicinal values, especially for the treatment of diabetes, orthopedic problems, and autoimmune diseases. Few studies also claim that it is beneficial for the treatment of autism. While camel milk remains a niche product at the moment, it will be interesting to see if this product can make a dent in the massive dairy-milk industry, especially with the presence of several other healthy plant-based milk alternatives.

Growing demand and expanding production

Camel milk is not a new product as it has been consumed in the Middle East for ages, however, it is only recently that it has sparked global interest. Owing to its significant health benefits (primarily for diabetes), the product has found traction especially in developed countries, such as the USA, parts of Europe, Singapore, and Australia. The global market, which was valued at about US$4.24 billion in 2017 is estimated to register a CAGR of about 7% during 2018-2022.

Investments to expand Australian camel milk production

In response to the growing demand, several companies (especially across Australia) are entering the camel milk space and are increasing their investments in the sector.

Australia’s Wild Camel Corporation has expressed plans to increase its herd size five-fold from 450 camels to 2,500 camels over the next two years.

Similarly, Western Australia-based Good Earth dairy, which in mind-2018 had about 100 camels, plans to expand to 3,300 camels by June 2020, which would help the dairy produce about 10,000 liters of camel milk in a day.

Victoria-based The Camel Milk Co. doubled its milk output in 2017 to reach 250 liters a day from a herd of 250 camels. It has also maintained a scope for further expansion by moving to a farm that can house a herd of 1,000 camels, planning to increase its herd size along with growing demand.

International investments are also pouring into Australia’s camel milk market. In 2017, UAE-based investors funded a US$6 million (AUD8 million) pilot camel milk farm at Rochester, Australia. Several Chinese investors are also reported to be interested in investing in the camel milk business in the country.High Production Costs Dampen Camel Milk Market Potential

India’s camel milk production grows as well

In addition to Australia, India (and a few African countries, such as Kenya and Ethiopia) has also focused on increasing camel milk production.

India-based Aadvik Foods and Products, which procures raw camel milk from Indian camel breeders and herders and processes and markets it, has significantly increased its scale of operations. It started with procuring and processing 80-100 liters milk per month in 2015 and moved on to procuring and processing close to 8,000 liters per month in 2017.

In January 2018, Rajasthan’s State Government (in partnership with Jaipur-based Saras Dairy) announced its plans to set up a mini camel milk plant in Jaipur. The plant will cost US$1 million (INR 70 million) and is expected to be set up by the end of the year. Post the establishment of the Jaipur plan, the government plans to open another mini plant in Bikaner.

Expanding food product lines

In addition to processing and marketing camel milk, several companies across the globe are expanding their product base to include camel milk products such as milk powder, chocolate, cheese, infant formula, ice cream, etc.

In 2016, Desert Farms, a US-based camel milk company, added camel milk soaps and camel milk powder to its product range.

In 2017, India-based Aadvik Foods, also extended its camel milk product line to include camel milk chocolates and milk powder.

In a similar move, Amul, one of India’s largest dairy cooperatives, launched camel milk chocolates in late 2017. Unlike most other players in the market, Amul has first started with chocolates and then wishes to enter the packaged camel milk market in the near future.

In 2018, Australia’s QCamel announced its plan to launch camel-milk chocolates for the Australian as well as international markets.

In February 2018, UAE-based Camelicious launched the world’s first camel milk infant formula for children aged one to three, an alternative for children who are lactose-intolerant.

The camel products for children are praised for their benefits, as camel milk is the closest alternative to mother’s milk in terms of nutritional value. Since camel milk is beneficial for children as it has higher iron and vitamin C content compared with other milk options, products such as chocolates, infant formula, and ice cream, seem to be smart product extensions, especially if such benefits are highlighted through marketing.

Moreover, product extensions help companies reach a greater audience for their camel milk. Since camel milk is saltier than the largely consumed cow milk, products such as chocolates, help garner users that otherwise may reject camel milk due to taste preferences.

High retail prices hamper demand growth

While camel milk as a product is gaining popularity and acceptance globally, it is not without its share of challenges. Camel milk is the most expensive type of milk in the market.

In the USA, Desert Farms sells one gallon of camel milk for US$144 (US$38 per liter), while it sells a kg of camel milk powder for about US$370. In comparison, a gallon of cow milk sells for about US$3.50 in the USA.

In Singapore, a liter of camel milk sells for about US$19 per liter (US$72 per gallon). In comparison, cow milk sells for close to US$8 per gallon in Singapore.

Similarly, camel milk in India costs about US$7 per liter and camel milk powder costs close to US$87 per kg, whereas cow milk retails for about US$0.6 per liter.

While the benefits of camel milk are plentiful, they do not always justify the high price in the eyes of the consumer. The high cost can be attributed to the high production cost and low yield compared with dairy cattle produce.

In Australia, the cost of producing one liter of camel milk is around US$13 (AUD17), while in India a liter of camel milk cost US$5-6 (INR 350-400) to produce – in comparison to this, producing one liter of cow milk costs farmers about US$0.27-0.32 (AUD0.37-0.44) per liter in Australia and US$0.2-0.27 (INR 14-22) per liter in India.

Camels also produce less milk in comparison with cows. While cows produce around 16 liters a day, a camel usually produces only 6 liters a day.

While the benefits of camel milk are plentiful, they do not always justify the high price in the eyes of the consumer.

In addition to the barrier of high price and costs, camel milk also faces significant competition from plant-based milk alternatives, such as soy, almond, and coconut milk. These milk options are also considered to be a healthy alternative to cow milk and have the added benefit of being vegan. Moreover, while these milk options are more expensive in comparison with cow milk, their prices are still considered more reasonable when compared with camel milk price.

EOS Perspective

Camel milk has a lot of inherent benefits, which are expected to ensure steady sales growth over the next decade. While there are no doubts regarding the growing popularity of camel milk, it is too far-fetched to say that this market can dent the dairy mega-industry. Camel milk market is standing at the beginning of its promising growth curve, however, it must work towards pushing the production costs down to become more mainstream rather than niche, which will not be achieved by simply marketing the medicinal properties of the product.

Camel milk market is standing at the beginning of its promising growth curve, however, it must work towards pushing the production costs down to become more mainstream.

Several dairy farms across the globe have realized this aspect and are working towards achieving economies of scale and getting costs down through increasing operations size and venturing into extended product lines. While it is certain that the industry will continue to grow, it is yet to be seen whether it can create a shelf space for itself across large retail stores or whether it remains a primarily niche premium online sales product mostly for affluent consumers.

by EOS Intelligence EOS Intelligence No Comments

Brazil – Lucrative but Challenging E-commerce Industry

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Brazil is likely to account for approximately half of US$64.4 billion retail e-commerce sales across Latin America in 2019. Being the region’s largest country with a whopping 200 million population, a tech-savvy and consumption-driven middle class, and one of the largest internet-connected populations of the world, Brazil is one of the most preferred Latin American countries where international retailers are looking to expand. However, e-commerce success in Brazil also comes with numerous challenges. Overcoming those challenges still remains a quagmire for e-commerce merchants.

This article is part of a series focusing on e-commerce in LATAM, which also includes a look into e-commerce market in Mexico

The good and the difficult

Despite the economic slowdown and political turbulence in the country, retail e-commerce market has continued to grow, recording 10% y-o-y growth in 2018. Brazilians are connected now more than ever, access to the internet and technologies is becoming affordable by the day, while consumers are particularly enthusiastic to purchase international products using online shopping websites, all of which is making Brazil Latin America’s e-commerce powerhouse. Another key reason for online retail growth is the fact that consumers have become cash-strapped amidst frail economic conditions, which has squeezed money out of the market, bringing a prominent change in buying behavior, where consumers are more price conscious and driven by promotions. In such a scenario, e-commerce has emerged as a clear winner by offering lower prices and good deals, as compared with offline channels.

Operating an e-commerce business in Brazil is a double-edged sword. On the one hand, the 140 million internet users represent an enormous e-commerce opportunity, while on the other hand, Brazil is plagued with operational challenges and struggles.

However, operating an e-commerce business in Brazil is a double-edged sword. On the one hand, the 140 million internet users represent an enormous e-commerce opportunity, while on the other hand, Brazil is plagued with operational challenges and struggles with complex logistics, high tax rates, and payment issues, among others.

An array of challenges

One of the key challenges for any international retailer operating in Brazil is the high tax rate of 6.4% applicable on all international payments, which is enough to disincentivize shoppers to make purchases from international retailers such as Amazon or Alibaba. Further, customers are required to pay 60% flat tax on all imported product purchases valued between US$50-500 (the range may vary across different states). The taxes almost double the price of products, which could deter digital sales. In addition to the taxes, Brazil’s customs procedures are slow and complex, and shipments take a long time to arrive, making the online shopping experience arduous for customers.

For international retailers to operate in Brazil, it is crucial that they familiarize themselves with various local payment methods such as Boleto Bancário (bank slips), payment options offered by regional players (MercadoLivre offers MercadoPago, which is equivalent to PayPal), among others. This is because only 20% of Brazilians have access to international credit cards and instead prefer paying through local payment channels. This could be an obstacle for e-commerce players, as most transactions on shopping websites rely on online card payments. Furthermore, credit cards provided by domestic banks can only issue payments that are made in Brazilian Real, hence, international retailers need to find a way to convert currency if they want to operate in Brazil.

Brazil – Lucrative but Challenging E-commerce Industry

There are also several operational, logistics, and infrastructural challenges that are impairing e-commerce growth in the country. Strikes in Brazil are very common and happen quite often, consequently halting operations of federal customs or postal services. It usually takes some time to resume operations after the strike and the packages/deliveries could take even longer to reach the final destination. The recent truckers strike in spring of 2018 caused more than 3 million online deliveries to arrive with significant delays.

The country also lacks proper infrastructure to support e-commerce business – the distribution centers rarely function 24-hours a day due to security concerns and costly overtimes, which prevents shippers from collecting packages at night when the traffic is lower. Further, traffic situation in major Brazilian cities such Rio de Janeiro and Sao Paulo is so overwhelming that same day or next day shipping requirements are very difficult to fulfill. In addition, rampant cargo robberies are further disrupting e-commerce business in Brazil and are an acute problem in Rio. All major e-commerce players and logistics companies are investing heavily to protect goods, which increases security costs and is subsequently squeezing profit margins. Sao Paulo’s cargo transportation and logistics companies spend about 10-14% of revenue on ensuring cargo safety, while in Rio this ratio lies between 15% and 20% of revenue.

Sao Paulo’s cargo transportation and logistics companies spend about 10-14% of revenue on ensuring cargo safety, while in Rio this ratio lies between 15% and 20% of revenue.

Strong fundamentals promise opportunities

Nonetheless, challenges have not yet dissuaded customers from shopping online or prevented international and local players to expand operations in Brazil. Players are continuously making efforts to improve services to lure customers. One of the key trends that are reshaping customer support services is the increasing focus to provide chatbots on e-commerce websites for 24-hour shopping assistance. Brazilian e-commerce players are betting on chatbots to improve customer engagement and management, and to generate brand awareness.

With rising number of smartphone users in Brazil, mobile commerce is also growing and players are increasingly focusing on tapping this opportunity. In 2017, m-commerce users grew 42% y-o-y and mobile devices contributed to 31% of e-commerce sales in H1 2017. Furthermore, Brazil is a country with highly active social media users, a fact which serves as a key platform to expand business – as of March 2016, 60% of e-commerce sites used social media for sales and marketing. Numerous Brazilian companies use social media for marketing and it has become an integral part of e-commerce business, where social media is used as a tool for promotion and to reach out to customers.

EOS Perspective

While Brazil’s e-commerce market could be a cash cow for retailers, it also comes with various quirks and challenges. Localizing business in Brazil requires enormous amount of planning, calculation, and understanding the market before entering it. The high cost of doing business could be intimidating for several players along with online payment challenges, hefty taxes, and inferior infrastructure. However, forging local partnerships could solve some of the issues. For instance, cross-border e-commerce merchants could partner with Brazilian payment processing companies and invest in developing local payment methods to overcome the online payment challenge.

Alternative delivery channels are becoming popular, and these could help solve the logistics and shipping issues to a certain extent. InPost, a Polish company that operates a network of parcel lockers, introduced click and collect services in Brazil, which allows customers to place an order online and collect package from InPost’s lockers that are situated at most frequently visited places such as gas stations. Customers receive a QR code by email, which is used to operate the lockers. The lockers offer convenience for customers and reduce wait times, and greatly reduce logistics cost for retailers. While this is only one of potential novelties that could ease logistics problems, the arrival of established international retailers such as Amazon and Alibaba might be expected to bring in other innovations to reduce delivery, infrastructure, and payment barriers.

Despite the existing macro-economic and operational challenges, the country’s potential as a digital commerce market will continue to attract investments and is expected to keep growing.

Despite the existing macro-economic and operational challenges, the country’s potential as a digital commerce market will continue to attract investments and is expected to keep growing. With a large internet savvy consumer market eager to purchase international products and with westernization deeply influencing the young population, Brazil will continue to draw the attention of international retailers across the world. Amidst the country’s turbulent politics and economy, purchasing power grew 3% y-o-y in 2017, making Brazil even more attractive for online retailers. With new trends reshaping the industry and players forging ways to improve operations, the country is expected to remain the largest e-commerce market of Latin America ahead of Mexico and Argentina in the foreseeable future.

by EOS Intelligence EOS Intelligence No Comments

Mexico’s E-commerce Sector to Rise Amidst Challenges

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E-commerce in Mexico is witnessing a steady growth and is slowly becoming one of the most dynamic sectors of the country’s economy. In the last five years, e-commerce market in Mexico has grown significantly, as retailers strengthened their digital strategies to grow sales. The online channel is becoming an indispensable part of retail and despite all operational challenges that exist in the market, opportunities are too attractive to be missed.

The article is part of series focusing on e-commerce in LATAM, which also includes a look into e-commerce market in Brazil

In recent years, Mexico has attracted interest from global brands to expand in the country, where online retailing is expected to grow substantially – revenue generated by e-commerce is expected to reach US$ 17.6 billion by 2020, growing at a rate of 16.6% annually. Mexico’s distinctive geographic and demographic characteristics make it one of the most promising e-commerce markets in Latin America, where global companies are looking to expand. Its proximity to the USA is advantageous, making it an attractive target for USA-based retailers looking to grow internationally (Amazon, Walmart, Best Buy, among others). Additionally, the growing population of young, working-age, tech-savvy Mexicans with sufficient disposable income is the key target for global retail chains, particularly for companies eyeing growth through e-commerce channel.

Mexico’s distinctive geographic and demographic characteristics make it one of the most promising e-commerce markets in Latin America, where global companies are looking to expand.

Lack of consumer trust 

In the last five years, e-commerce has witnessed double-digit growth and the trend is likely to continue in the long term. However, the market faces few challenges, which are impeding growth. To begin with, low consumer confidence in online transactions is a major barrier. Mexican users are skeptical when it comes to internet-based transactions due to distrust in payment methods and fear that the banking information provided will be misused, amidst high level of banking-related frauds prevalent in the country. According to a study conducted by Aite Group1, in Q2 2016, 83% of the interviewed respondents witnessed identify theft, while 70% were victims to online banking frauds. Consumer willingness to make online purchases is further shattered by the unsatisfactory online shopping experience delivered by some retailers due their relatively poor website designs and product display. According to a joint study by The Cocktail.com and ISDI, Challenges of E-commerce Mexico in 2017, consumers typically lost confidence in the online purchase process when trying to look for information on the products sold, making payments, understanding shipment and delivery policies, and dealing with returns.

Dependence on cash

Mexico is a cash-based economy, with 90% Mexicans preferring to make payments in physical currency. High dependence on cash is largely caused by limited access to modern financial infrastructure – as of 2016, there were only 37.7 ATMs and 10.3 bank branches per 100,000 people. Moreover, large proportion of the population remains unbanked along with low credit card penetration in the country. The dominance of physical currency in Mexico limits e-commerce growth, which is dependent on online payments. To overcome this challenge, players are adapting to align with customer preferences, as the significance of cash is impossible to overlook in Mexico. E-commerce players are introducing hybrid payment systems. For example, Linio and MercadoLibre allow customers to pay in cash, through banks, pharmacies, and convenience stores (OXXO and 7-Eleven), for items bought online. Walmart has introduced more than 2,000 kiosks in its physical stores, where customers can pay in cash for products bought online.

EOS Perspective

Although several large players, such as Amazon, Walmart, and MercadoLibre operate in the market, e-commerce sector still faces several obstacles and has yet not developed to the levels of other e-commerce markets that exist globally. For the Mexican e-commerce market to grow, it is imperative for the retailers to boost consumer confidence by ensuring that the buyer is safe; one way to achieve that is to make sure that the purchase process does not end with payment confirmation. Instead, the complete purchase process should be made transparent by enabling consumers to track all orders, receive notifications on shipping process, as well as making the return policy/process agile and convenient for shoppers.

For the Mexican e-commerce market to grow, it is imperative for the retailers to boost consumer confidence by ensuring that
the buyer is safe.

In spite of all quirks and challenges of the market, undoubtedly, Mexico offers a promising future for e-commerce with its sizable upsides – high internet and mobile penetration, growing purchasing power among consumers, declining smartphone prices, presence of e-commerce giants, such as MercadoLibre and Amazon looking to expand operations, among others. According to the Mexican Association of Online Sales (AMVO), five years ago in Mexico, online sales of large retailers including Walmart, Sanborns, Sears, Liverpool, and Palacio de Hierro comprised merely 1% of their total sales. This share rose to nearly 20% by 2017.

The e-commerce market is developing, demonstrated through sustainable and constant improvements – for instance, the country is making efforts to steadily develop infrastructure, customers are offered wider payment options through offline channels, and Amazon’s entry in the market has acted as a catalyst to e-commerce development, boosting customers’ trust in online shopping websites. With the launch of Amazon Prime in 2017, Amazon reduced shipment time to 1-2 days and expanded free shipping option across Mexico – a significant step that would revolutionize online retailing with other players trying to follow Amazon’s lead.

Mexico is ripe for e-commerce to boom. Even though the market is at nascent stage of development and faces challenges, it is also laden with myriad of opportunities. Online shopping accounts for a small share of the total annual retail sales in Mexico – e-commerce comprised 1.6% of total retail sales in 2016 and is likely to grow to 2.6% by 2019 – which represents a huge opportunity for players, as Mexicans have just begun adopting shopping through e-commerce. Players operating in the market understand the tremendous future growth prospects that the market offers, hence, are focusing to expand operations. With the right growth strategy, understanding of the market, and knowledge of consumer buying behavior, it is possible to survive and grow in the market, even though it is packed with challenges.
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Notes:

  1. 2016 Global Consumer Card Fraud study conducted by Aite Group; n (number of respondents interviewed in Mexico) = 303
  2. American e-commerce companies: Amazon and Best Buy
  3. American retail companies: Walmart and Sears
  4. Latin America-based e-commerce companies: Linio and MercadoLibre
  5. Mexico-based department store chains: El Palacio de Hierro, Sanborns, and Liverpool
by EOS Intelligence EOS Intelligence No Comments

Commentary: Walmart Acquires Flipkart – The India Scenario

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Putting an end to all rumors and speculations making the rounds about the Walmart-Flipkart deal, Walmart, America’s largest retail chain, on 9th May, 2018, finally closed the deal at US$16 billion by acquiring Flipkart, India’s largest e-commerce platform

What’s the deal?

The buyout, touted as one of the biggest e-commerce deals, has led Walmart to own 77% stake in Flipkart. The association of the two players comes at a time when the Indian e-commerce market is bourgeoning and is expected to reach US$200 billion by 2026 (up from US$15 billion in 2016), increasing at a CAGR of nearly 30%. For Walmart, this is a great opportunity at the right time to grow its foothold in the Indian market.

As part of the deal, US$2 billion was the definite amount invested in Flipkart, and remaining US$14 billion was used to buy out other stakeholders which sees Softbank’s (Flipkart’s largest shareholder prior to the deal) exit from Flipkart, among others. The remaining 23% of the company stakes will stay with Binny Bansal (co-founder of Flipkart), China’s Tencent Holdings, Tiger Global Management, and Microsoft.

Flipkart and Walmart offer each other a strategic and valuable partnership. By acquiring Flipkart, Walmart adds Jabong and Myntra (fashion retail players), PhonePe (payment platform), and Ekart (logistics and supply chain provider) to its portfolio. Walmart can use them to its leverage in understanding the Indian e-commerce ecosystem and gain insights into Indian consumers’ online shopping habits. In return, Walmart’s experience in logistics and supply chain will come in handy for Flipkart to strengthen its operations, even further, in India.

What does it mean for e-commerce landscape and players?

Walmart acquiring Flipkart may prove to be a turning point for e-commerce in India. Small and medium sized enterprises are expected to gain from the deal. As Walmart grows in India, the company plans to procure products directly from local businesses and offer them growth opportunity by exporting their products to other countries via e-commerce. Even grocery suppliers and ‘kirana’ stores owners could benefit in the long run as Walmart may merge its cash and carry business with Flipkart, which aligns with Flipkart’s move to invest and grow its online grocery business – it launched a pilot program to sell groceries on its platform in Bengaluru in July 2017.

However, the deal has not been welcomed by online sellers on Flipkart and they are concerned about the future of their businesses. There is a speculation that with Walmart entering India, it may bring with it the already existing line of labels via Flipkart to the Indian market. This may not only increase competition among sellers but may result in eliminating some of the smaller sellers already present on the Flipkart platform by offering products at much lower prices.

But the most difficult challenge brought by the acquisition will be faced by other players, such as Snapdeal or BigBasket, operating in the e-commerce space. As Walmart and Flipkart ally together, having a proficient knowledge related to retail, supply-chain management and logistics, and with its tiff with Amazon, already a front runner, it is most likely that the competition in the e-commerce sector is going to intensify and players, especially small ones, will have to offer top notch service in terms of quality, price, on-time delivery, and possibly vertical or niche specialization, to survive the heat of the competition.

What does it mean for consumers?

With fierce competition expected to rise between the many e-retailers, it only means good news for consumers. Consumers can now expect new brands, better variety, and more options to choose from. In order to stay ahead of its competitors, players will be likely to offer better discounts which the consumers want.

Apart from better promotional offers, consumers can also expect better customer service and quicker product deliveries. Also, as the e-commerce sector grows in coming years, it is most likely that large players such as Walmart and Amazon would broaden their reach in Tier II cities, Tier III cities, and even rural areas, as consumers in these parts of the country represent a huge untapped potential for online sales.

What can be expected in future?

In the current scenario, this move brings with it both good and bad news. From a consumer’s point of view, evolution in the e-commerce space is great as they will now have more options at better prices to choose from. However from a supplier’s perspective, the pressure to offer good quality products at low prices, while surviving competition, will be intense.

The deal is expected to revolutionize the dynamics of online and offline retail sector in India. The e-commerce boom is relatively new to India and a merger like this signifies the enormous potential of the sector by offering new opportunities to suppliers and delivering more value to customers.

The deal is expected to revolutionize the dynamics of online and offline retail sector in India.

With the deal being finalized, one thing that is bound to happen is a head on collision between Walmart and Amazon to emerge as the leader in the Indian e-commerce landscape. To outrun its competitor, each player will rigorously work on improving its supply chain infrastructure thus can be hoped to create a good number of jobs. As the consumer demand increases, farming (through new grocery stores that Flipkart plans to open) and infrastructure sectors are expected to benefit in the long run.

At this stage, only speculations can be made about how much benefit Walmart will have by acquiring Flipkart. However, this deal has definitely paved the way for the growth of the Indian e-commerce industry.

by EOS Intelligence EOS Intelligence No Comments

Infographic: Dark Chocolate – India’s New Indulgence Is Here to Stay

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India’s indulgence in dark chocolate is gradually rising. While the Indian chocolate industry has grown manifold over the decade, especially in milk and white chocolate segments, it is the dark chocolate segment that has gained momentum in the recent years. The growth in demand for dark chocolate can be attributed to the growing health consciousness, increased per capita income of the urban population, and exposure to foreign flavors, especially amongst urban Indians. Most of the demand (and market) is currently limited to urban cities as dark chocolate is typically priced higher than other chocolate types. Nevertheless, though still getting accustomed to the bitter taste of dark chocolate, Indian market offers great growth prospects for players associated with this sector provided they plan efficiently and act keeping in mind the specifics of the Indian market scenario.

by EOS Intelligence EOS Intelligence No Comments

Infographic: Social Media-fueled Restaurants: How Instagram Has Impacted the Restaurant Industry

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Instagram has infiltrated the restaurant business, pushing it to be more photogenic, colorful, and trendy. With several Instagrammers and restaurants posting pictures of beautifully crafted meals every day, food has become an integral part of social networking. Restaurants have picked up on this trend and are focusing on becoming more ‘Insta-friendly’ or ‘Instagrammable’ by modifying their décor, lighting, and food presentation. From rainbow colored unicorn food and drinks to galaxy donuts, all are crafted keeping Instagram in mind. Physical spaces are being designed to bait Instagrammers, with expectation to inspire them to take maximum photographs and share them on social media.

With social media playing a crucial role in decision-making for diners, whether it is choice of food or restaurant, Instagram has become an indispensable tool for digital marketing for restaurants helping them to drive business and increase awareness.

Social media restaurants

Social media restaurants

  • Location of restaurants (refer to the infographic):
    • Bellota – A Spanish cuisine bistro in San Francisco, USA
    • Media Noche – A casual dining restaurant in San Francisco, USA
    • Peal’s Finest Tea – A tea café in Los Angeles, USA
    • Seamore’s – A casual seafood restaurant chain across New York, USA
    • Comodo – A casual dining restaurant in New York, USA
    • Pez Playa – A beach-front bar and casual dining restaurant in Mallorca, Spain
    • Dirty Bones – A casual dining restaurant chain across London, UK
    • Sonic – A drive-in fast-food restaurant chain across the USA
    • Zizzi – Italian casual dining restaurant chain in the UK and Ireland
    • Chili’s – American casual dining international restaurant chain
    • Starbucks – American/international coffeehouse chain
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Infographic: Tailored Cosmetics – Customization Is a New Trend

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In the last five years, the beauty and cosmetics industry has witnessed a considerable demand for bespoke or tailored beauty products, which offer an alternative to “one-size-fits-all” cosmetics. The bespoke cosmetics companies allow customizing ingredients, colors, and fragrances, among others, to provide products tailored to an individual’s skincare routine or requirements. With consumers being increasingly selective, more engaged, and aware about ingredient and formula benefits, the appetite for customization to meet their distinct needs has grown.

Presently, the market for tailored beauty products is relatively small, dominated by small-sized players and start-ups, with a few established beauty brands such as Estée Lauder, Shiseido, Lancôme, among others, operating in the market. As demand grows, several other players are expected to venture into the market.

Despite challenges such as limited accessibility and high product prices, bespoke cosmetics market has tremendous growth potential and is certainly more than just a fad. The concept of customization catering to every individual’s requirements is increasingly luring more customers and could take bespoke cosmetics from being a novelty to mainstream sooner than later.

tailored cosmetics

Headquarter locations of tailored cosmetics manufacturers (refer to the infographic)

  • Function of Beauty and Kiehl’s – New York, USA
  • Ittsē and eSalon – California, USA
  • Cover Girl – Maryland, USA
  • Skin Inc. – Singapore
  • GeneU – London, UK
  • Ioma and Lancôme – Paris, France
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