Connect With Authors
*Your message will be sent straight to the team/individual responsible for the article.
Menu
Colombia’s total consumer expenditure is projected to reach close to a quarter of a trillion dollar in 2022, making it the fourth largest consumer market in Latin America. Despite the country’s recovering economy, unemployment is expected to remain high, which may weigh on consumer spending. However, the retail market is expected to see growth, with retail sales in nominal local-currency terms projected to grow at a compound annual growth rate of more than 6% in the next five years, projecting based on past correlation with its private consumption and IMF prediction of GDP and inflation. The growth rate may be inflated by high prices though.
Online retail is expected to see dynamic growth and account for more than 3% of the retail market in 2022, according to data from Edge by Ascential. This growth is supported by rising internet penetration and smartphone usage in the coming years. Local and regional players dominate the online market, with brick-and-mortar chains also developing their digital presence. Most consumer goods demand is met by imports, with the exception of foodstuffs and certain domestic products such as white goods, cosmetics, and clothing. The exchange rate between the Colombian peso and the US dollar is important as it affects imports and exports.
In the long term, the retail market in Colombia is expected to be sustained by changes in shopping habits, greater access to credit, and rising income levels. However, retail development may be hindered by poor infrastructure and ongoing security issues, which will add to logistical difficulties. This in turns will result to e-commerce not growing at its full potential.
The influx of Venezuelan refugees into Colombia in the last seven years has boosted domestic consumption but has also created other problems. While there will be some investment in higher-end supermarket chains and luxury goods, the growth in this sector is likely to be slower than in other countries in the region with higher average income levels. The majority of growth in the retail market will be geared towards low- and middle-income consumers.
The Colombian government’s program, launched a decade ago, to provide internet services to low-income households has contributed to an increase in online retail sales even before the COVID-19 pandemic hit. Additionally, the legal framework put in place to regulate e-commerce has also helped to boost consumer confidence. However, internet penetration is still largely concentrated in urban areas, meaning that online sales will only make up a small percentage of the overall retail market. Nevertheless, the lacking of logistics infrastructure in rural area itself won’t contribute much of e-commerce growth in the near terms.
Despite being dominated by regional companies, the online retail market in Colombia has seen an influx of international players. MercadoLibre, an Argentine company, is currently the most popular online retailer in the country. It offers an online marketplace as well as an electronic payment system, Mercado Pago. Traditional brick-and-mortar retailers such as Grupo Éxito, Falabella, Cencosud, and Casino, have also been able to capitalize on the shift to online shopping due to the lockdowns. Furthermore, international companies such as Amazon and Shopee, an online marketplace owned by Singapore’s Sea Group, are also expanding into the Colombian market.
Last mile apps key to growth: With the pandemic, mobile e-commerce in Colombia has experienced significant growth. Last mile apps like Rappi, Merqueo, and Uber Eats have played a crucial role in driving this growth by providing low-value purchases and familiarizing consumers with the convenience of mobile e-commerce. These apps are also building on the platform provided by the widespread use of smartphones and the expansion of high-speed mobile internet in the country.
Social networks provide sales opportunities: Due to the widespread use of smartphones and their deeply embedded role in consumers’ daily lives, retailers are turning to mobile technology to reach consumers during the pandemic. One way they are doing this is through social networks, such as WhatsApp, which allows retailers to maintain contact with consumers and generate sales.
Growing role for mobile e-commerce: As consumers return to more hectic lifestyles, smartphones will become the primary mode of connectivity. This means that e-commerce players will need to develop their pages and portals for mobile use to accommodate the growing number of consumers engaging with online retailing through smartphones.
Producers getting closer to consumers: Through the development of e-commerce pages and apps, producers and manufacturers are getting closer to the final consumer without the intervention of intermediaries or retailers. This trend has been strengthened by the pandemic, as manufacturers sought to maintain contact with consumers and generate sales in the context of closed brick-and-mortar stores and increased consumer digital engagement.
Some challenges around security: Mobile e-commerce in Colombia is facing some challenges, particularly around security. These include risks associated with using open Wi-Fi networks for purchases and the potential for private information to be gathered when using a smartphone. In addition, there are concerns about companies and users failing to comply with Colombian regulations regarding the control and use of personal data collected. Companies must ensure they obtain express consent for the use of personal information and prevent the release of any information that may make users vulnerable to crime when shopping online using their mobile devices.
In Cambodia, There are about 0.6% of people use credit cards, and 7.2% of people use debit cards. While there are 3.1% of people purchase on the internet, there is only 5.9% of people with online banking accounts.
For E-Commerce Customers in ColombiaWhat are the major driving factors to purchasing online?
There is 25.39 million consumer goods e-commerce users in Colombia, and they spend total of around 9.02 billion USD dollars in 2021. That makes a per capita spending on consumer goods e-commerce of around 355 USD. Also, in those e-commerce users, about 42.7% of them purchase through their mobile phone.
Our consumer research practice tracks what customers spend and how they make decisions across major economies in the world.
