According to Franco Calderon of the Latin America Retail Connection, Latin America has 600 million potential customers and a spending power of $3.24 trillion. This, together with a burgeoning middle class, makes it an appealing market for U.S.-based ecommerce businesses.
Big players, such as Amazon and Walmart, have already taken notice — the former reported $475 million in Latin American Web sales in 2013. But when it comes to tapping into this market, how can smaller ecommerce businesses keep up?
One strategy is to approach Latin America country by country. After all, the market requirements for selling to Argentina differ greatly from Colombia or Chile. With this in mind, here are a few things that businesses should consider before entering Latin America’s largest ecommerce market — Brazil.
The opportunity and challenge of Brazil
Brazil boasts 202 million people of whom 33.5 million shop online. More importantly, its consumers make 1 in 4 online purchases from U.S.-based retailers, making it an attractive first step into Latin America.
Despite these prospects, many ecommerce businesses struggle with expanding to Brazil. In fact, an Endicia customer survey found Brazil to be the most challenging international country to ship to.
What makes shipping to Brazil so difficult? In a nutshell: lack of visibility and slow shipping speeds.
Only 28% of the packages sent to Brazil via the postal network are actually tracked, meaning merchants can’t provide updates to customers regarding the status of their shipments.
As for shipping speeds — Brazil recently made a change to the way items clear customs, which translates into slower service overall.
Following a 40% growth in ecommerce imports in 2013, Brazil’s tax service (Receita Federal) and postal service (Correios) have started inspecting postal parcels entering the country to ensure that duties and taxes are collected on foreign merchandise.
As a result, postal shipments are seeing delays of up to 10 days before they can clear customs. To add to this, if duties and taxes are owed on a shipment, the Brazilian recipient has to physically visit the local post office to pay the duties and taxes before they are allowed to take the shipment home, adding to the delay.
Both these hurdles have made selling to Brazil an arduous experience for online merchants, and many have stopped shipping there altogether. But there are ways for businesses to realize Brazil’s potential without the headaches.
Ways around the challenges
Businesses should start by re-examining their shipping mix to determine whether it makes sense to shift some package volume to a private carrier. Private carriers do receive faster clearance through customs and can provide end-to-end tracking on shipments.
However, it’s worth noting that private carriers can be expensive — especially if a business is shipping lightweight packages to residential addresses. They also include international service fees and surcharges that are not charged until after a shipment is delivered.
Alternatively, if the postal network offers the most affordable option for your shipments, look for software and service providers that allow packages to be delivered duty paid (DDP), meaning all taxes are collected before the item is shipped.
While shipping items DDP means a bigger cost to customers at checkout, it also ensures that packages will clear customs quickly and without any nasty surprises at delivery.
Postal consolidators, such as DHL Global Mail, offer pre-paid duty services, as Endicia company does through its Endicia Global Service™ program. These options use the low-costs of the postal network while providing tracking options and speedy delivery that’s on par with private carriers. This is ideal for lighter-weight packages, up to 10 lbs., heading to residential addresses.
While there are challenges associated with shipping to Brazil, there are now more options than ever to help small ecommerce businesses overcome them. Pre-paying duties and taxes can provide a more transparent shopping experience for customers and ensures speedy package clearance through customs. By making even small changes, businesses can have an easier time tapping into the promise of Brazil’s booming ecommerce market.
Source:
This is a contributed piece by Amine Khechfé, Co-founder and General Manager, Endicia
