Editor | Li Xiaotian

This year, the hot destination for going abroad is undoubtedly Latin America. In addition to Mexico's manufacturing industry, Brazil's Fintech and pan-entertainment, as well as the booming mining industry in countries like Chile, Latin America's consumer market is also a blue ocean with increasing popularity.

According to the International Monetary Fund (IMF), in 2023, two Latin American countries had a per capita GDP exceeding USD 20,000, namely Uruguay and Guyana - in comparison, China's per capita GDP last year was USD 12,600. However, many people may not have heard of these two countries.

Apart from its impressive GDP, Latin America is also in a period of rapid e-commerce development. In 2023, e-commerce sales in Latin America exceeded USD 117 billion, a year-on-year increase of 30%. It is expected that sales could reach USD 205 billion by 2028 (Statista).

'Mining gold in Latin America' has become a well-known slogan in the overseas expansion circle, but information gaps have also emerged.

'The first hurdle (to entering Latin America) is not compliance or logistics, but the information gap. Foreign media is hard to understand, visas are difficult to obtain, and sitting at a desk looking across the ocean means being far from the market and even farther from making money,' one overseas expansionist once told Xiaguang News.

Two months ago, Xiaguang News organized an offline salon in Shenzhen, with the theme centered on the Latin American consumer market, focusing on the opportunities in the Latin American e-commerce market.

Among the guests at this salon, some flew to Latin America to conduct in-depth field research, some flew back to Latin America from time to time and called it their 'happy home,' and still others continuously focused on Latin America, witnessing every turning point in its consumer market transformation.

Their sharing is invaluable first-hand information and the most scarce front-line experience in the market.

Xiaguang News recorded the salon content in its entirety and compiled it into nine insights into the Latin American consumer market based on relevant materials. Sharing guests: Hong Peilin - Assistant Director and Minister of the Shenzhen E-commerce Service Center; Zheng Zhenqiu Sam - Investor at Zhongwei Capital (hereinafter referred to as 'Sam'); MercadoLibre Official Manager; Thomas - Founder of Bandalabs, an overseas influencer marketing company.

Insight 1:

The development of e-commerce in Latin America is roughly equivalent to that of China in 2010

A guest asked at the salon, 'Do you know what the current online-offline consumption ratio is in Latin America?' Someone boldly guessed 3:7, but the real data is even more exaggerated, at 1:9.

China's e-commerce industry has matured significantly, with people casually scrolling through Douyin (TikTok's Chinese counterpart) and potentially placing multiple orders. However, the current state of e-commerce development in Latin America can be compared to that of China in 2010.

With the spread of smartphones and the maturity of internet infrastructure, China bid farewell to the PC internet era in 2010 and officially opened the door to the mobile internet era. After the digital economy ecosystem gradually matured, e-commerce platforms such as Taobao and JD.com also entered a period of rapid growth.

Latin America, on the other hand, is still in the early stages of e-commerce development.

Latin American consumers have not yet fully adapted to the e-commerce model, but the pandemic in recent years has made them realize the convenience of online shopping. '(Consumers) are still continuously changing their consumption habits, shifting from offline to online shopping. Moreover, payment behaviors are also evolving. In the past few years, many consumers still used cash on delivery,' said the MercadoLibre official manager.

Inside a shopping mall in Brazil. Source: Sam

'Just starting out' means significant opportunities in the future and also means that entrants can reap the benefits of high growth rates in recent years.

Taking an example from a seller contacted by the MercadoLibre official manager, their sales last year were around 1,000 orders per month, but this year, they are already reaching 1,000 orders per week.

Insight 2:

'Made in China' is a dimensional downgrade blow to Latin America

Latin Americans who have visited China are often amazed by the dazzling array of 'Made in China' products. A friend once said that his Latin American friend spent two days shopping in malls during a trip to China. 'They had to go into every store and kept asking, 'What is this?' To them, there are too many and too many 'ahead of their time' products in China,' he said.

Due to insufficient local industrialization, Latin America lacks diversified products, and the lack of products is even more pronounced on e-commerce platforms that are just starting out - some sellers even transport products from other cross-border platforms to resell on MercadoLibre.

Because of high taxes, prices in Latin America are not low, so consumers have a high demand for cost-effective products. 'They would even fly to Outlet Malls in Los Angeles to buy shoes because they are cheaper than locally,' said Thomas. Diversification and cost-effectiveness are precisely the advantages of Made in China. An insider at MercadoLibre revealed that many large European and American sellers transferred their best-selling products to Latin America and found that sales were also good, but they had not previously paid attention to this market. Moreover, Latin American consumers do not blindly worship international brands, and small and beautiful new consumer products have a significant market instead.

Insight 3:

Choosing the right track is essential for the five most popular consumer categories

Strong consumer spending power and market potential are good signs, but what exactly sells well in Latin America?

The MercadoLibre official manager combined data to show that current bestsellers are concentrated in five categories.

The first is consumer electronics. Smartphones, laptops, and electronic accessories are popular in Latin America. Currently, Latin America is still a growth market for mobile internet, and consumer demand for mobile phones is high, with Brazil even being called 'the country that loves playing with phones the most.'

The second is furniture and tools. News of overseas furniture companies building factories in Mexico is not uncommon this year, but for cross-border sellers, considering logistics and inventory issues, the MercadoLibre official manager recommends that domestic-based sellers focus on products weighing less than 25 kg.

The third is clothing and sportswear. Currently, clothing products on Latin American e-commerce platforms tend to be more standardized with a single color. 'There is a severe lack of clothing with patterns and a sense of design. Latin American women love beauty and want to see more clothing that highlights their figures,' said the MercadoLibre official manager.

The fourth is automotive and motorcycle accessories, such as car bags and hangers. In the Latin American market, popular automotive and motorcycle brands tend to follow a cost-effective route, such as Great Wall Motors and Honda motorcycles. When making accessories, practicality and compatibility need to be considered.

The fifth is maternity and children's toys. It is worth noting that the fertility rate in Latin America is declining. Taking Brazil as an example, in the 1960s, the average number of children per woman of childbearing age was 6.3, which dropped to 1.7 by 2020. However, even so, due to the incomplete local supply chain, consumers still rely heavily on Chinese maternity and childcare products.

Insight 4:

Latin American consumers: willing to spend and fond of cost-effectiveness

According to Sam's description, someone conducted a small survey of 30 people in Brazil, asking, 'For an item costing USD 80, would you choose to pay it all at once or in 10 installments of USD 10 each?' All 30 people chose the latter option.

From Brazil, we can glimpse the consumption situation in Latin America. The development of Fintech has prompted consumers to form the habit of installment payments. They care not about the total value to be paid but about the absolute amount of each payment.

Many people still envision Latin America as a market filled with slums, gangs, and drug dealers when they think of going there. Compared to neighboring Southeast Asia and wealthy Europe and the United States, Latin America may seem like an unprofitable market. In fact, Latin America's spending power is not low, with average order values 'basically falling between North America and Southeast Asia,' and the habit of installment payments greatly aids consumption.

An art museum in São Paulo, Brazil. Source: Pedro

A young population also energizes the Latin American consumer market. A friend once joked, 'When I went to Mexico, I found that people there drink two large bottles of cola every day, no wonder I didn't see many elderly people.'

Data shows that in 2022, Latin America had a population of approximately 650 million, with 67.46% falling within the prime age range of 15-64 years. This group has labor capabilities and is not afraid to 'live paycheck to paycheck.'

Of course, cost-effectiveness is also ingrained in the DNA of Latin Americans. Even the rich who can afford yachts also shop at Shein for clothes.

'If you want to sell a USD 10 item, you should list the original price as USD 15 and offer a 30% discount. You must give them the feeling that they are getting a good deal,' said the MercadoLibre official manager.

Insight 5:

To understand the Latin American consumer market, start with Brazil

When discussing Latin America, Brazil cannot be avoided.

After an in-depth visit to Brazil, Sam shared several interesting facts about the country, providing insights into opportunities in its consumer market.

First, Brazil's regional economic landscape is very similar to that of China.

'The wealthiest areas are in the east, similar to eastern China, specifically the Jiangsu-Zhejiang-Shanghai region. The south is where Italian descendants live, akin to southern China, and is very wealthy. The northeast is relatively poorer, but the further west and north you go, the poorer the economy becomes, similar to northwest China, with vast territories and a sparse population,' said Sam.

Therefore, to gauge the spending power and trends in the Brazilian market, focusing on the coastal regions of the east and south is sufficient.

A highway in Brazil. Source: Sam

Second, Brazil is one of the world's leading markets for plastic surgery, and since 1998, medical insurance has covered cosmetic surgery in Brazil.

The universal love of beauty has also made Brazil a 'influencer marketing' powerhouse after the rise of mobile internet. Nielsen data shows that Brazil has over 500,000 bloggers with at least 10,000 followers nationwide. E-commerce brands looking to enter Latin America must embrace KOLs.

Third, Brazil has the largest Japanese population outside of Japan itself. According to data from Japan's Ministry of Foreign Affairs, Brazil has approximately 2 million Japanese-Brazilians.

In the late 19th century, Brazil established diplomatic relations with Japan and decided to import labor from Japan to fill staffing gaps in coffee and other plantations. After more than a century of accumulation, many Japanese-Brazilians have become middle-class or higher in Brazil.

'Nowadays, Japanese people in Brazil hold relatively white-collar jobs and have a high social status. Therefore, Asian faces, including Chinese products, are quite popular in Brazil,' said Sam.

Moreover, the Japanese-favored otaku culture also has a significant market in Brazil, as evidenced by the popularity of Genshin Impact in the country.

Insight 6:

Mastering influencer marketing is the first step to entering the Latin American e-commerce market

The success of Genshin Impact in Latin America is inseparable from the power of influencer marketing.

Thomas has collaborated with miHoYo on KOL outreach projects in Brazil, but influencer marketing is increasingly relied upon not only in the gaming industry but also in cross-border e-commerce.

'Latin Americans are highly influenced by influencers when making purchasing decisions,'" said Thomas.

In a survey on whether consumers made purchases based on influencer recommendations in the past year, the global average was 18%, while the figure was 41% in Brazil, 29% in Mexico, and 20% in Colombia.

Moreover, the current state of short video development in Latin America resembles that of Douyin (TikTok) when it first emerged in China, and its influencer economy is still evolving. This has led to many influencers being unaware of their traffic value.

'Some influencers have high-quality fans but low commercial quotes. Some Latin American influencers initially quote exorbitant prices, but they ultimately accept lower prices after negotiation. From the results, the ROI of marketing with Latin American influencers is relatively high,' said Thomas.

Thomas (fifth from left) in Brazil. Source: Thomas

The power of influencers is immense - recently, the hit Netflix reality show 'Selling Sunset' showcased American social media influencers selling multi-million-dollar mansions through Instagram.

It is foreseeable that the live e-commerce industry will continue to thrive in Latin America.

Insight 7:

Taxes and logistics remain significant hurdles; bribing officials and paying protection money are necessary

Taxes and logistics in Latin America have long hindered cross-border businesses. Sam revealed that a large Chinese enterprise took 20 years to turn a profit in Brazil, mainly due to taxation issues.

Brazil has earned the nickname 'the country of taxes':

Cross-border packages with a value below USD 50 are subject to a 20% import tax, while those between USD 50 and USD 3,000 are subject to a 60% import tax.

Apart from federal taxes, an additional 17% ICMS state tax must be paid. For sellers, the same product may need to be priced 3-4 times higher in Brazil to potentially turn a profit.

Mexico may be slightly more favorable, but the situation has also worsened this year. According to the latest decree issued in April, temporary import tariffs of 35% will be imposed on textiles, clothing, footwear, and other products entering the country.

Guanajuato, Mexico, which also inspired the film 'Coco.' Source: Thomas

This is related to the 'revitalization of industrialization' initiative led by Brazil and radiating to some Latin American countries. Since the 1980s, Latin American countries have generally relied on imports and neglected the development of national industries, leading to fragile industrial chains and low industrialization levels. Realizing the problem, Latin American countries have begun to prioritize the development of their domestic industries and are determined to reduce dependence on imports.

Finding a balance between cost-effectiveness and profitability may long plague cross-border sellers in Latin America.

Furthermore, logistics issues in Latin America have long been criticized.

Most logistics companies in Mexico purchase 'armed escort insurance.' 'All cargo transportation requires guns there. If you don't buy insurance, your cargo will likely be robbed. In fact, the same group of people may be both the escort and the robbers,' said the MercadoLibre official manager.

In fact, Mexico's logistics system is relatively mature because 'many people have already established relationships locally in the early stages.' Therefore, when going abroad, overseas enterprises must bribe officials at ports and pay protection money. If they lack the resources, they can rely on large platforms' overseas warehouse models to protect their goods for the time being.

"Insight 8: Overprotective Labor Laws, 996 Work Schedules, and Intense Competition Are Hard to Escape"

Facing the dual pressures of taxation and logistics, large companies with sufficient resources will consider establishing offices or even factories locally in Latin America. However, labor issues have emerged as a major focus. Thomas recalled receiving flyers and business cards from labor lawyers outside an office building in Latin America, who asked, "Do you want to sue your boss?" In Latin America, "suing your boss" has even formed an industry chain.

The historical roots of overly protective labor laws can be traced back to the last century. Influenced by populism, some Latin American countries pursued high-welfare systems, hoping to win the support of the lower and middle classes by "throwing money" at them. However, the end result was a "welfare race," where hardworking individuals did not receive their due rewards, and laziness became the norm for most people.

"You rarely see locals in Brazilian office buildings after 6 pm," Sam noted.

A street scene in São Paulo, Brazil. Image credit: Pedro

While white-collar workers are relatively easier to manage, managing blue-collar workers at the grassroots level poses more complex challenges. Some companies outsource this responsibility to human resources firms, but at a considerable cost. "If an employee's basic salary is $1,900 per month, the cost to an external company is around $5,000. That's roughly twice the cost," one source explained.

To reduce labor costs, some companies hire "contractors," essentially outsourced workers similar to those in China.

Moreover, Chinese and Latin American companies differ in their management mindsets and cultures. For Latin Americans, who value family, the concepts of "996" work schedules and intense competition are unacceptable.

"Insight 9: Don't Rely Too Heavily on Experience; Making Money Often Requires a Fresh Perspective"

The previous eight insights have covered both positive and negative aspects of Latin America. However, for businesses expanding overseas, the key is to identify opportunities, which often arise unexpectedly.

Let's end with a story shared by Minister Hong:

"During a visit to a province in mainland China, I encountered a company that specialized in coffee machines in Latin America. These machines are unlike anything we imagine; they resemble rice mills and are highly industrialized. For Chinese people, drinking coffee is a refined, bourgeois experience, enjoyed slowly brewed in a moka pot."

"But that's not what they make. Their machines need to meet two primary customer demands: first, they must withstand outdoor conditions, including sun and rain, without peeling paint, frayed wires, or electrical hazards. Second, they must be capable of brewing large quantities of coffee to serve many people simultaneously, allowing everyone to enjoy a cup together."

Today, this company leads its category in Latin America. Its cheapest product retails for over $2,000, and "they sell hundreds of millions of dollars worth each year."

There are many untapped consumer demands in the Latin American market."

"Don't rely too heavily on your experience in mature markets. Instead, discard your preconceptions and embrace change and new things. In this process, you'll discover opportunities for rapid growth."