7 Keys to Successful Business Expansion in Latin America in 2024

Beyond the beauty of its landscapes and diverse cultures, Latin America is a hotspot for global business growth, particularly in the booming realm of e-commerce. However, making it big in this dynamic market is more than just getting translations right. It’s about really understanding market potential, what consumers want, and the rules you need to follow. 

This article digs into the key aspects you need to know for a successful expansion, helping businesses make the most of the big opportunities waiting in Latin America.

Why Expand to Latin America?

Expanding to Latin America is a strategic move given its population of 650 million, boasting an 80% internet penetration and a strong inclination for online shopping. The region witnessed remarkable double-digit e-commerce growth in 2023, a trend expected to persist until 2027. According to PCMI, the e-commerce market in 2023 surpassed USD 510 billion, reflecting a substantial 27% growth compared to 2022. This flourishing market is anticipated to surpass the 1 billion USD mark by 2027.

The rapid development in financial inclusion, digital payments, and cross-border growth has transformed Latin America into a robust, mature market, offering substantial opportunities and ample room for further expansion. The cultural ties between Latin America, the USA, and Europe create an ideal environment for global merchants. Shared history, social media influence, and similar consumer preferences make it easier for world-famous brands to connect with Latin American consumers. Many Latin Americans already hold a positive perception of brands from the US, APAC, and Europe, fostering trust and a receptive market for their products.

As a result, cross-border purchases are on the rise, with nearly 80% of the population in the top seven Latin American markets, including Mexico, Brazil, Colombia, Paraguay, and Argentina, making online purchases. This growing demand reflects the increasing preference for international brands and products not readily available in local markets.

Keys to Successful Business Expansion in Latin America

1. Targeting Strategic Markets

Despite Latin America consisting of 18 countries, the e-commerce landscape is concentrated, with just 5 countries representing 90% of the total market share. Focusing on these key markets is crucial for tapping into the region’s potential. Brazil, as the largest economy, boasts a staggering USD 275 billion digital e-commerce market, making up 54% of the total share. In 2023, Brazil experienced a significant surge in e-commerce penetration to 90% among adults, up from 68% in 2020. The projected lower inflation rate in 2024 enhances the appeal for online purchases, as consumers are expected to cautiously increase spending.

Mexico emerges as another major player, with a robust 34% growth from 2022 to 2023, holding a market worth USD 74.5 billion and over 16% share of the total e-commerce market. Meanwhile, Colombia, Chile, and Peru are rapidly growing markets, with digital penetration exceeding 30% and notable increases in online sales.

Despite a turbulent financial crisis, Argentina achieved an impressive 26% growth in digital sales, showcasing resilience in the digital commerce landscape. Peru, growing at a 30% rate, is poised to surpass Argentina and Chile by 2026, becoming the 4th largest market in Latin America, following Colombia, Mexico, and Brazil.

2. Choosing the Right Channels

E-commerce in Latin America predominantly thrives on online marketplaces, contributing to over 80% of total online sales, especially in countries like Brazil. Establishing an online presence on these platforms is crucial for securing a substantial share of the e-commerce market, given their popularity due to customer-friendly features like installment payments, swift delivery, flexible cancellation and return policies, and enticing discounts.

When choosing the right channels, it’s essential to note the diversity of the market. Unlike the dominant presence of Amazon in the U.S., Latin America’s major player, Mercado Libre, holds less than 22% of total online sales. The top eight platforms collectively capture 50% of the market share, leaving the rest to be distributed among numerous other marketplaces.

Key players like Mercado Libre, Americanas, Magalu, VIA Varejo, Amazon Brazil, and Amazon Mexico, concentrate a significant portion of sales. However, emerging platforms like Carrefour in Brazil and Coppel in Mexico are experiencing impressive growth rates. 

3. Navigating Regulatory Dynamics and  Recent Changes

One of the primary challenges faced by businesses venturing into Latin American markets is the ever-evolving regulatory landscape. E-commerce, in particular, encounters significant regulatory hurdles, impacting both domestic and international operations.

In the context of cross-border e-commerce, each country introduces unique regulations, taxes, and compliance requirements. It’s imperative to understand these specifics, including maximum FOB prices for cross-border purchases, taxes for international transactions, and weight and length limits. Certain products may also encounter import restrictions, encompassing healthcare products, vitamins, supplements, medical materials, batteries, and Bluetooth devices, among others.

Brazil experienced a significant shift in cross-border policies with the inception of ‘Remessa Conforme’ on August 1st, 2023. This compliance program exempts taxes on international e-commerce purchases up to USD 50. However, customers must pay a standard state tax of 17% (ICMS, similar to VAT) and declare products before arrival, streamlining the import process and reducing customs processing time.

To stay abreast of the latest developments, businesses are advised to monitor Brazil’s Chamber of Digital Commerce, Camara eNet, and Mexico’s AMVO, where updated compliance programs and valuable information are regularly shared.

4. Addressing Working Capital Challenges

In specific scenarios, sellers involved in cross-border transactions might experience substantial delays in receiving payment for a sale, lasting up to 40 days. This delay results from customer preferences for installment payments, extended delivery times, prolonged customs clearance in specific regions, and post-delivery cancellations and returns.

A pivotal strategy to overcome this challenge involves staying informed about each marketplace’s payment policies for cross-border sales and exploring solutions that can enhance timely payment collection. For example, nocnoc addresses this issue by offering an advance payment plan for sellers operating in Latin American marketplaces, facilitating quicker and more secure payment collection.

5. Mastering the Influencers of Consumer Purchases

In the Latin American market, the foremost factors shaping consumer shopping decisions are primarily pricing, followed by product descriptions, closely followed by customer service, delivery speed, and stock availability. A 2023 survey by Wunderman Thompson highlighted the paramount importance of providing precise and reliable product information. Over 70% of respondents identified accurate product information as a critical factor in their online shopping experience. Therefore, it is essential to meticulously translate product details, utilizing appropriate units of measure and optimizing keywords for each language. This practice fosters customer trust and confidence, ensuring they make informed purchases tailored to their needs.

6. Understanding Customer Protection Laws

Latin American countries boast robust customer protection laws that empower consumers to return products or cancel orders without specific reasons. Global businesses should be cognizant of these laws, as they can impact logistical costs.

The “right to regret” law is applicable in countries like Brazil and Argentina, granting buyers the right to cancel their purchase without any particular reason and receive a full refund within 7 days of product receipt in Brazil or 10 days in Argentina.

Hence, it is crucial to provide timely customer support, address concerns promptly, and ensure accurate product information. This proactive approach helps mitigate potential returns and cancellations, aligning with customer protection regulations.

7. Customizing Commercial Strategies for Each Region

Despite shared traditions between Latin America and the US, each Latin American country possesses its unique culture, rituals, and traditions. These distinctions manifest in diverse commercial festivities and specific celebration days. For instance, in Brazil, Valentine’s Day is not celebrated. Instead, they observe Día dos Namorados on June 12, a significant shopping day for beauty and perfume retailers. Being aware of these cultural nuances is crucial for crafting successful commercial strategies and marketing campaigns, tailoring products and approaches to the specificity of each country. Commercial dates, such as Father’s Day, Mother’s Day, or Children’s Day, may vary each year. Stay up-to-date with the most important dates in 2024 by downloading the 2024 ecommerce calendar here.

Conclusion: Seizing Opportunities for Global Expansion in Latin America

Latin America presents an abundance of opportunities for businesses to venture into new markets and foster growth. By strategically expanding into the right markets and choosing appropriate online marketplaces, businesses can secure a substantial share of the e-commerce market in Latin America. Staying informed about the latest regulations and ensuring product compliance across each market can prevent delays in customs and enhance delivery rates.

To boost sales and reach a diverse consumer base, it is crucial to localize products with accurate titles and descriptions, offer 24/7 support in local languages, and understand key e-commerce dates for targeted marketing campaigns.

For businesses seeking to thrive in Latin America, nocnoc provides a solution that allows them to start selling within 48 hours and reach 485 million consumers.  Upon creating an account, your products will be showcased across +15 marketplaces within nocnoc’s megastores, known for their excellent reputation among local shoppers. nocnoc manages every aspect, from last-mile deliveries and taxes to customs, cancellations, returns, payments, and marketing. 

Get started by signing up through our website and boost your sales on the largest cross-border store in Latin America.