Comprehensive Guide to Expanding Your US-based Brand to Latin America
After years of assisting US-based brands in expanding their presence and raising awareness in the Latin American market, we have compiled a comprehensive guide highlighting the key factors for a successful expansion. Regardless of the brand, these steps are universally applicable and should be followed diligently. By implementing these strategies, you can ensure a successful expansion of your brand in Latin America.
Expanding your brand to Latin America: Why?
Before going into detail, we would like to point out why Latin America is a great choice for expanding your brand. First of all, LatAm is one of the fastest-growing and most attractive e-commerce markets in the world. According to eMarketer, the e-commerce market is valued at $378 billion USD and is expected to continue growing at a rate of 25%, reaching $829 billion USD by 2025. The widespread adoption of smartphones and nearly universal internet access have contributed to the increase in online shopping in the region. In 2022, over 74% of the population in Latin America shopped online, which is a 19% increase from 2020.
International shopping is becoming more popular. Consumers are willing to wait longer and pay higher prices in order to buy branded products that they couldn’t find in their own country. In fact, cross-border e-commerce grew by 44% in 2022, which was 2.5 times higher than domestic e-commerce growth, according to research conducted by American Market Intelligence.
Now that we have shared why LatAm seems like a promising region to increase sales, let’s move on to our considerations.
Considerations for Expanding Your Brand to Latin America
1. Understand Latin America’s e-commerce market
Before diving into anything, it’s crucial to understand how the LatAm e-commerce market operates. One key distinction from the United States, Europe, or the UK is that marketplace platforms dominate the e-commerce landscape. In countries like Brazil, over 80% of the e-commerce share comes from online marketplaces such as Mercado Libre, Americanas, Magalu, Amazon Brazil, Casas Bahia, and many more. This market is incredibly fragmented, with hundreds of these marketplaces vying for consumers’ attention. Therefore, if you have ambitions to expand your brand, it’s imperative to begin by establishing a presence on these marketplaces and devising a robust diversification strategy.
A study conducted by Morgan Stanley unveiled an interesting fact: the eight largest marketplaces in Brazil collectively represent over 50% of the total marketplace share. However, the remaining share is distributed across hundreds of other platforms. This is precisely why diversification holds the key to success, and it’s crucial to identify the platforms that offer the best starting point. As we’ll explore in the next section, it’s important to note that not all marketplaces permit cross-border operations. Some may require you to establish a legal entity to operate, which poses a significant challenge for brands wanting to test the waters and gauge their success before fully committing to a market.
2. Do market research
Conducting thorough market research is crucial before diving into expansion. It’s essential to determine the markets where your brand will excel, identify the most suitable market for your products, analyze your competitors, understand the competitive pricing landscape, evaluate the platforms worth considering, and gain insights into the local culture and regulations. It’s a comprehensive process that requires extensive research and understanding before taking the next steps.
Define your target markets
Despite Latin America being composed of 18 countries, only five of them account for over 90% of the total e-commerce sales in the region. Brazil stands out as the most developed and strongest e-commerce market, capturing over 55% of total sales. According to Americas Market Intelligence, the Brazilian e-commerce market is valued at 275 billion USD. Mexico is also a robust market, accounting for over 20% of the e-commerce share, benefiting from its proximity to the United States. Following the list is Argentina, Colombia, and Chile, which are experiencing rapid growth.
Based on our experience, we recommend paying close attention to Brazil and Mexico, but it’s important not to limit yourself to these two markets. Each market may have different categories that perform exceptionally well. For instance, in Brazil, the strongest categories for e-commerce are beauty, perfume, and skincare products. Other popular categories include toys, games, and electronics. In Mexico, electronics are particularly popular for cross-border purchases. Argentina, on the other hand, showcases significant popularity in cosmetics and fashion. In Chile, vitamins and supplements dominate the market with a higher sales share compared to other countries.
By understanding the unique demands of each market, you can tailor your approach and capitalize on the specific opportunities available.
You’d be surprised by the number of brands that fail to conduct a thorough analysis of local competitors and end up being overshadowed by them. When entering a new market with a relatively unknown brand, it’s essential to prepare for competition from local brands offering similar products. The key lies in understanding how you can differentiate yourself from them, whether through a robust brand awareness campaign or strategic pricing strategies. To investigate your competitors, try searching for similar keywords and titles across various marketplaces. Even if your brand is larger and more established, it’s still worth conducting an extensive analysis. You may discover resellers of your products, so it’s crucial to identify them and assess their performance.
Please take into consideration that in Brazil, people speak Portuguese, while in Mexico and other markets, people speak Spanish. Keep this in mind when conducting searches for similar products, as your competitors might be using different keywords due to language variations.
Determine sales channels
While you may initially assume that expanding to Amazon Brazil or Amazon Mexico is the best choice, the reality is different in Latin America. There are other marketplaces that enjoy greater popularity and preference than Amazon. Mercado Libre, for instance, leads the way with over 650 million monthly visitors and a strong presence throughout the region. Additionally, platforms like Americanas, Magazine Luiza, and Casas Bahia hold significant shares of the e-commerce market in Brazil. While Amazon is gaining popularity in Latin America, it still lags behind other dominant platforms in terms of order volume and annual sales.
Furthermore, it’s important to consider that not all of these marketplaces facilitate cross-border operations. Some may require you to enter the market with the assistance of a partner, such as nocnoc, which can help you initiate sales on the marketplaces without necessitating the establishment of a legal entity.
3. Understand cultural differences
Each market has its own unique culture, language, preferences, behaviors, and shopping festivities. Before introducing your brand in LATAM, it is crucial to understand whether consumers will embrace your product, gauge its popularity, ensure you are using the appropriate keywords to list your product, determine the best-performing search terms, and identify what consumers value most. Additionally, you should familiarize yourself with the ideal timing for offering discounts, identify local shopping festivals worth participating in, and determine which product categories perform best during each month. Let’s delve into some important considerations regarding this matter.
Not only will you need to provide customer support in Portuguese and English for your clients, but you’ll also need to adapt your product titles and descriptions for each market. For instance, in Mexico, people don’t search for smartwatches using the keyword “smartwatch” alone; they use “reloj inteligente,” which is the Spanish term for smartwatch. This applies not only to Mexico but to most countries. Even if the translation seems accurate, the search term may not be an exact match. In Brazil, for example, “Waffle maker” is translated as “Máquina de Waffles” (Waffle Machine), which is not an exact translation of the term. It’s essential to understand the most relevant keywords and search terms specific to each market, as the translation alone may not suffice.
Before making online purchases, consumers in Latin America prioritize store and seller reputation. They take seller reputation seriously and are reluctant to buy from stores that have low sales, numerous cancellations, or negative reviews. Consumers want assurance that their products will be delivered on time and in good condition. Platforms like ReclameAqui.com serve as outlets for consumers to voice their complaints and leave reviews about their experiences. Establishing a presence on such platforms is crucial to allow your consumers to advocate for your brand and instill the confidence needed to encourage purchases from your store.
Each country has its own unique calendar of e-commerce events. Recognizing these special dates is crucial for developing a comprehensive strategy throughout the year and tailoring marketing approaches to each month. For example, while Valentine’s Day takes place on February 14th in the US, in Brazil, it occurs on June 12th, known as “Dia dos Namorados” (Lovers’ Day). During this time, sales of beauty and perfume products skyrocket, making it the most popular category for the month. Furthermore, Children’s Day is celebrated in April in Mexico, while in Brazil, it takes place in October. The same variation can be seen for other events like Father’s Day and Mother’s Day.
It is important to note that Latin America does not celebrate Amazon Prime Day, however, we do have HOT Sale, which is held in May and June. HOT Sale presents an excellent opportunity for significant sales and promotions across various e-commerce platforms in the region.
4. Delivering your products to Latin America
When it comes to expanding your brand to Latin America, one of the most challenging aspects to consider is the logistical process of delivering your products to the final consumers. Many brands face significant hurdles, such as theft, customs delays, and excessive charges, when trying to ensure successful product delivery.
Some shipping carriers from the US lack the necessary resources to provide a comprehensive and efficient service in this region, including Mexico. Even those carriers that do offer such services tend to be expensive, resulting in increased retail prices for your products. On the other hand, using a local carrier may run the risk of packages never reaching their intended destinations. Therefore, it is crucial to thoroughly study and evaluate potential logistic partners to ensure smooth and successful deliveries.
5. Being compliant with the market
When expanding your brand, it is crucial to ensure compliance with the regulations and requirements of the target markets. Each country in Latin America has its own specific regulations and tax policies. Making a clear understanding of these factors is essential to avoid potential customs issues.
One important consideration is the minimum value at which consumers become subject to import taxes. This threshold varies among countries. For example, in Colombia, it is $200 USD, while in Brazil, Mexico, and Argentina, it is $50 USD. In Chile, the threshold is even lower at $39 USD. If your product’s value exceeds these thresholds, customers will need to pay an import tax. In Brazil, this tax is calculated as 60% of the CIF value, while in Mexico, it is set at 20%.
Furthermore, it is crucial to take into account the maximum weight allowances for shipments. In Colombia, the weight limit is 110 lbs, whereas in Brazil, it is 66 lbs, and in Mexico, it is 77 lbs. Additionally, the maximum allowable height may also vary from one country to another.
6. Doing Brand Awareness
In the midst of so many brands and products available on e-commerce sites and marketplaces in LatAm, it is crucial to become relevant and stand out from your competitors. But how do you achieve that? By developing a successful advertising and marketing strategy within and beyond marketplaces, you can enhance your brand visibility and maximize your sales.
Marketplaces like Mercado Libre, Carrefour, Ponto Frio, or Americanas offer advertising plans that allow you to set a daily budget and promote products within their platforms. You can strategically place your products on banners or other prominent locations.
Based on our experience, placing products on banners during special events can significantly boost your sales and provide a positive ROI. Marketplaces experience substantial user growth during events like Black Friday, Hot Sale, Christmas, Children’s Day, Mother’s Day, and more. For example, last year, we ran ads on Mercado Libre during Black Friday and saw a remarkable increase in daily sales of over +100% for those specific products.
Marketplace Ads enable you to advertise a wide range of products. However, we recommend keeping well-performing ads active. Keep in mind that promoting new products can enhance their visibility. When it comes to products with low turnover, deciding whether to invest in advertising depends on your sales objectives. If your goal is to lead the category, investing in advertising can result in higher sales volume.
Social Media Ads
Through social media, you can generate brand awareness, educate consumers, and direct them to your sales channels. Mixing advertising strategies on marketplaces with social media ads that also lead to your products allows you to reach an even higher percentage of visits and diversify your promotion channels.
Last, but not least, we suggest having a budget to invest in influencers. In LatAm, it is really popular to have influencers try new products. Even if you partner with small or micro influencers, their posts and videos can generate an impressive amount of views and clicks. The key here is to understand your audience and identify influencers whose followers align with your target audience. For example, if you are trying to promote a kitchen appliance, the best approach is to find kitchen influencers who create recipes. Secondly, it is also important to define metrics and monitor them. If you pay an influencer to promote something and fail to track the views or clicks, it would be a waste of money.
Undoubtedly, Latin America presents a great opportunity for brands and retailers worldwide to expand into new markets and place their products in the hands of consumers who are willing to pay more and even wait for their products if it involves an international sale.
However, expanding into LatAm without the assistance of a partner who can advise on market complexities, customs regulations, market trends, shopping event calendars, and more can be very challenging.
At nocnoc, we specialize in helping brands and sellers from the US to easily expand into LatAm and list their products in over 15 markets across 5 countries, while conducting effective brand awareness campaigns and increasing their sales.
nocnoc – Your brand in LatAm with the help of local experts
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