Will the e-business boom continue after the pandemic?

The impact of COVID-19 lockdowns on e-commerce in Latin America is becoming more pronounced as online shopping increases and demographic trends emerge that will re-shape the sector.

A study by market research firm Americas Market Intelligence (AMI) and Echo Market Research reflects the growth in food and grocery delivery, online banking and streaming services subscriptions.

Presented Monday during a webinar on the evolution of digital payments in the region, the main finding from surveying 2,078 adult internet users in Mexico, Colombia and Brazil is that growth in e-commerce has been substantial but highly nuanced. 

The study identified users, dubbed “newbies,” which either never or only rarely had made online purchases. This segment is probably not as promising as many e-retailers hoped, though. The strongest growth will come from the well-educated and affluent sectors, which are most protected from the pandemic-related economic downturn.

Apart from newbies, the study also identified other COVID-19 online purchasing behaviors: “retreaters,” who have decreased online financial transactions; “maintainers,” whose habits remain unchanged; “adapters,” who have somewhat increased transactions; and “disruptors,” who have strongly upped use of digital platforms for shopping, finance or entertainment. 

Percentages of all five groups in the three countries 

About 64% of participants were maintainers or adapters, according to the study. Most disruptors are found in Brazil and more newbies in Colombia and Mexico.  

WOMEN IN FLUX

Only maintainers were predominantly males, with females making up 54% of disruptors and 62% of newbies, segments that showed some change in usage.

The research also indicated that disruptors were more educated than other segments, with 84% having at least two years of undergraduate education (and 60% having an advanced degree), compared to 63% of newbies and 61% of retreaters having two years of undergraduate education.

Retreaters, according to AMI’s head of payments practices Lindsay Lehr, are more likely users who are being forced to lower overall consumption and discretionary purchases, which are often associated with online shopping.

They are also more likely to have children, with 44% saying they have no children, compared to 66% of disruptors and 55% of newbies. 

The latter suffered economically to a similar degree as retreaters and both adjusted to the quarantines in similar ways.

Source: AMI / Echo Research

LOST INCOME

Both retreaters and newbies reported a high incidence of job loss and reduced household income, with 86% of the former and 84% of the latter saying they had lost employment temporarily or permanently.

Among maintainers, 38% said they suffered job loss as did 30% among adapters and 28% among disruptors.

Of the latter, 61% said they began teleworking and 54% would continue, while among newbies 38% started working from home and only 28% said they would continue to do so.

Lehr said, “newbies are in a more precarious situation. So, they’re going to be lower income, and probably more blue-collar or informal jobs where working from home is not as feasible.”

She added, “this group is exciting, because we have newly exposed consumers to e-commerce that we want to bring into that channel and remain there. They’re also the most vulnerable.”

Lehr emphasized this contradiction and said the lockdowns were designed for wealthier, more developed economies but turned out rather ruinous in Latin America. AMI is forecasting a 2020 GDP drop of 8.5% for Latin America and the Caribbean, the steepest of any economic bloc. 

CLOCK TICKING

Gabriel Jahger of Brazil’s payment solutions fintech Ebanx, said the economic pressure on newbies is causing concern over the continuation of the e-payments boom after the re-opening.

“This is something that I am afraid of for example,” he said, “I believe that once they have the stores, the real local stores that they were used to going to … maybe they get back to their old way.”

He said old buying habits are commonly seen to return whenever clients enter a new market space for the first time. E-commerce companies enjoying a surge in sales during the lockdowns should take this development into account.

“Newbies are the most precarious group,” Lehr said , responding to Jahger. She agreed that many are using shopping apps to buy at particular stores, visiting which is not feasible amid social distancing measures.

“They are vulnerable for going backwards,” said Lehr. Many newbies could take from their first time experience that online shopping is less preferable to the in-person experience and will resume their previous behavior. 

The quality of their online experience will be decisive. 

"Really, what the question is, are these newbies having a good experience? Is their experience seamless and easy? Is it straightforward? Do they have the right payment method?," Lehr said.

But, she added, “over 40% of the total population of internet users will continue working from home,” and “this is very transformational” with impacts on the products and services people will consume and other implications on customer behavior.

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The study’s author, John Price, wrote, “what the survey made clear to us was that the ground is shifting beneath the feet of Latin American consumers. Economic disruption is impacting close to 70% of the population.” 

He added, “technological disruption is impacting roughly one quarter of households and both trends are changing how and what consumers purchase. The strategic takeaways of the survey … make it clear that brands and marketers must engage now with consumers if they are to play a role in their lives over the next few years.”

Based on the survey, AMI recommended to marketing teams that niche opportunities continue to appear, but require speed to exploit. Online marketing and sales efforts need to be prioritized, considering into which of the five user segments customers will fall.

“Now is a pivotal moment when consumers re-define purchase priorities and brand loyalty. Engage them ASAP,” concluded the report.