Colombia is the next "growth engine" of cross-border e-commerce, showing its dark horse status!

As the fourth largest economy in Latin America, Colombia's continuously improving economic level has made it the most commercially attractive country in Latin America.

LM123 learned that as early as 2019, the size of Colombia's e-commerce market had reached US$7.6 billion, and in 2020, e-commerce sales in Latin America increased significantly, up 19.4% from 2019. According to AMI's forecast, by 2022, Colombia's e-commerce market will reach US$26 billion at a growth rate of 150%.

It can be seen that the e-commerce market in Colombia has a promising future. So what is the current situation of the e-commerce market in Colombia? Is it expected to become another gold-digging hotspot in Latin America?

1. Overview of the Colombian Market

1. Unpopular potential stocks, future development is promising

Colombia is a market that is often overlooked by domestic cross-border merchants but has great potential. As one of the fastest growing economies in Latin America, its e-commerce development speed can be described as "far ahead of the rest".

According to a report by the Colombian Chamber of E-Commerce (CCCE), e-commerce sales in Colombia increased by 47% to US$12.2 billion in the first quarter of 2022 compared with the same period in 2021, and increased by 109% compared with the same period in 2020, setting a new historical record.

At the same time, the high Internet penetration rate (up to 70%) also makes Colombians shop online more frequently and have a higher acceptance of e-commerce.

The CCCE report shows that the total number of online transactions in Colombia in the first quarter reached 79.1 million, a year-on-year increase of 43.9%. The average order value reached US$154,215, a year-on-year increase of 2.6%. This shows that cross-border e-commerce sales in Colombia are developing significantly.

2. The rise of social e-commerce as a new consumption engine

LM123 learned that with the increase in Internet penetration and the popularization of social software, e-commerce, which has already been growing in various forms, has added new opportunities. New purchasing methods and channels are constantly being created to attract new consumers, and Colombians' consumption and purchasing habits have undergone tremendous changes.

Colombia has seen growth in the use of social networks to purchase products and services over the past two years. Rapyd research shows that 25% of Colombians have made at least one purchase through a social network, and 59% of Colombians are willing to make a purchase through a social network.

This means that there is a huge market space for social e-commerce in Colombia. But at the same time, the biggest problem facing social e-commerce is the issue of consumer trust. 62% of respondents said that they prefer to buy high-value products through e-commerce websites.

Therefore, in the current Colombian market, the consumption trend of e-commerce websites is still ahead of social e-commerce. 34% of respondents prefer to buy on e-commerce websites, while 23% of consumers prefer to buy through social e-commerce. There are also 40% of people who do not prefer a specific channel.

3. New market trends, platforms take the lead

a. Falabella

LM123 learned that in order to enhance the logistics competitiveness of its retail business, Latin American e-commerce giant Falabella opened a new distribution center for "last mile" delivery .

After the new distribution center is completed, it will have the dispatching capacity of 300,000 orders per month, and it will also shorten the delivery time and improve the online shopping experience of buyers. At the same time, LM123 learned that the new distribution center is a supplement to the regional warehouses with a total area of ​​1.5 million square meters opened in Lima and Bogota, with an initial investment of US$3.5 million. Falabella also stated that he would invest about US$140 million to strengthen the logistics network.

Benoit de Grave, general manager of Falabella.com, pointed out that once the new distribution center is completed, Falabella will be responsible for storing, packaging and delivering the products.

b. Amazon

LM123 has learned that Colombia’s sales tax rules will take effect on online platforms such as Amazon and eBay starting July 1. The Colombian Ministry of Finance said it will transfer the responsibility for collecting PST (provincial sales tax) to companies such as eBay and Amazon, saying it is a move to create a more level playing field for local online businesses.

LM123 predicts that the collection of provincial consumption tax will have a significant impact on the platform's online sellers .

c. Meikeduo

LM123 learned that Meikeduo opened a new warehouse in Colombia, aiming to strengthen its e-commerce logistics network and strive to provide more buyers with delivery services within 48 hours, thereby increasing the volume of orders delivered within 48 hours and 24 hours to 80% and 50% respectively.

After the completion of the new warehouse, the order processing capacity will also be increased to more than 40,000 orders per day. And with this opening, Meikeduo expects to create more than 200 jobs in 2022, which will be reflected in the operation, transportation, supply and support of the entire infrastructure.

LM123 learned that currently, Meikeduo has integrated 31 motorcycles, 15 electric trucks and 46 cars to provide delivery services for products in cities such as Bogota, Cali, Medellin, Barranquilla, Cartagena and Tunja.

4. Fast logistics and customs clearance, diverse payment methods

The most important mode of cargo transportation in Colombia is road transportation, which covers road, rail, aviation, shipping, pipeline and other fields. In terms of air transportation, Colombia has more than 70 airports, including 14 international airports. Famous airlines include AVIANCA, Viva Airlines, etc. Among them, AVIANCA is open to 17 countries, providing a solid foundation for international air cargo.

LM123 has learned that Colombia’s freight and logistics market will grow at a compound annual growth rate of 8.55% between 2020 and 2025. In addition, Colombia has also made progress in trade facilitation with the gradual implementation of customs regulations and non-intrusive inspection measures.

Thanks to the free and open trade policy, currently only 1.5% of imported goods need to apply for pre-examination permission, and the rest can be imported freely.

At the same time, in terms of payment methods, 55% of people in Latin America do not have bank accounts, and 60% of people make transactions in cash. However, during the epidemic, the trend of cash payments has slowly declined, and e-wallets and bank transfers are significantly changing consumers' payment habits.

Due to their economic history, Colombians have different preferences when it comes to choosing online payments, and while cash and voucher payments are the main online payment methods in Colombia, other alternatives are also growing .

Among them, Via Baloto is extremely popular in Colombia, with more than 85% of Colombians using the service. Customers can use Via Baloto vouchers to pay for online goods in more than 10,000 stores in Colombia.

5. Many highlights of the festival, opportunities for gold mining

LM123 learned that the Republic of Colombia is a country where multiple ethnic groups and cultures converge. By supporting local festivals and understanding consumption trends, cross-border sellers and platforms can harvest huge amounts of traffic.

▲ The picture comes from shopee cross-border e-commerce

In summary, Colombia is showing strong e-commerce market potential, and its future development momentum cannot be underestimated. Sellers can continue to follow and pay attention, and consider entering the market at the right time!