[Study Case] How the world’s biggest brands are succeeding in the Latin American Market
A survey conducted by market intelligence firm Ipsos and the fintech EBANX discovered that 58% of surveyed global merchants sell their products outside of North America, with nearly half in Latin America. Which are these companies that are thriving in the region? We have listed some of them to shed a light on what are the strategies behind their success with Latin Americans.
While mobile adoption and the e-commerce sector continue to evolve in Latin America, Latin American consumers are increasing and expanding online shopping behavior more than ever. A survey held by market intelligence platforms AMI and EchoMR with over 2,000 Internet-using adults in the region found out that 59% of online consumers in Brazil increased e-commerce purchases amid the pandemic. In addition to that, 20% of those surveyed in Mexico and Colombia made their first e-commerce transaction during quarantines.
“With this expansion of the digitization of society, people who avoided the digital world are now forced to embrace it. Even people without a banking account are arranging a manner to do e-commerce, as there are more and more tools available,” says John Price, managing director at AMI. “There are 30 million new e-commerce customers in Latin America this year. A lot of these people have adopted new payment methods – it’s an expansion of the payment pyramid.”
This booming digital behavior hasn't been unnoticed by global companies. Market intelligence firm Ipsos and EBANX learned that 58% of surveyed global merchants sell their products outside of North America, with nearly half in Latin America. In addition to that, sales in the region have either exceeded expectations or are on track for many (57%) of these merchants.
From ordering food delivery to shopping for everyday products, as well as increasing consumption in streaming services, there are global companies with particular experience in engaging these Latin American consumers. We have listed some of them to unfold their strategies when it comes to conquering the region. Take a look:
Netflix: Latin American streaming leader now and in the foreseeable future
Streaming giant Netflix has In Latin America third-largest region in the number of subscribers, and this position doesn't seem to be changing anytime soon. In the second quarter of 2020, the company recorded 1.75 million new additions, reaching a total of 36.07 million users in the market. According to Digital TV Research, the firm will reach 48 million subscribers in the region by 2025, a 54% growth in six years.
Globally, Netflix reported 10.09 million new subscribers between April and June and reached as much as 192.95 million subscribers worldwide. Year-over-year, this meant a 27.3% growth for the company.
An analysis by the British website specializing in researching and comparing technology services CompariTech shows that Brazil is the third-largest market for Netflix worldwide, and that, outside the United States, Brazil accounts for the second-largest number of subscribers: 16,364 million in 2020’s first-quarter, which would account for almost half of all subscribers in Latin America. CompariTech‘s projections considered the Q1 results disclosed by the company in April, and the average monthly revenue per membership in each region to estimate subscribers and revenue numbers in 20 countries.
But the popularity of Reed Hasting's firm is not only expressed by the number of subscribers. In June, after two and a half months of the pandemic in Brazil, Netflix appeared in a ranking as one of the ten brands classified as the most transformative, along with Brazilian giants such as Magazine Luiza, iFood, and Natura.
“Our foray into Latin America in 2011 reflects our belief that the entire region, from Brazil to Mexico, wants to see their own narratives reflected on the screen,” said Francisco Ramos, vice-president of International Originals for Latin America at Netflix, in an interview to LABS. “We quickly started to produce in the region – first in Mexico, then in Brazil – our first two series made outside the United States."
The strategy for Brazil, where its subscription base accounts for almost a third of Latin America, focuses on the variety and diversity of content. “We will produce stories tailored to different languages and preferences and that can entertain our subscribers no matter what they are seeking,” says Netflix.
A new report by Colombia’s Communications Regulatory Commission (CRC) revealed that 24% of Colombians had paid for video streaming last year. The study on the role of over-the-top (OTT) services, also shows that Netflix is the favorite platform in the country, with 17% of respondents mentioning it, followed by Claro Video, HBO Go and DirecTV Play each with 3%, and Amazon Prime and Movistar Play each with 1%.
In 2018, the American-Colombian coproduction Narcos was the fifth most in-demand SVoD original series in the world, according to data from Parrot Analytics. 3%, an original Brazilian science fiction series, also from Netflix, had half the audience of the first season coming from outside Brazil, according to information from the Brazilian division of the company.
Focusing on localized content – Netflix is investing ever more in content produced outside the US – and local partnerships with TV stations, the streaming giant has conquered, in Latin America, a loyal market now and in the near future.
Amazon: Customer retention through convenience in a wide range offering
Amazon's sales increased 26% to $75.5 billion in the first quarter of 2020, compared with $59.7 billion in the first quarter 2019. Net income, on the other hand, decreased to $2.5 billion in the first quarter, compared with the $3.6 billion reached in 2019 Q1.
"From online shopping to AWS to Prime Video and Fire TV, the current crisis is demonstrating the adaptability and durability of Amazon’s business as never before, but it’s also the hardest time we’ve ever faced,” said Jeff Bezos, Amazon founder and CEO, at the Q1 earnings report.
As Business Insider first reported, Amazon has already gained $561 billion in market value this year — and if Goldman Sachs and Jefferies prediction are right, this number is poised to grow. According to Goldman, Jeff Bezos' empire will benefit from "accelerating e-commerce growth" during the COVID-19 pandemic. The big tech will report Q2 earnings on July 30 and expects its sales to reach something between $75.0 billion and $81.0 billion, or to grow between 18% and 28% compared with the second-quarter of 2019.
In Brazil, the global giant is sparing no effort to grow amid the e-commerce expansion. This month, Amazon started offering its recurring shopping program called Programe e Poupe (Subscribe and Save, in its English version) in the country. With that, users can schedule deliveries in advance of the same products that they buy from time to time, and receive a 10% discount on the amount of all orders besides having free shipping from the second delivery onwards.
Monthly or even half-yearly, orders are billed to the customer’s credit card before shipping. Amazon's new launching came to complement the Prime subscription benefit launched in Brazil last year. For those who are also subscribers to Amazon Prime, which offers free shipping for various products, discounts on Programe e Poupe are up to 15%.
“We want to bring even more convenience to the Brazilian customer,” Melina Ioshii, leader of the consumables category at Amazon stated. “Our goal is to take care of the operational part, to remove the concern of customers, so that they can better enjoy the time they have at home. This way, we make life easier for customers by automatically replacing products that are used every month, following the preferences and schedule defined by the consumer themselves without having to worry about making new purchases of the item,” she added.
In January, when Amazon reported its Q4 results, the company announced that since launching Prime in September, Brazil has seen the fastest growth in paid Prime members in Amazon’s history. The key to this growth? Amazon betted on a growing expansion of its selection on amazon.com.br, including millions of items, and in December the country opened its fourth fulfillment center to support growth.
Three and a half years after its arrival in Latin America, Amazon Prime Video has amassed 7 million subscribers across the region, where the platform consolidated itself as the second biggest force in video streaming. In total numbers, the size of Prime Video is about a fifth of Netflix‘s base of Latin American customers.
2020 has been the year for Prime Video to bet on a Latin American localization strategy. The service launched its first original productions in Brazil, including the reality show Soltos em Floripa and the docuseries Tudo ou Nada – Brazilian Selection. The platform also has original Mexican productions since 2018, in addition to productions under development for Argentina, Chile, and Colombia, with releases scheduled for 2020 and 2021.
Amazon is also gaining ground against established players in Brazil. The company, along with iFood and Wish, was among the platforms that gained most positions in a ranking of Brazilian mobile consumers’ favorite apps, according to a study about the mobile commerce in Brazil, from April.
According to the research, called Panorama Mobile Time / Opinion Box and held by Mobile Time, Amazon is growing gradually: while a year ago it didn’t even appear on the list, in September 2019, it entered the 14th position, with 5%. Now, Amazon is in 10th place, with 7% of Brazilian mobile consumers citing it as one of the most-used apps for shopping.
Other divisions of Jeff Bezos' empire are also making progress in the region. The cloud-computing division Amazon Web Services (AWS) launched earlier in June its hybrid cloud computing solution in Brazil, called Outposts. In February, AWS announced its plans to invest $236 million (about BRL$ 1 billion) in Brazil over the next two years in the expansion of data centers in the state of São Paulo to serve the company’s growing customer base in South America. Earlier in 2019, the company had already announced a plan to expand data centers in Colombia to serve customers in Latin America as a whole.
Eying the forced digitization that the pandemic imposed on retailers, Amazon's marketplace division, in Brazil since 2017, launched a page dedicated exclusively to helping retailers with small and medium businesses to start selling products on the internet - or to expand their businesses within the marketplace.
Spotify: Adapting far beyond translation and realizing payment needs
Music streaming giant Spotify has recently hit a new – and impressive – record: in the first week of July, Spotify‘s shares reached a price of $271.49, which made the company hit $50.485 billion in market capitalization – it was the first European company and startup to do this.
Image: Yahoo! Finance
In one year, the company’s shares were up 86.13%. What explains this movement? According to analysts, the reasons behind this appreciation go beyond the COVID-19 pandemic and the fact that people are consuming more audio, video, and gaming streaming services.
Earlier this month, Spotify announced its plans to adapt locally popular scripted podcasts to different countries and regions, as a part of the audio-streaming service to gain subscribers globally. The first show will be Sandra, released in 2018 by Gimlet, a company that was later acquired by Spotify. Local versions, that in Latin America will be released in Mexico and Brazil, will not be merely translations of the original podcast into different languages, but adaptations with different characters’ names and scripts.
In January, the streaming service also premiered Made in Medellín, Spotify’s music-focused original podcast focusing on reggaeton star J Balvin and narrated by the artist himself.
Efforts on localization goes beyond. Spotify announced the launch of its new lyrics feature, through a new agreement with provider Musixmatch, in 17 Latin American markets such as Argentina, Bolivia, Brazil, Chile, Colombia, Mexico, Peru, and Uruguay. In addition, the streaming platform started to expand Premium Duo, a feature that allows two people who live together to share one subscription plan while maintaining their own individual accounts, to other markets like the US, UK and India.
The service was first launched last year in Latin America, where it won strong results amid a market known for its price-sensitive consumers.
Latam now accounts for 21% of Spotify’s global subscriptions, with a total of 27 million paid users and is also home to 22% of monthly active users on the platform, or 63 million. 16 million users were added between the Q1 2019 and Q1 2020.
Distribution of Spotify subscribers by region
Distribution of Spotify monthly active users (MAUs, which include non-paid) by region
Whether by offering regionalized content, adapting the podcasts offer, or paying attention to the way Latin Americans behave about subscription plans, Spotify is accurate when it comes to meet the Latin American consumers’ needs. That's why it may come as no surprise that in its financial results for Q1 2020, the company reported that Latin America was one of the markets where it is experiencing the fastest growth, increasing the number of users by 36% YoY in the region.
Uber: Leveraging partnerships and expanding product-portfolio
One of the most affected sectors with the economic turmoil brought by the pandemic; ride-hailing companies felt the strain from reduced business when consumers started to curtail rides due to contamination fear. But if one company has been clever to adapt to a new reality, this one is Uber.
“While our Rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet, focus additional resources on Uber Eats, and prepare us for any recovery scenario,” said CEO Dara Khosrowshahi at the company's first quarter financial report. “Along with the surge in food delivery, we are encouraged by the early signs we are seeing in markets that are beginning to open back up. Our global footprint and highly variable cost structure remain an important advantage, as our expectation is that the Rides recovery will vary by city and country.”
In May, Uber released its global first-quarter results, and, as expected, the demand for the ride operation fell strongly (80% in April), but Uber Eats operations revealed itself as the company’s safe port during COVID-19 pandemic and beyond.
In Latin America, Uber's strategy has been a particular sum of engaging with city regulators to better understand the role of urban mobility amid the new normal; strategic partnerships; and more attention to other business units such as grocery and food delivery, and logistics.
Earlier this month, Uber officially launched grocery delivery in 19 select Latin American cities across Brazil, Canada, Chile, Colombia and Peru, as part of the recently acquired majority stake in Cornershop, the Chile-based startup that brought grocery delivery at first to the Latin American market. In Brazil, the partnership with Uber includes two of the country’s three largest supermarket retailers, Carrefour and Grupo Big. Cornershop also allows purchases from Varanda, Emporium São Paulo, Gimba and Cobasi in Brazil. In Colombia, Cornershop has had a presence since last year with businesses such as Farmatodo, Colsubsidio, Locatel, Jumbo, Metro, Alkosto, Justo & Bueno, Surtifruver, Ara, Laika and Puerto Market, among others.
Uber’s announcement came shortly after the announcement of Postmates' acquisition for $2.65 billion. With the deal, Uber is set to be the largest delivery service in the US after DoorDash. Both Uber and Postmates are operating in the negative: Uber has lost $2.9 billion during Q1 because of the pandemic.
Now, Latin Americans are able to purchase groceries through both the Uber and Uber Eats apps. “Over the last six months, it’s become increasingly clear that grocery delivery is not only popular, but often a necessity. We expect to see this trend continue as people across the world look for new ways to save time and stay safe. We’re excited to be on this journey alongside the popular grocery delivery startup Cornershop to make this a reality today”, said Uber.
Another strategy played out by the big tech was to expand the product portfolio. Gradually opening up other categories of commercialized products besides food, Uber Eats was already serving pharmacies, and most recently, the platform started to sell Disney, Marvel and Star Wars‘ toys in São Paulo, the largest Brazilian city.
Fabio Plein, general manager of Uber Eats in Brazil, said that in the past 3 months, Eats has been working on expanding the categories and products available on the app. “We are very excited about the arrival of Disney, Marvel and Star Wars products to inaugurate entry into the toy segment”, he said. Besides planning the delivery of toys in other Brazilian cities, Uber Eats' next step will be the portfolio expansion to other categories, such as gifts and personal and decorative items. In Latin America, Uber Eats grew 100% in April and May compared to the same period last year.
But to tackle competition against counterparts iFood and Rappi, the on-demand food delivery app has been moving forward. In June, Uber Eats announced the expansion of a new “lunchbox” delivery service in Brazil. The feature, called Caseirinho (Portuguese for “homemade”), offers set meals at affordable prices and competes directly with Loop, a similar service on local rival platform iFood.
With prices starting at BRL 9.99, customers can choose dishes that are part of everyday meals for Brazilians, such as chicken fillet, strogonoff, and rice and beans. “The attractive price and the quality of the meals made our users quickly adhere to the new model and it was possible to observe that, in the cities tested, Caseirinho quickly became a top option at lunchtime”, Uber Eats general manager in Brazil said in a statement.
Uber Flash and local engagement with regulators
But increasing product offering to reach Latin American consumers wasn't the only strategy played out by the on-demand platform. By different means, Uber has been engaging with local regulators to enable or sometimes adapt its services to Latin American markets.
After having its ride operations suspended from Colombia in December; in February, Uber managed to make a small adaptation in the app, by allowing Colombians users to rent cars with drivers. However, in June, four months later, a Colombian court overturned the order that previously forced Uber to suspend operations in the country. “We reiterate the urgency of having clear laws that strengthen the growth of these sectors developed by technology,” Uber said in a statement.
In addition to the ride-hailing issues in Colombia, Uber also had to adapt its micromobility unit in Latin America. Due to the Jump division’s merger with Lime, announced in May, the company decided to cease its electric scooter operations in Brazil, once Lime is no longer operating in the country. “Uber continues to firmly believe in micromobility and its power to positively transform cities and recognizes that Lime’s scale and focus will be instrumental in advancing this transformation,” the company stated. Also motivated by the merger with Lime, the company stopped offering Jump bike rental service in Mexico City (Mexico), São Paulo, Santos (both in Brazil), and Santiago (Chile).
But the disruption regarding its micromobility unit didn't stop the company from keeping to engage with local regulators, as the company is well-aware that this is the only way to positively impact changes in the urban mobility landscape. One of these examples is Uber's latest partnership with the City Hall of São Paulo, for relaunching the Leisure Bike Lane (Ciclofaixa de Lazer), marking yet another stage of activities resumption in the city amid the Covid-19 pandemic.
Under the sponsorship of Uber, the Leisure Bike Lane will return to operate on the same stretches and times as before. “The so-called new normal is an opportunity for all of us, who live in São Paulo, to rethink our relationship with the car and how it affects our city,” stated Claudia Woods, general director of Uber in Brazil. “Uber has a very important role to play in that, encouraging people to put aside the habit of driving alone and putting as many transport options as possible into their hands.”
In Mexico, for its turn, the company inaugurated, also in July, a sanitation center for cars in Mexico City, in order to reinforce the protection for users and drivers. “In the pilot phase of this initiative, we could see that nearly 90% of drivers said they feel safer. We know that hygiene and protection are fundamental for them in the face of the new normality and at Uber we are prioritizing it,” said Gretta González, general director of Shared Travel at Uber in Mexico. In Brazil, Uber has been offering sanitation and disinfection at designated centers in São Paulo, Rio de Janeiro, Belo Horizonte, Porto Alegre, Salvador and Brasília.
Strategic partnerships, as the one with Chile's Cornershop, combined with close and ongoing work with the Latin American cities, has been paving the way for Uber's success in the region. "Following regulatory approval in Chile, Uber’s majority investment in Cornershop is expected to close in the coming days, outside of Mexico," the firm detailed in a press release. "Uber and Cornershop continue to work closely with COFECE, the Mexican Competition Authority, as they assess the final component of the investment, bringing together Uber and Cornershop in Mexico."
And such efforts seem to be paying out. According to the latest edition of the survey Panorama Mobile Time / Opinion Box – Mobile commerce in Brazil, in the dispute between delivery apps, Uber Eats places second, only after the Brazilian iFood. Uber's food delivery division has been winning share gradually from six to six months, with each new edition of the survey.
As for the general ranking of most-used apps for mobile commerce, Uber Eats appears in 9th place, with 8% of Brazilian mobile consumers citing it as one of the most-used apps for shopping, ahead of well established Brazilian brands Submarino, Casas Bahia, and Netshoes. Uber was also featured as the app Brazilians prefer when it comes to ordering rides. From the 1,532 smartphone users who declared to have already requested rides by apps, 70% claimed to do so with Uber, against 23% that answered the Brazilian 99 app (later acquired by Chinese Didi Chuxing).
By meeting Latin Americans' preferences, whether by expanding product portfolio, adapting to these markets' realities, and locally engaging with companies and authorities, Uber has understood how to become a trusted brand among these consumers – even – and maybe mostly – amid such challenging times brought by the pandemic.
Want to learn more about the Latin American Market scenario after COVID-19? EBANX's annual exclusive study is out! Curated by EBANX's experts, this study provides a contextualized portrait of the behavioral trends shaping the region's payments and cross-border e-commerce market, especially after Covid-19.
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