Beyond obvious beneficiaries like etailers, the recent e-commerce boom in Latin America has favored logistics companies. In conducting our ongoing logistics market research for Latin America via interviews, several firms have told us that their revenues from e-commerce operations have soared by four times in the last 12 months.
However, the impact on logistics extends further than just revenues: the massive shift to online consumption has created a new reality for logistics companies operating in Latin America. Here is a look at some of the aspects of that new reality.
2021 Latin America Outlook
Which countries and industries will recover first—and why
5 MAJOR LATAM LOGISTICS MARKET SHIFTS THAT COMPANIES MUST ADAPT TO
#1 Logistics at the Core of the Strategy
Before the pandemic, for most etailers, logistics was not a prime focus. But now, these online sellers are spending more on logistics and IT to merge the online and offline worlds. It is less about omnichannel — a buzzword in the past few years — and more about linking and complementing the online and offline worlds. For example, retailers now use their physical stores to accept returns from online orders, and customers can now place orders online and pick up their goods in the stores.
In our LatAm logistics research, we see logistics at the center of these efforts to integrate online and offline retail. As a result, fulfillment centers, reverse logistics, dark stores, and next-day delivery are becoming the fastest-growing segments because companies are looking to differentiate, better serve customers, and offer a better customer experience. As such, logistics players that are focused on those segments are experiencing fast growth.
#2 The Rise of the Few
This trend is the increasing interest of SMEs and online brands to sell directly to customers via social commerce as this channel becomes increasingly popular in Latin America thanks to the longstanding embrace of social media in the region. As a result, we expect to see strong growth in this channel in the next couple of months, creating a new source of revenue for logistics players. Small sellers come with entirely different needs than large retailers and marketplaces, offering at the aggregated level an excellent opportunity for niche logistics companies to diversify and expand in Latin America.
#3 Customers Becoming Competitors
While in previous years, etailers like Mercado Libre and Amazon were great customers for logistics firms, these companies have developed their own in-house logistics capabilities. Over the past 12 months they have invested heavily to expand their distribution networks, including their last-mile delivery capabilities. Faster than you may expect, these etailers could become a threat to the existing logistics players in the region.
#4 Growing Last-Mile Competitors
Small, crowdsourced companies that can provide last-mile service have been mushrooming in Latin America recently, going outside of their home markets. For example, 99 Minutos, a Mexican company, is now hiring in Colombia, while Chazki is expanding in Chile and Argentina. All of these companies are tapping into this new demand from sellers that are looking to offer customers same-day deliveries, next-day deliveries at a cheap rate. That is something that is happening today. This might be an opportunity for logistics companies to partner with these disruptors, or these upstart companies could become a threat to the business models of larger, established players.
#5 More in the Middle
Another byproduct of merchants in Latin America selling more online through social media and existing marketplaces is the rise of a new set of “middlemen” in the logistics space. We’re referring to logistics services aggregators like Envíoclick, Mienvío and Tiendanube — which offer IT support, order fulfillment, parcel career management and other services — to the mom-and-pop shops that have started selling online. If they have not done so already, these new logistics competitors will soon start eating into the profits from e-commerce that more established logistics companies have been enjoying.
Going forward—and holding back
As companies adjust to this new LatAm logistics reality, it’s helpful to step back and look at the broader e-commerce picture over time, since these online sales are so heavily impacting the logistics industry. In 2017 we did a webinar on the main obstacles to e-commerce in Latin America, and now that time has passed, it’s helpful to revisit those as we try to understand what will change in the industry soon.
One obstacle we cited back then was reverse logistics. Back in 2017 it was a major problem—and it still is. A study conducted by Salesforce in October 2020 indicated that as many as 58% of Mexican e-commerce customers had problems returning products. Those problems are not limited to Mexico, as we have observed in studying the region’s logistics market: reverse logistics continues to be a problem in many countries. This can clearly hold back growth, as customers are reluctant to order online because they will have major difficulties returning incorrect, damaged, or unsuitable products.
Another obstacle we have observed is with custom procedures and restrictive de minimis thresholds in several countries. There is no coordination between Latin American countries to set a common de minimis thresholds. That basically put a barrier for online sellers trying to penetrate new countries because the landed cost of a purchase it is still unclear.
2021 Latin America Outlook
Which countries and industries will recover first—and why
Despite these challenges, we have also seen some positive developments in LatAm logistics regarding e-commerce: shipment reliability and transit times have improved dramatically. In Mexico, Brazil, Colombia and Chile, today we’re seeing two-day shipping covering most of the main cities. That’s something that did not exist before and today is being offered to customers. We’re seeing same-day delivery and the reliability aspect of the delivery has also improved. Today, more than 85% of goods are being delivered within the transit times offered to customers, according to the interviews that we’ve had with logistics players in the region.
Shipment reliability and transit times have improved dramatically.
In Mexico, Brazil, Colombia and Chile, today we’re seeing two-day shipping covering most of the main cities.
Another positive development has been with price transparency and the technology to track packages and the information offered to customer improving tremendously in the past couple of years.
Adjusting to the New Reality in LatAm Logistics
Contact us to find out how our logistics market intelligence can help you understand the pace of the changes in the industry, solutions for the obstacles and overall opportunities to be had as e-commerce continues to expand in the region.
Our customized LatAm logistics market studies can focus on solutions for your specific challenges, give you a market landscape for a segment or an entire industry, let you know about potential partners or companies to acquire and much more.
