February 02, 2018
The rapid growth of e-commerce in recent years could herald the full entry into the country of industry giant Amazon. The issue is no longer if it will come to Colombia, but when.
Amazon, the world's fourth largest company with a market capitalization of USD 665 billion, may well have landing in Colombia among its medium-term plans, by opening an office of marketplace, its stellar business unit.
The issue does not seem to be an exaggeration, considering aspects such as the progressive growth of the sales of goods and services via the Internet, the development of agile logistics in certain companies and the slight improvement in the income of Colombians in recent years.
The analysts we have consulted seem to agree, however, that the landing will take a bit longer.
"I don’t foresee this important company arriving in the short term, later on, yes. I think Colombia needs to develop this activity a little more," says Juan Gabriel Pérez, CEO of Invest in Bogota.
In fact, this firm, which is dedicated to attracting new companies and capital to the city, was the first to seduce the American giant to landing in the country. "In 2015 we made a first contact and we began operations in 2017 with its business unit that focuses on cloud storage," Pérez explains.
That is already a positive sign, though far from conclusive.
Another fact to consider is that last December 17 the much-respected Buenos Aires newspaper, El Clarín, published an article entitled: "Amazon’s secret plans to settle in Argentina". In the aforementioned text, the Argentinian media affirms that starting late last year Amazon is making all the necessary preparations to register the opening of two of its companies in that country: Amazon Web Services and Amazon Data Services.
The first of these is the one that has already been operating in Colombia for some time with clients that include: RCN, ICFES, Nequi and Amazon competitor, Mercadolibre.com.
It should be emphasized that Amazon’s local offerings in this business segment is impressive. Simply unfolding the list of products offered in Colombia on its website is enough to realize the extent of its package of services.
El Clarín of Argentina also mentions a full strategic plan by Amazon to reach several markets in the region with its marketplace, an e-commerce platform that enables sellers to sell products online, and which made the multinational great in the first place.
Still a way to go
Despite the growth in e-commerce in recent years, Colombians are still too timid about adopting these technologies and payment systems. According to experts, this attitude is more associated with the lack of consumer information than failures in the product sale and delivery processes.
Of total retail sales, probably only 1% is done through online transactions, something that experts on the subject call ‘penetration’.
That puts us at a very low level compared to other countries in the region, where such fears have been clearing over time and thanks to better financial education - not to mention countries that are much more advanced in this area, such as the United States and China, where penetration is between 8% and 13%, according to figures provided by Jaime Ramírez, country manager for Colombia of Mercadolibre.com
The good news is that specialists’ projections would have us believe that this business is unstoppable.
Victoria Virviescas is the CEO of the Colombian Chamber of E-Commerce (CCCE) and one of the most knowledgeable people in the country regarding this activity. She believes that the eventual arrival of Amazon to the country would stimulate the sector's competitiveness and generate interesting opportunities for the industry to continue to grow.
Virviescas reports that the e - commerce market in 2017 may have represented transactions of around COP 7 trillion, which is some 17% more than was recorded in 2016. More precise figures will be released shortly.
Experiences such as 'Black Friday' and 'CyberMonday' among other discount days for online sales have also had positive effects on this business.
What Colombians mostly buy over the Internet is clothing, footwear, technology and airline tickets. The growth potential is enormous.
Therefore, to refine the policy, the CCCE is creating an economic observatory to evaluate these trends and see where the activity can be further stimulated.
The other aspect that must be improved are the transport logistics. Although there has been progress in delivery times, customer care and the number of companies entering the arena, these are a long way off international standards. We should remember that some of Amazon’s and Aliexpress’s deliveries are actually made by drones.
"Colombia must take advantage of its geographical location on the continent and its new airport in Bogota to become a parcel hub, which involves offering competitive freight rates and making much more progress in banking processes," says in Invest in Bogota’s Pérez.
Some parcel delivery companies have been improving the logistics and are delivering orders in good condition and on time, but technology is needed for real-time product traceability and perfecting customer service.
One company that has evolved in this sense is Dafiti. Camilo Rueda, the company’s general manager, explains that one of the keys to the success of this company is that it allows and facilitates refunds in case of dissatisfaction. In logistical issues, the executive explains that they have combined internal and external messengers to meet the promised delivery schedules.
Faced with the possible arrival of Amazon in the country, Rueda says it would be good news for companies that are doing their job well, since it will boost the sector. "I do not rule out Amazon’s entering the country in the short term," the executive says.
Other firms will not be able to survive in the market unless they have sophisticated customer-service schemes. Dafiti, for example, has combined the use of its own and external messengers to meet the promised delivery schedules.
The company has also seen the need to expand its product offerings and therefore plans to double the area of its warehouses in Bogota this year.
"Last year provided the best results for the company, we grew 67% in sales. This year we want to continue on this path, and in January this year we are already growing at a rate of 135% over the same month last year," Rueda says.
These figures show the rapid growth of this activity, despite the black clouds on the horizons of the Colombian economy in 2016 and 2017.
Given these figures and the growth potential of this business, it is more than natural that e-commerce will continue to grow in the world and in Colombia. There seems to be no going back. According to a SAP study, an estimated 940 million online shoppers will spend nearly USD 1 trillion (a million million) in e-commerce transactions in 2020, representing 30% of the overall volume of online transactions.
The eventual arrival in the country of Amazon with its marketplace should not scare company owners, it should be seen as an opportunity. However, they must prepare themselves ahead of the arrival. The figures and growth of this company in the world should at last raise their concerns.
According to a study by Global Powers of Retailing 2017, the retail division of the firm founded by Jeff Bezos, incidentally the richest man in the world, generated revenues of around USD 80 billion, a figure comparable with Carrefour’s operations. The difference is that Amazon’s growth is double-digit, while conventional trade is just 2% or 3%.
Another advantage that has not been analyzed in this business is that it means savings in time and money for most consumers. Fewer mobilizations in the major cities helps improve mobility and provide time for other occupations such as the family. Let’s hope Amazon’s arrival in Colombia is not too far off.
Information by Invest in Bogota