The consumer ecommerce channel in Latin America is experiencing rapid growth, fueled by increases in internet connectivity, the growth of the middle class, and the proliferation of smartphones that allow consumers to make purchases from anywhere. In response to growing consumer demand, companies such as MercadoLibre, eBay’s Latin American partner and one of the leading ecommerce sites in the region, have increased their reach while enjoying steady growth in sales. While the consumer oriented ecommerce segment is a field crowded with established competitors offering a variety of purchasing and payment options, B2B sales through the online channel remain relatively underdeveloped.
With no equivalent of MercadoLibre in the B2B sector, companies that act now stand to capture significant untapped market share by using ecommerce to access SMB customers that were previously deemed too difficult to reach or too expensive to serve. A recent study conducted for a client by Frontier Strategy Group’s Bespoke Research team confirmed the market opportunity for B2B sales to SMB customers in Colombia through the ecommerce channel and also identified three common mistakes avoid:
Mistake #1: Taking a One-Size-Fits-All Approach
Not all SMB customers are the same. FSG’s study focused on a variety of different types of businesses, revealing key differences in purchasing frequency and expenditure, and different priorities for each segment. While fast and reliable delivery of goods and high quality customer service were important for some respondents, other respondents were more concerned with convenience and cost savings. In order to successfully meet the needs of segments with highly differentiated priorities, B2B companies must ensure that an ecommerce site is adaptable enough to meet the needs of different segments, offering flexible payment and delivery options, with customer service that is responsive the unique needs of a diverse range of customers.
Mistake #2: Lack of Payment Options
“Usually we pay all suppliers at the end of the month by checks. We have credit for one month or 35 days. We do not pay immediately after purchase. Here, bills expire in one month and then they are cancelled. Sometimes, we do not have all the money to pay suppliers at the beginning of the month, but, at month end, we have money from everything that was sold throughout the month.”
One of the key inhibitors of online purchasing among SMB customers is the perception that online platforms do not offer the same payment options as the local stores and distributors that these businesses typically purchase from. Many of the business respondents interviewed for FSG’s study were accustomed to making purchases on 30-day trade credit, paid at the end of each month via check, and worried that this payment option would not be available online. B2B companies seeking to reach these customers through the ecommerce channel must offer more flexible payment options, including the ability to purchase products on credit and pay at the end of each month.
Mistake #3: Failure to Minimize Customer-Perceived Risks
“The only objection I would have is around security, as the seller could be a fictitious company and there is the risk of being conned.”
— Interview Respondent
“Goods that come by boat sometimes are delayed or damaged; the service is not good.”
— Interview Respondent
For B2B customers in Latin America, payment security is paramount. FSG’s study found that concerns over security were one of the most commonly cited inhibitors of ecommerce adoption. Though many respondents reported making personal purchases online, these same respondents were concerned about the security risks involved in making business purchases through unfamiliar online portals. Ecommerce companies must take extra steps to reassure B2B customers that their personal and payment information is secure on online platforms. Because B2B customers are more trusting of recognized names with a proven track record, B2B companies that can establish themselves early on as a secure ecommerce portal will gain a significant advantage in the long run.
B2B respondents also reported concerns over the quality of products purchased online. These respondents expressed reservations about purchasing products without being able to judge product quality in person, and were also concerned that products shipped from long distances could become lost or damaged. B2B ecommerce companies can minimize this perceived risk through a comprehensive return policy that reimburses customers for products that are damaged or unsatisfactory.
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