My latest of many money-making schemes has been in the world of e-commerce.
I started playing around with e-commerce during My Last Trip To Peru. Appeared the country was ripe for it; the economy was booming, and I certainly noticed people with disposal income in Lima. But despite all that, there was a lack of cool stuff to buy – many of the big chain American stores that I saw in Mexico that offered impossibly cheap goods hadn’t made their way down, and I knew that import laws were pretty lax compared to countries like Argentina or Ecuador, and manufacturing costs were lower than countries like Chile or Brazil. Sao Paulo is the financial hub of Brazil.
It seemed like if I wanted to start a little Latin American business venture in 2017, Peru was a good place to do it.
..So I did it!
Over time, I was lucky enough to link up with someone who had a business down here, and we started working together to bring products into the country, as well as produce stuff locally at a low cost (in our case, clothing).
I’m happy to say that the business is still ticking along. We’re not talking huge amounts of profit by any means, but it’s been a fun adventure so far. And, although I’m in Canada for the time being, I’m getting my ducks (i.e stock, websites, branding) in a row so I can go hard when I head back down south.
Today, I wanted to share with you some of the things I’ve learned about e-commerce in Latin America. I published bits and pieces of this a few months ago, but I figure it makes more sense to throw everything down in one article for anyone interested in going this route. So forgive me if there is some repetition/if some things are out of order.
Settle in, because this will be a long one!
Let’s get it going:
Part 1: How To Start An E-Commerce Business In Latin America
If you want to reside in Latin America, you’ll need to find a way to make money.
The vast majority of foreigners down here will make their living doing one of the following things:
1) Teaching English
2) Working for a multinational corporation
3) Freelancing from their computers
It makes sense. These are the only immediately apparent options for expats south of the border who aren’t citizens of their adopted country and who haven’t started a location-independent business.
But unfortunately, these aren’t always ideal work situations.
– English teachers don’t make very much money
– Employees of multinational companies usually need years of experience before they can put in for a transfer
– Freelancing is somewhat unstable, and limited to services that can be delivered electronically
So, what do you do if you want make money in Central or South America as a foreigner, but aren’t interested in any of the above options?
Fortunately, there’s an alternative.
Opening An Online Store
It’s Not As Crazy At It Sounds!
There is plenty of information on the Internet about sourcing products from Latin America and selling them through an online platform to customers in the United States and Europe. But there is virtually no information about selling products to the Latin American market.
There’s good reason for this. On paper, it makes much more sense to sell to an American market, where clients have more money to spend and are much more comfortable with making online purchases, than it does to sell to a Latin American market where people are poorer, where only around 10% of the population have bank accounts and where online shopping is in its infancy and viewed with suspicion.
That, accompanied by the fact that you’ll have to do business in a foreign language and culture, is enough to send most people running for the hills.
But, being the contrarian that I am, I’m here to tell you why all this should not scare you off.
First, let’s take a look at the growth of e-commerce across the region.
All information from: Http://Amiperspectiva.Americasmi.Com/
The fact that e-commerce is only just starting to catch on in LATAM means two important things:
1) It has huge potential for growth
2) Competition is still low
I’m always amused at how bad the marketing and advertising is in Latin American countries. With the exception of Brazil and Mexico, it is a train wreck. One common theme is for advertising companies to simply copy popular American campaigns and apply them to… well, anything.
For instance, on several occasions I’ve seen the phrase “What happens in Vegas, stays in Vegas” translated to market everything from popular nightclub chains to affluent residential areas (lo que pasa en ____ se queda en ____).
Websites for some of the biggest and most successful regional companies still look like they were built 20 years ago.
Large beauty salons will put out a blown-up, out-of-focus picture of Britney Spears or Nicole Kidman to advertise their services.
The bar is really, really low.
This is slowly changing as increased competition in major industries is forcing companies to up their game, but it is still nowhere near on the level that we see in North America or Europe.
In terms of marketing, it’s like taking a time machine back 10-15 years.
With the right product, intermediate knowledge of SEO, Facebook/Google Ads and Instagram, along with a basic cultural understanding of your target market, you’ll kill it down here much easier than you ever could in the United States.
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Disadvantages And Advantages
If you’re thinking about taking advantage of the growing e-commerce market in Central and South America as an expat, you will run into some very real hurdles. Before looking into the steps you will need to take to set-up a successful store down here, let me help you decide if it’s worth it for you.
Less competition/saturation than in the developed world
One of the fastest-growing regions for e-commerce
More untapped markets (e.g. things that are currently popular in US that haven’t made their way down yet)
Many obvious opportunities for arbitrage
Low start-up costs & unlimited income potential (unlike teaching English)
Still a small market with low credit card penetration & less disposable income
Legal headaches w/ registering business in a foreign country (if you choose to register…more on that later)
A lack of suitable payment gateways
So, although there are good opportunities to fill gaps in the market and to build a presence via effective marketing, a small customer base and bureaucracy will pose difficulties.
So, How Do You Do It?
Opening an Internet Store in Latin America isn’t much different than opening one in your home country. However, there are a few additional (and often annoying) things you’ll need to do.
I’ll walk you through them.
STEP 1: FIND YOUR NICHE
This has two meanings.
First, you must choose what country you want to do business in. You can do business in multiple Latin American countries, but this get’s tricky when it comes to shipping, as well as selecting a suitable payment method.
More on that later.
Second, you must find a product to sell.
You’ll want to select a domestic market that has a decent-sized population with disposal income, and with notable credit card penetration.
This ultimately rules out smaller/poorer countries (Guatemala, El Salvador, Honduras, Bolivia, Paraguay…).
The following countries will be your best options based on population, and/or number of people using credit cards:
When deciding on a product to sell, a good starting point is to make a list of all of the products that are more expensive to purchase in the country than in the United States, and that are difficult to get. There’s little point in trying to sell a product that locals can already get cheaply and easily. You’ll have an advantage here if you’ve come from the USA or Europe – you’ll immediately notice things that are missing from store shelves that are easily obtainable at home. A quick Google search will also give you an idea of what Latinos are paying a premium for in their respective countries but can be found cheaper elsewhere.
Consider what demographic you’ll be dealing with. The people in Latin America with credit cards that shop on the Internet will normally be middle/upper class, and between the ages of about 20-50. What kind of things might they want?
Also keep in mind that manufacturing is fairly cheap in Latin America, so if you have an idea of a product that isn’t yet available in your country of choice, you may be able to get it produced domestically to cut costs.
STEP 2: OPEN A BANK ACCOUNT
After you’ve decided on a country and a product, you will need to open up a local bank account. This can be tough depending on what country you’re in, but it is more or less a necessity. Most payment processors will only let you display checkout prices in the currency that your bank account is linked to, and the bank transfers from your payment processor to your account will need to be in your bank’s home currency. Not to mention, you will be able to bypass the payment processing system altogether if your customer prefers to pay via bank transfer.
If you simply link your online store to your bank account from the United States when you’re selling in, say, Colombia, your Colombian customers will get confused when they see prices in USD, and you’ll get hit with a conversion fee to convert their pesos into your US dollars. Without a local bank account, you’ll lose money both on sales, and on the conversion.
Also, many people in Latin America are more comfortable paying via bank transfers as opposed to credit card. You will need a local bank account to accommodate this.
If you’re a foreigner on a tourist visa without a cedula (local identification card), opening a bank account will be nearly impossible. The banks will claim that they are not allowed to open a bank account for you unless you have permission to work or study in the country.
Fortunately, this is Latin America, and the rules are often bendable.
For instance, if you obtain a reference from someone with a ‘premium’ account (i.e. basically just someone who earns a lot of money) most banks will make an exception and let you open an account.
A simple letter from someone with a registered business saying that they will be employing you (doesn’t have to be legit) will can do the trick as well.
And, if all else fails, banks in cities with a large expat population (for example, Cancun, Cuenca, Cusco) will be more open to the idea, as they are familiar with dealing with such requests from retirees. If you’re having no luck opening an account in Mexico City, fly to Playa del Carmen or Puerto Vallarta and you might find the bank employees are a bit more open.
When there’s a will, there’s a way. If you keep trying at different branches, eventually someone will let you do it.
STEP 3: CHOOSE A WEB PLATFORM FOR YOUR STORE
Next, you’ll need a platform for your online store. As you probably know, there are a few options for this. If you’re new to this game, I’ll make it simple: use Shopify. It’s arguably the most common e-commerce platform, and one of the most user-friendly. It also supports payment gateways that work in just about every country in the world.
If you’re experienced with WordPress, combining that with WooCommerce is also a good option for Latin America.
Squarespace, although very user-friendly with gorgeous templates, will only allow you to sell products in major currencies, won’t allow you to change the check-out language from English and only works with one payment gateway (Stripe).
Best to steer clear.
STEP 4: SELECT A PAYMENT GATEWAY
Next, you’ll need to link a payment gateway to your store.
Sounds simple, right?
Yes and no.
Popular payment gateways in North America, such as PayPal and Stripe, aren’t good options here in Latin America.
This is because, fun fact, not many people have PayPal accounts in LATAM. And they are unlikely to go through the process of getting one just to order something from your store. This is because, for the most part, PayPal has made it impossible to transfers funds from PayPal into any bank account located in Latin America.
And, unfortunately, Stripe only supports a handful of currencies at the moment, so you won’t be able to use their services to sell in the local currency (good news is that Stripe is currently beta testing in Brazil and Mexico).
If you’re using Shopify, the best payment gateways to use will be 2Checkout or PayU, Latin America’s version of PayPal.
PayU is a major and trusted payment gateway in the following countries: Colombia, Argentina, Brazil, Chile, Mexico, Panama, and Peru.
It will be extremely beneficial to have a PayU account, as it will allow your customers a way to pay you with cash at many local corner stores and supermarkets. Since people here aren’t yet comfortable giving out their credit card over the Internet, having a PayU account will help you capture what would have otherwise been many lost sales. People trust it.
Problem is, getting a PayU merchant account as a foreigner requires things you may not have.
Here’s what you’ll need:
1) A National I.D. (often known as a ‘cedula’ or ‘carnet’)
2) Proof of your registered business (tax I.D)
3) Your Bank Information
4) Proof that your bank account is active (i.e. photocopy of recent transactions)
5) Personal information (phone number, email, name, etc)
If you only have a tourist visa, you won’t be eligible for a national I.D card. And, since won’t want to register your business…at least not yet (I’ll get to why later), you won’t be able to provide proof of a registered business.
That would leave 2Checkout as your other option. It’s not the best payment gateway in the world, and it’ll charge you a whopping $15 dollars to transfer money into your account (unless you’re in Mexico, in which case it’s free). But, unlike PayPal or Stripe, it will allow you to link a foreign bank account and display prices in your local currency.
…but there’s another problem. Although it doesn’t require proof of a registered business, 2Checkout will require proof of address and ID. If you want to sell in, say, Argentina, and your ID is from the United States, your application will likely be rejected.
So, what do you do?
Whatever option you choose, if you’re on a tourist visa, you’re going to need a local. There’s really no way around it. Either find someone you can trust and use their ID to open an account, or find a business partner. I know, this is sketchy as hell since this person will effectively have control of your earnings, but this is what you’ll have to do if you want to sell in a country where you don’t have a national ID card.
Another alternative is to only accept bank transfers as a form of payment. If you go this route, you’ll only need a bank account. On the one hand, this isn’t a bad idea since many folks down here prefer to pay by bank transfer than with a credit card. On the other hand, it’s a pain because the payment process won’t be streamlined – each customer that purchases something will need to send you a confirmation of their bank transfer by phone or email. A bit more laborious.
However, if your plan is to sell to multiple Latin American countries, your best option will be to base your store in the United States and sell in US dollars. Cross-border payments are a problem in Latin America (PayU claims they can accommodate cross-border payments, but when I called they told me they couldn’t…liars!). People who shop online will be used to buying things in American currency, as the majority of the stuff they buy internationally online (from Amazon, typically) will be in good ol’ USD. Invest in an automatic currency converter app on Shopify so the customers can see prices in their local currency to avoid confusion. Just let them know that when it comes time to checkout, they will be charged in USD. This may lose you a few sales, but if you are selling internationally, it’s much better for customers to see that they’ll be charged in USD – a currency they more or less trust and understand – as opposed to, let’s say, Peruvian soles.
Unfortunately, it’s the credit card thing again – not many are comfortable using them online, or even have them. Since you can’t accept cross-border bank transfers down here without paying massive fees, you’re going to lose a few sales.
Ideally, if you plan to sell into multiple LATAM countries, you’d have both Shopify Payments (best payment gateway available on Shopify) and PayU set up as payment options. Unfortunately, I haven’t found a way to do this.
In short, if you want to sell to only one country, find a trustworthy local, get a bank account and use the local currency. If you want to sell to multiple countries, use US dollars as your store’s currency. Neither option is ideal, but you gotta do what you gotta do.
STEP 5: HIRE SOMEONE
Once you have your online store set up and looking the way you want, you’ll eventually want to hire a fluent Spanish-speaker to help with website content, email inquiries, shipping, etc.
Initially, you can just use a friend, but once more orders, calls, emails and Facebook/WhatsApp/Instagram inquiries come in (WhatsApp is a fairly common method of business inquiries in LATAM), you’ll want someone to deal with that – at least until your Spanish is at an advanced level.
…Even then, you’ll want to hire someone. It’s a huge time drain to do all of this yourself. Much, much better to outsource to a local or a virtual assistant.
What About Registering Your Business?
Although it’s possible to register a business on a tourist visa in many Central and South American countries, I don’t suggest you do it. Contrary to popular belief, the tax authorities in these countries will actually make your life more difficult if you’re trying to do things by the book. As a foreigner with a business on their radar, they may just decide to make your life hell.
Also, you’ll have to pay taxes in the country you’re operating in. Not ideal. And, depending on the country, they may also require that you employ up to five locals if you plan on registering a business as a foreigner.
If you’re just looking to start a small e-commerce business, this simply isn’t feasible (at least, not in the beginning stages). You’ll be buried under the costs.
Since you’ll be operating your business online, there basically no way that the local tax authorities will catch on to your hustle. I venture that the only hurdle you’ll face if you do not have a registered business is if, for whatever reason, you’d like to open a physical store as well as an online store. Not having a registered business will make this decidedly more sketchy, and it’ll have to be cash only – there are no decent POS systems like Square down here for independent vendors (and these payment processors won’t work down here if you bring them from home).
**You can, however, rent some office spaces/storage lockers as a tourist if you need somewhere to store your stock.
When you’re just starting out, you’ll want to stay as low-profile as possible. Only when your business becomes successful should you think about registering it.
However, having a registered business could be beneficial in the long run because you will have the option to “hire yourself” and use your own company as a vehicle to get permanent residency in the country of your choice. Unfortunately, you’ll be taxed twice if you do this – once as a employee and once as a company – but if residency in a Latin American country is a primary goal of yours, starting a small business is a cool path to take.
Biz Latin Hub can help you with this.
A Few Words On Marketing
Marketing will be the thing that makes or breaks your business. Quality and customer service are important too, but not nearly as much as your brand’s aesthetic.
One thing I’ve noticed about people in LATAM is that on the whole they aren’t as concerned with, or appreciative of, high quality products or good customer service as North Americans. What is much more important to them, however, is image.
They need to feel that they are buying from a “cool” brand.
For instance, an affluent Latino may never buy a pair of sunglasses from a street stall in a bad neighbourhood, but take those same glasses and put them in a stylish store on the right side of town and they’ll pay five times the price. This is true anywhere in the world, but it is particularly true down here.
The product photos, social media and brand message for your company must be on point. They have to look better than the competition’s. Hire someone if you have to. Just get everything looking as perfect as possible. You’ll be selling a lifestyle first and your product second.
In the beginning stages, your product just has to be passable. When you’re starting, branding is far more important. Focus on improving your product once you’ve got some traction.
Facebook and Instagram are sickeningly popular in Latin America (if you think the United States is bad you ain’t seen nothing). You’ll want to focus most of your advertising here. Find out who the big influencers are in your city/country, or successful, laterally-related companies that you’re not in direct competition with. Give them merchandise or money in exchange for featuring your product.
Do not underestimate the importance of this. A popular blogger or a hip independent company vouching for your product can be the difference between huge success and complete obscurity. People don’t seem to Google things too much here, so Facebook and Instagram will likely drive the majority of your sales.
Opening an online shop in Latin America can be a low-cost and exciting way to earn a living. It’s not without its challenges, and it’s not the best fit for The Digital Nomad Lifestyle, but the income potential is much higher than teaching English or working in a hostel.
If you’re dead set on what country you want to live in and you want to give an e-commerce store a shot, I highly suggest going through the necessary steps to get a student or work visa, regardless if you have plans to study, or work for a company. This is simply because it will enable you to apply for an I.D card, which will make opening a bank account much easier.
Skip the guesswork and develop your ideal Latin Life Plan with our consultation services:
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Part 2 – How To Market Your E-Commerce Business In Latin America
Assuming you’ve completed the steps outlined in part 1, you should already have an online store set up, a product(s) to sell and a Latin American country (or countries) to sell it in.
Your product should meet the following criteria:
1) Easy to import and/or manufacture for a low cost in your country of choice (preferably a small, lightweight product to save on shipping)
2) In-demand among middle/upper class Latinos between the ages of 20-40
3) Either cheaper or better quality than the competition
Your country of choice should meet the following criteria
1) Few import restrictions and/or low manufacturing costs (depending on if you want to import or manufacture/replicate your product domestically)
2) Reasonable credit card/e-commerce penetration (rules out many countries, unfortunately).
3) A semi-functional postal service
So, you have a product that has reasonable demand in your country or countries of choice, a sharp looking website a cool sounding name with a snappy logo and all your social media accounts set up.
Now for the hard part.
How do you reach potential customers?
A Few Words About Internet Marketing In Latin America
Since E-Commerce is a relatively new concept in Latin America, your target demographic must be younger folk (older people use the Internet less, won’t know how to shop online and, even if they do, will often be too paranoid to give out their credit card information).
When thinking about how to promote your store on the web, it is important to remember that the Internet isn’t used quite in the same way in Latin America as it is in the United States, Canada or Europe. For instance, if an American is looking for the best bakery in Anaheim, California, they are likely to use Google. And you can bet that the business has managed to rank 1st in Google for “Best Bakery In Anaheim” is laughing all the way to the bank.
In Latin America, however, people are more likely to ask a friend where a good bakery is, or simply go to the one closest to their house. They simply don’t rely on Google for finding stuff nearly as much as we do. For this reason, you’ll find that the same keywords that are exceedingly valuable in English are largely useless in Spanish (at least for now) and are considerably easier to rank for.
What I’m trying to say here is to ignore Google Ads and SEO in the beginning stages of marketing your business. It may be prudent to try to rank for Spanish keywords in the future, but for now you just won’t see much ROI coming out of this.
But, whereas Latin Americans don’t use Google quite as much as Canadians, Americans, Europeans, etc, they use Facebook like maniacs.
Just take a look at this graph.
Brazil, Mexico and Colombia are all in the world top 10 for most Facebook crazed countries. And that’s from 2012. Facebook use here has expanded exponentially since then.
Although, as you can see, the metrics this study used to draw its conclusion are a bit questionable, I can personally attest to the fact that people use social media down here (especially Facebook and Instagram) far more than my fellow Canadians.
It’s disgusting, really…
But! Luckily for you, the demographic you’ll need to be targeting for your online store is exactly the same group of people who use Facebook and Instagram the most. For this reason, it will help if your product is highly sharable on these platforms (health and fitness or fashion as opposed to sex toys or car engine components, for instance).
Your First 1000 Facebook Fans
While you might be tempted to throw money at Facebook ads right out of the gate or, even worse, pay for fake followers after putting up some content, I highly suggest you don’t do this. While fake followers might give others the impression your page is more legitimate, these people will never engage or buy anything, so there is really no point. Especially when, for the same amount of money, you can get real followers who are actually interested in your stuff and will share it, thereby expanding your followers for you.
So, here is what you’ll do instead.
On Facebook, find out who the influencers are in your country and industry, or in a laterally related industry (eg. supplements; fitness clothing). Ask people you meet in person as well – you’ll be surprised to know how many rich kids will personally know people with popular Facebook or YouTube pages. Make a list of the influencers who have at the very least 50,000 follows and send them a message with your pitch. You can offer them money or free products in exchange for promoting your page in some way.
e.g. (their company’s) fans can receive a 20% discount at (your company) by liking (your company’s) Facebook page and subscribing to the email list. Have them request that their fans “like” your page
e.g. A video review of your product and their stamp of approval that your store is legit. Have them request that their fans “like” your page
You’ll generally find that Latin American influencers are a lot more chill about doing this sort of thing. They’re often less paranoid about you stealing their business if they’re in the same industry, and will often accept less in terms of money or gifts in exchange for promoting your content.
Do this with 3 or 4 influencers and it should be enough to get the ball rolling (I did this exact thing when I started an online store and it worked much better than I expected).
***Do this with Instagram, too.
If you choose influencers that have followers that would be interested in what your selling, after doing this, you should have around 500-1000 Facebook fans.
1000 To 5000 Facebook Fans
“1000 – 5000 Facebook fans? Vance, I here to make money, not to jerk off over how many fans I have!”
I know, I thought that too. But I soon discovered just how important social proof is in Latin America. In countries where people are hesitant to buy online in the first place, you need a solid fan base to lend legitimacy to your business. Only then will people eventually feel confident enough to buy from you. Keep in mind that your first sales will very likely be driven by social media, so neglect it at your own peril. In my experience, people only started buying once I reached 2000-3000 Facebook fans.
In order to get your fans well into the four-figure arena, you’ll want to use Facebook ads. Now that you already have a solid organic fan base, these ads will get you more bang for your buck (people will be more inclined to engage with a page with 1000 followers than with 11).
After testing a few different strategies, I found that by far the cheapest and fastest way to grow your following through Facebook Ads is by holding a giveaway, and by listing your ad strategy as “post engagement” (website clicks are too expensive and probably won’t convert, instead drive people to your website indirectly through Facebook interactions).
It works like this.
– Create a post with a flashy photo of one of your products (and some cool accessories, or whatever, just make it worth sharing)
– Enter to win a free _______! (post a link to the product on your website as well)
– Just follow these steps to be eligible
Like our Facebook page
Share this photo on your wall
Tag three friends in the comment section
We’ll announce the winner to our followers on (date) **A week later is a good time to announce the winner.
Then, pay to promote the post through Facebook Ads, $5 a day for a week, i.e until you announce the winner. Assuming there is interest in your product, this should produce pretty good results ($10/day + will always bring you better results…depends on how much you can/want to spend).
Here are some of my early stats of an ad exactly like the one above (in Spanish, of course).
After this ad ran I had +/- 2000 additional fans.
It might look impressive enough (I don’t know a lot about Facebook Ads so I’m not really sure), but in reality this ad led to a whopping one sale. But that’s OK, we’re not talking about sales yet, we’re talking about gaining a fanbase. Right now, you’re building the foundation which will give people the confidence to buy from you.
Mix all of the above in with a few boost posts of product links, discount codes on the first purchase to people who like your page/sign up for your email list etc, (**collect emails whenever and however you can) and you will have built yourself a solid following of interested people in less than a month.
Instagram And Other Methods Of Advertising?
Instagram ads are run through Facebook Ad manager, so any ad you create for Facebook you can run on Instagram as well. The value of Instagram in terms of sales will depend on what your business is. If you’re targeting women, particularly in fashion or cosmetics, it will be of more value to you than if you are selling to (non-gay) men. You can use a program to buy Instagram followers if you’re so inclined. If not, just pay for an occasional ad and utilize local hashtags on your photos to gain exposure. On Facebook, you can also publish the same giveaway strategy I mentioned earlier to gain more Instagram followers (i.e “Follow our Instagram to win”; “Winner will be announced on Instagram”.
Believe it or not, many people will buy products from a company’s Instagram page by contacting the owner (you) through WhatsApp to facilitate a bank transfer, accompanied by a Instagram screenshot of the product they want. In fact, I’m beginning to find that Instagram is more valuable than Facebook when it comes to actually getting sales.
The other, aforementioned obvious option is Google Ads and SEO. Again, I don’t recommend focusing on these strategies at the start – for me, it wasn’t worth it. I’m sure there is tons of potential here, but I haven’t figured out how to leverage it.
Word of mouth can also work here, but only if your business is partly physical.
Let me explain.
Once you’ve collected a good number of fans, you’ll soon notice that the number 1 question you’ll get is “Where is your store located?” (Donde queda la tienda?; De que país son?). The fact that a store targeting a Latin American country can be 100% online hasn’t quite caught on to people here, so they will assume that you’ll have a store in whatever country you’re advertising in. Or, if you’re advertising in multiple countries, they’ll ask what country you’re located in. Like I said before, people here aren’t entirely comfortable with buying on the Internet. The same customer who would easily drop $200 or $300 on your products in a physical store may never buy from you online.
It’s hard to get around. You’ll notice a ton of abandoned carts and a horrid conversion rate when you start trying to sell online in LATAM (Part 4 of this series will talk about how to get sales).
But there is a potential solution.
If you’re renting an office in a big city or have an apartment with your products in it, you can always set up a sort of “pop-up store” and have people come by who are interested. I know, I know. It sounds rogue as hell, but it can actually work pretty well. If you have cool stuff, word will get out and you can make some initial cash sales (Another option is to try to get your products in local stores, I may talk more about this in a future post).
Obviously you’re going to want to be extremely careful if you do this. Only run it out of your apartment if you have a doorman and if you’ve become buddies with him, and demand that any customers leave their IDs at the door with him before coming in.
In Latin America, there are these small mall/plaza type things that will let you rent a small store space/office for a few hundred a month. They look kind of like this.
As long as you have the cash, even as a foreigner, you can usually find a way to rent one of these as an office in most big Latin American cities. You could low-key do cash sales out of something like this, but if you’re too obvious or ostentatious, you’ll either get robbed or shut down. If you want to go this route, hire a local you know to run things while you make your presence scare. Foreigners will attract unwanted attention doing something like this, as you might imagine.
I realize we’re in crazy territory now. Just to be clear, I don’t suggest you do this unless you have a trustworthy local as a business partner. Even then, it is likely to be more trouble than it’s worth.
tl;dr: Focus your advertising on social media when starting out.
I guess I could have just said that and saved ya’ll a lot of time.
That’s about it for Part 2: aka my little introduction about how to market an e-commerce business in Latin America. Even if you don’t plan to relocate here, these tips can help out with expanding your business to a rapidly growing e-commerce market.
I realize most of what I said here probably isn’t rocket science to anyone with experience in e-commerce, and I’m sure more “savvy” marketers will probably have more efficient strategies that this, but I hope at least opened people’s eyes to another option for earning an income for anyone who wants to live in Latin America. Of course, feel free to tweak the marketing strategies to your liking once you’re up and running.
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Part 3 – E-Commerce In Latin America: How To Test Market Demand
Although this is Part 3, it really should be Part 1. After all, before you attempt to start any business, you should first make sure people want what you’re offering.
Fortunately, the Internet has made it easy to do this. Many of you may already be familiar with the idea of testing the demand of a product you aren’t selling yet by driving traffic to a sales page to gauge interest and telling any customers that want to buy your product that you’re ‘sold out’. Based on how many inquiries you get, you’ll have an idea if it’s a viable product or not.
This is a commonly-used strategy for hopeful entrepreneurs in the United States, Europe, Australia etc., but hasn’t quite caught on in LATAM. Good news is, it also works with consumers down here. However, the platforms you advertise on and the type of products that would be good to test for a local market are going to be different.
I’m going to walk you through an alternative and cost-efficient way to test demand in Latin America for your product.
Let’s get it going!
What Product Should You Sell?
I talked a bit about this In Part 1, but I didn’t say too much. I’ll go into more detail now.
The list of products you can sell online in Latin America is going to be much, much smaller than if you were targeting the American market. This has to do with a number or things, but mainly it comes down to these factors
1. A smaller demographic of online shoppers.
Basically you’ll have to target reasonable affluent people between ages 20-40 – no one else shops online.
Shipping is unreliable in every single Latin American country. Larger/heavier products are simply too expensive to ship and will have a greater likelihood of going “missing.” The product you sell must be on the small and lightweight end of things. Ideally, it will fit into a padded envelope or small box. Also, some countries have strict import restrictions, and some countries have high manufacturing costs. Ideally, the country you’re selling in will have low manufacturing costs and few import restrictions. Or, at least, one or the other. If you’re in a country with high manufacturing costs and many import restrictions (Argentina), things will be considerably more difficult for you. If you have your products in the country, things get a bit easier. There are indeed reliable domestic courier services in Latin America that will get the package to its destination quickly and undamaged. There is also Rappi/Glovo and UBER that can do express deliveries in your city for reasonable rates.
Due to shipping costs and inefficiencies, you’ll want to sell an item that either can’t be returned (for hygienic reasons for example, like bathing suits) or an item that isn’t likely to be returned.
You’ll need to pick a product that people want, but is not easy to find, or a product that people want that you can sell much cheaper. Trust is lower in these countries and people are much less willing to buy something from an unknown online vendor than they are in the United States, Europe etc.
**If you have experience with marketing, another option is to aim to create a strong brand. Although it may take longer and more money, if you manage to build a trustworthy entity with brand recognition, it will allow you to sell your product at a more expensive price.
People have less hobbies down here (ask any girl what she likes to do for fun and 95% of them will say “go to the movies.” While in the United States you can carve out a niche selling Sleeve Clips or Penis-Shaped Gummy Candies, in Latin America your options will be limited by a less rabid consumer culture.
The fact that there are much fewer products you can sell in a Latin America country can be a good or a bad thing depending on how you see it. I tend to see it as a good thing. When your options are limited by external factors, you’ll have a much better chance of quickly finding something viable rather than spending all your time musing over what product to sell and never actually getting to the next stage.
Initial research can often be as simple as making a list of things that correspond to the above criteria and start Googling “Donde Comprar (an item) en (your city). If there is something that people want and can’t find, or can only find for a hugely inflated price, you may have an idea that could work.
How To (Creatively) Test Demand
So, you’ve got a product that you think might work in your local market. But before you start investing your hard-earned cash into building a business around it, you want to be sure.
Here’s what you should do.
Go to MercadoLibre (basically LATAM’s version of eBay) and see if people are selling the same product you’re selling. If you find your product it’s a good sign – it indicates there may be demand.
Create your own MercadoLibre listing for the product you want to sell (make sure it’s high-quality and better than anyone else selling the same product as you). This is simply to see if there is interest in what you are selling. If you get interested buyers, tell them that you have sold out. This will tell you that there is demand, indicating you can move forward with your idea.
STEP 3 (OPTIONAL)
If you can get your hands on the product you plan to sell, buy a few units. It doesn’t have to be your exact product.
Let’s use shaving brushes as an example.
Say you noticed that shaving brushes are expensive in Colombia. You think you can get and/or manufacture much cooler-looking shaving brushes at a lower cost. At this point, just pick up any old shaving brushes from a store. Put up new MercadoLibre ads at the price you think you would be able to sell the brushes for, not the actual price that you paid for your brushes (yes, you’ll take a slight loss when you sell them). When someone wants to buy a brush, arrange to meet them in a public place to sell it to them.
The point of this is to learn as much as you can about your demographic without spending much money (only the difference in the cost/sale of the brushes). Talk to the guy about how hard they are to find, where people usually buy them, if barbers have them etc. Take note of the ages, appearances and interests of the people who want to buy your stuff. This will give you a good idea of who to target your ads at later on.
I say this is optional for two reasons:
1. Depending on the product you want to sell, this might not be worth it. If it’s hard to find or if it’s very expensive in the country and will have to take a huge loss selling it at a discount, it’s not worth going to all the trouble simply to find out a bit more about your target demographic.
2. You might be able to figure out your target demographic without doing this based on your product’s popularity in the United States. For instance, if you’re selling Anime paraphernalia, it’s probably going to be the same breed of people buying that stuff in any country.
Check if there are any other online stores selling your product. Since E-Commerce is in its infancy down here, there is a pretty good chance there won’t be, or if there are, they will be of dismal quality.
Set up a landing page to your product on the Internet (through WordPress, Shopify, whatever you want) that allows bank transfer payments (PayU LATAM is one option for this), as well as a Facebook Page. Drive traffic through Facebook Ads. See if people buy your product (or at least add it to their shopping carts if they are confused about how to buy).
The point of this is to see if people are willing to purchase something online off a site they aren’t familiar with. If you notice some sales or a lot of abandoned carts, it’s a good sign to start moving forward.
If the response was good, start building your online store (assuming you’ve got the sourcing of your product all figured out). Make it professional looking with a nice logo. Complete with idiot-proof descriptions about how to buy online and about how secure their information will be with you. Have a live chat feature because people will have a lot of questions. If you answer them promptly and confidently, your conversion rate will be much higher.
All of these steps shouldn’t cost you much more than a couple hundred dollars.
A very cost-effective way to see if your idea will be profitable.
You might be thinking “But Vance, can’t I just skip all the MercadoLibre type nonsense and just test demand with Facebook Ads?
You could, but that would mean that you’d have to pay to set up your landing page, logo, advertising etc. before having any idea if anyone wants your product. The point of the MercadoLibre business is to test demand in a simple way that will cost you nothing.
But if you’re confident you have a good idea and have the money to spend right out of the gate and don’t want to bother with meeting people in Starbucks to extract info and sell them your product, I see no reason you can’t skip directly to the advertising part.
And that’s about it! Hopefully this helps those of you on a tight budget who are looking to get into the E-Commerce game in Latin America to make some extra money.
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Part 4 – Dropshipping Or Private Label: Which E-Commerce Model Is Best For Latin America?
For those unfamiliar with these things as they relate to e-commerce, let me break it down in layman’s terms for you.
Dropshipping – Dropshipping is when the retailer (you) doesn’t keep stock but rather forwards customer orders and shipping information to a manufacturer or wholesaler who ships the customer’s order directly to them.
The easiest execution of a dropshipping store is through Shopify, Obrelo and AliExpress.
It works like this.
You set up a Shopify and download the Oberlo App. Through the app, you can browse all of the products on AliExpress and add them to your shop in only a few clicks. Most products will have photos that you are free to use as your own product photos in your shop. If a customer places an order for one of these items, you simply forward the product and shipping information to AliExpress via Oberlo, order the product and pocket the price difference between the cost in your store, and the cost in AliExpress. That easy.
Private Label – Private label is when you have someone manufacture your product, and then you sell that product under your own brand. In other words, you create your own brand and (normally) hold your own stock.
It can work like this.
You find a manufacturer in China that can make cool looking dress shoes on the cheap. You order a bunch of units from them at a discount, call them Don’s shoes (maybe your name is Don) and sell them under that brand name. Maybe you get some fancy tags and boxes that say “Don’s shoes,” talk about your origin story on your website, brand yourself as a small local business… you get the drift. You’re creating a brand image.
I’ve experimented with both models in Latin America, and the good news is that both can work. The bad news is that both are far from perfect.
Let’s take a look, shall we?
Dropshipping is an amazing concept. The sky is the limit on what you can earn and how many customers you can reach. It’s completely location-independent and you can run your entire business from a computer. I mean, you don’t even need a good computer! A $400 ACER would probably do the job.
It can also be a huge pain. If you’re anything like me, you’d want to know every aspect of a business you’re running. With dropshipping, you give most of that up. Best of all, you get to take all of the blame for things that your supplier has screwed up or cut corners on.
Oh well, nothing’s perfect.
Let’s take a quick look at the pros and cons of dropshipping in Latin America
PROS OF DROPSHIPPING
1. Location Independent. Since you’re not holding any stock, you can run a successful dropshipping company entirely from your computer. This means you can travel or live wherever you want.
2. Low Starting Cost. Since you don’t have to invest in stock, manufacturing costs, storage space, packaging etc., you can start a dropshipping business for practically nothing. For just the cost of a domain and hosting and you can be up and running.
3. Low general costs. Again, not having to order or manufacture things wholesale, store your stuff and hire a handful of employees will cut costs magnificently.
4. Scalability. The beauty of a dropshipping store is that the bulk of your workload is handled by others. The difference between handling 10 orders a month and 100 orders a month won’t cost you much more effort (although eventually you’ll want to outsource customer service stuff to someone else). Also, with a dropshipping store you can test products and add new products quickly. Something isn’t selling? Simply replace it with a new product.
5. You can sell internationally. If you’re dropshipping from China, you can take advantage of extremely cheap worldwide shipping rates. This means that with a dropshipping store, you can easily sell to whatever country you want.
6. It’s easy. You can set up a dropshipping store in a day. And if you get an order, everything is handled for you by your supplier. The only thing you need to focus on is making sales and marketing your business.
CONS OF DROPSHIPPING
1) Smaller profit margin. When you’re ordering individual products from suppliers, it’s going to cost you more than if you were to buy wholesale. Also, without being able to brand your products, you’re not going to be able to get away with charging as much for them.
2) A serious lack of control. As a dropshipper, you have no control. I hate this about dropshipping. Late shipments, dysfunctional/inaccurate products, ugly packaging. It all can (and will) happen, and there isn’t much you can do about it. This is why dropshipping stores invariably have bad reviews on the Internet. You’ll have to deal with a lot more angry and unsatisfied customers if you’re dropshipping.
3) Shipping. Let’s be honest. If you’re thinking about starting a dropshipping store in Latin America, you’re probably going to be sourcing products from China. Since Latin America is far away from China and isn’t the most prioritize market for them, shipping is going to take a long, long time. They will take longer to process your order and it will spend more time in transit. There’s no e-packet to LATAM, so forget about a two-week arrival. In fact, several items I’ve ordered have taken over 2 months to arrive to LATAM.
And that’s if they arrive at all.
Due to inadequate national postal services in every single Latin American country (no exceptions), many packages will get lost or stolen somewhere on route. Others will arrive to the local post office, but there will be arbitrary duties fees to be paid (sometimes, customs officials open your package, assign an arbitrary duty fee to the contents and demand the person picking it up pays the “tax” before they can take it home. Argentina is bad for this).
Although dropshippers from AliExpress are generally good about getting you a refund or replacement product if your stuff doesn’t arrive, good luck explaining to your customer why they’ve been waiting months on end for a watch or a pair of leggings, or why they are responsible for paying exorbitant duty charges.
4) More competition. Everyone and their mothers are getting in on the dropshipping game now. It’s somewhat of a saturated market. Makes sense since there are basically no barriers to entry. Although not many Latin Americans know about dropshipping, this won’t necesarrily be an advantage for you – many dropshipping stores (ZAFUL and ROMWE are two examples) already have pretty solid client bases in LATAM.
Although having your site and customer service in Spanish will be a slight advantage, you’ll find it results more in having to deal with stupid questions than in increased sales.
5) Customer retention. When your product takes months to arrive, probably doesn’t look exactly like the photos and in a black garbage bag labeled “CHINA POST” that person is probably not going to buy from you again. At least, that’s been my experience. So you’re constantly going to have to focus on acquiring new customers and, if you have a large social media, reputation management. This isn’t a huge deal – since you’re supplier takes care of everything else it will free up time to focus on things like this – but just realize that customer loyalty isn’t really going to be a thing for your dropshipping store.
***Note: I realize that many of the cons listed above can be solved by finding a reliable fulfillment center (i.e. probably not one in China). Problem is, you won’t have much luck finding a dropshipping partner in Latin America that’s going to take on anything that isn’t massive volume. This is written with the assumption that you’ll be dropshipping with AliExpress or something similar.
I’ve always had a bit of a hard-on for the idea of having my own brand; selling my own products. One thing I’ve always hated about things like affiliate marketing is that you have no control over your earnings. If all of a sudden a program shuts down or they decide to skim $100-$200 off your sales each month (happens to me EVERY month), there’s nothing you can do about it. Like a day job, your earnings are dependent on someone else and you have limited ability to sway things in your favor.
Dropshipping is similar in a lot of ways in terms of the lack of control – if your supplier runs out of stock, there’s not much you can do about it. Don’t like the packaging or quality control? Again, not much you can do.
Private labeling offers you the ability to control nearly every aspect of your e-commerce business: branding, shipping, the people who work for you etc. It allows you to create something that’s truly yours.
But it sure as hell isn’t easy to get going.
Unlike dropshipping, if your plan is to start a brand you’re going to have to work a lot harder, both physically and mentally. You’ll lose a lot of money in the process, testing products, figuring out how much stock to hold and where to store it, branding and hiring people.
That said, if you do things right you’ll have a sustainable money maker, as well as something you can be proud of.
Let’s dive into the pros and cons.
PROS OF PRIVATE LABEL
1) More control. I’ve been over this so I won’t belabor it. The main advantage over a private label company is that you can control as much of it as you want. Want to ship your product in sexy boxes? Do it up. Want to include a personalized note to each customer? To hell with it it, why not. Don’t like the person in charge of shipping? Fire that individual. You’re the king.
2) Better profit margins. Since you’ll be ordering and manufacturing things on a larger scale than dropshipping, you’ll be able to pay less for your products. And because you have a unique brand, you’ll be able to charge more to your customer. I currently have one product that I get made for $2.00 a unit, and it sells for $40.00 in the local currency. And that price is considered reasonable. The biggest markup I can get away with in my dropshipping store is 200%.
Now, will these better margins make up for the additional costs incurred by starting a private label store rather than a dropshipping store? Not immediately (it will take awhile to move your stock, some of it you’ll have to move at a discount), but if you’re in it for the semi-long term, it will pay off.
3) Receiving Payments. This is a major, major issue for e-commerce in Latin America. Most people are still uncomfortable using their credit cards online, and much prefer to pay by a direct bank transfer instead. They also like to pay in their local currency. If you have a private label store targeting one country, you will be able to accept direct bank transfers (assuming you have a bank account in that country). This is massively important, as you’ll find that most customers opt to pay this way. One of the main benefits of a dropshipping store is that you can sell to any country in Latin America…until you find out that no one wants to pay you with anything other than a bank transfer. Even worse, you’ll have to pick one currency to sell in (probably USD) and this will confuse them even more.
4) Quality. The quality of everything is compromised when you run a dropshipping store. With a private label, you’ll be able to screen each product for flaws, correct size, color etc. before it ships out. This makes it much more likely that customer will tell their friends about you and/or buy from you again.
5) Shipping. You’ll be shipping domestically, so packages will arrive much, much faster than if you were dropshipping. Customers really care about this (you’ll find one of the most common questions you get is ‘how long does shipping take). People will buy from your store over a dropshipping one – even if it costs more – if it means they’ll get the package in a few days as opposed to months. Many Latin American countries have quick and reliable *domestic* courier services. These will be private companies. Use them instead of the national postal service if you are sending packages within the country. But, keep in mind, you’ll often need to collect the customer’s identity number and phone number, as well as their name and address, to ship with a private courier. Also, you can use apps like Cabify/Glovo or UBER for same-day delivery if the recipient lives in your city.
6) Less competition. With a private label you have your own unique brand. One you can develop in whatever way you like. Even if you’re selling the same product as someone else, you can differentiate yourself in any number of ways. With dropshipping, you can only go so far with this. No matter what your ‘brand image’ is on social media, your packages are still going to arrive in crappy packages from China, and made with the same crappy material as anyone else. And you’ll be stuck with their product photos. Plus, with all the new players in dropshipping, it’s pretty much a race to the bottom with razor thin margins. With a private label you don’t have to worry as much about these things. And, with a private label, you’ll also have the opportunity to have your products in stores around your chosen city.
CONS OF PRIVATE LABEL
1) Not location independent. If you want to start a private label e-commerce business, you’ll have to pick a base country. There’s really no way around this. Since you’ll be responsible for holding stock and shipping, you’ll need to be present. Eventually, you can hire people to run everything for you but even if you do everything right, don’t expect to be able to distance yourself from the business for at least a year or two.
2) Higher cost. You’ll need some initial capital to get up and running. Whereas a dropshipping store can be profitable in your first month, a private label will not be. You’ll have to invest in buying your products, branding material and potentially a storage space or office unless you plan on running the whole thing out of your apartment.
3) Harder to scale. Unlike with dropshipping, if you have a product that isn’t selling, you’re stuck with that product just chilling in storage. And the money you invested into buying it will be gone. Also, if you find yourself going from 10 orders to 100 orders, it means considerably more work for you, or it means you’ll have to hire someone, which will cut into your profits.
4) Harder to sell internationally. You’re pretty much going to have to focus your sales on one country. This is because you’ll have to price your store in one currency, and you’ll only be able to accept bank transfers from the country/currency that your bank account is in (if not your customers will be charged a massive fee). Also, because of shipping costs. The reason the Chinese are able to ship stuff so cheap worldwide is because their government subsidizes shipping costs. If you try to ship things between two Latin American countries, it will cost you more. Trust also comes into play here. Chileans won’t want to buy from a Peruvian company for example because they’ll deem it less trustworthy (they look down on Peruvians to a degree). Same goes with Colombians buying something from Ecuador, Peruvians buying something from Bolivia etc. etc.
5) It’s harder to execute. Dropshipping stores can be thrown up in a day. You don’t have to handle any orders. You never even have to touch the product. With a private label brand, you’ll have to handle everything. You alone are responsible for keeping things in stock, quality control, packaging, shipping etc. And you’ll need to have all of these things in order before you can start making sales. It’s much more work.
The Bottom Line
So, which kind of online store is better for Latin America, dropshipping or private label?
Although it’s harder to get up and running and will cost more money, a private label business is much more sustainable than a dropshipping store. If you’re in it for the longrun, you’re going to want to invest in your own brand.
The lack of e-packet service and the vast distance between Latin America and China makes shipping times borderline unacceptable to your clients. That, and the fact that the quality of many products is subpar, means that you won’t be getting much return business. Even if the product is good, you can’t control the shipping times. Things make arrive in 3 weeks or 3 months. You simply won’t know. Your reputation will eventually be shot, and people will stop buying from you altogether.
I’d say my dropshipping store has about a year shelf life before I’ll have to kill it.
Dropshipping is an excellent option if the bulk of your customers are in the United States, but it’s ultimately an unsustainable business model down here due to poor logistics.
The Vance Solution
That being said, I absolutely recommend that any one who wants to try e-commerce down here starts with a dropshipping store.
But it may not be for the reason you think.
It’s because it’s great market research.
Think about it. You can test all of the products you want for free to see what’s in demand. Even better, if you haven’t decided where is the best country to start your business in, you can see which countries or even cities where demand is highest. After running some ad campaigns and seeing which products are purchased/garner the most interest and where, you’ll know exactly what products to sell and which market to sell them in for your private label brand.
After a few months of research, order the most popular products in bulk from China (or just order a couple if it’s something that can be easily replicated in your country of choice, like clothing or simply toys/trinkets) and voila! You can start building your brand with the confidence that people are interested in the products you’re offering.
My dropshipping store, while earning virtually no money, has been far more valuable in the way it has given me insight into what to sell in my private label store. It has vastly mitigated risk – I can be more or less sure that what I decide to buy in bigger quantities will sell by testing it first in the dropshipping store.
So far, it’s working out.
Private label is a better long term online business model than dropshipping, but it will cost more money to start and requires more work.
Start a dropshipping store not in the hopes of sustainable long term profit, but rather to test products that you can sell for a higher markup in your private label store.
And that’s about it!
I’m a fairly risk-averse person, and trying to sell products to people whose culture and buying habits I don’t really understand made things even more intimidating. Testing products in a dropshipping store to eventually sell in a private label store was the best strategy I found to mitigate risk and be fairly sure that I could actually sell the stuff I was buying/making.
Not being overly passionate about the stuff I’m selling has helped immensely – I simply respond to what other people want (I’m often baffled at the nonsense items that are popular, but I ignore that little voice in my head).
I hope this helped any of you that are interested in trying a more non-conventional way to make a living in an Latin American country.
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Part 5 – E-Commerce In Latin America: How To Make Sales
Welcome to Part 5 of my e-commerce in Latin America series. Parts 1-4 covered how to get your store up and running, how to market your store and whether you should use dropshipping or private label goods.
But none of that means anything unless people are buying your stuff.
The good news is that, if you’ve followed parts 1-4 of the series, you should know whether you have a viable product for your market.
The bad news is that, when it comes to online shopping, it’s much more difficult to bridge the gap between interest and the sale in this part of the world.
Allow me to explain.
The Challenge Of Selling Online In Latin America
People don’t use goddamn credit cards.
That’s pretty much the number 1 challenge.
Many people don’t even have credit cards. Hey, many people don’t even have bank accounts!
Fortunately, this isn’t as big a deal as it sounds. If you’ve applied the information in my previous posts, your product will be aimed toward the upper/middle class anyway. Therefore, one way or another, your customer base will likely have access to a credit card (theirs or their parents’).
Your biggest problem will be getting these people to whip out those cards and make a purchase on your website. Latin American countries have notoriously low-trust societies, and credit card fraud is a growing problem, Particularly In Mexico And Brazil. This means that, even if someone wants what you’re selling, they are much less likely to pull the trigger than a customer in the United States, Canada, Europe or Australia, where online shopping has become the norm.
How can you overcome this barrier?
Well, in short, it comes down to just one thing: you must be able to gain your customer’s trust.
7 Simple Ways To Build Customer Trust…Latin American Style
After starting an e-commerce store down here I was giddy with excitement. I gained 4000 Facebook followers in about two weeks, interest and engagement were extremely high for my brand and, according to Shopify, my store was in the top 5% of traffic out of all stores that started at the same time as me.
I’ve stumbled onto a goldmine, I thought.
I sat back and waited for the sales to roll in.
Problem is, they never did.
Two months in, my conversion rate (percentage of users who visited my page and bought something) was something like 0.4%. If you’re not familiar with conversion rates, that’s really bad. Seriously. A pigeon could peck a better conversion rate than that.
Even worse, I was spending an incredible amount of time responding to idiotic Facebook inquiries regarding information about prices, shipping, colors etc (idiotic because all of this information was listed clearly on my website), mistakingly thinking that it would result in sales.
In other words, not only was I not making any money, I was also losing about 4 hours a day of my time between answering email responses and trying to tweak the website to figure out where I was going wrong.
It took awhile, but I eventually determined that there were two main reasons that people weren’t buying anything:
1. They didn’t know how to buy something on the Internet.
2. They were too scared to buy something on the Internet…or at least from a site like mine.
Because I’m from Canada, where everyone and their mother shops online regularly, I didn’t account for these factors. But I soon found out it’s something you have to take seriously.
After making some adjustments, I was able to increase my conversion rate from 0.4% to 1% in a couple weeks.
Here’s how I did it.
STEP 1: CREATE A GUIDE FOR HOW TO BUY ONLINE
If you’re from a developed country, where buying online seems intuitive at this point, this will appear ridiculous. But if you’re selling online in Latin America, it’s important to teach people how to do this (by far, the most frequent question I get through email and my Facebook page is “how do I buy something?”). On your site, you’re going to want to create a guide, in Spanish, for people who don’t know how to buy online. Whenever you get this question (you will get this question), simply redirect them to a page you’ve created outlining the process.
The Chinese clothing company ROMWE has a good template for this. Check out their guide Here.
Basically, translate ROMWE’s guide into Spanish. Add some things if you need to, just to be as thorough as possible. Pretend you’re trying to explain the process to your grandmother. Making a guide like this saved me a ton of time responding to messages and clarified the process to people who have never made an online purchase.
2. PROVE YOUR WEBSITE IS SECURE
People in the west generally know that it is safe to make a purchase if they see this before the url of a website:
In Latin America, it’s not as straightforward; you’ll need to do more to show people your site is secure. This is partially due to, as I mentioned before, low trust societies, but it’s also because it’s much harder to dispute a credit card charge in these countries.
In Canada, for instance, if your credit card information gets lifted, your CC company will call you immediately to inquire about some uncharacteristic purchases. If you confirm that you didn’t make these purchases, the company will cancel your card and refund your money. Simple as that.
With banks south of the border, you’ll have to do a huge song and dance to dispute a charge, which will likely require multiple phone calls and bank visits. It’s a much bigger pain.
This means that many people would rather not take the risk buying from a website unless they are absolutely sure their information is going to be safe.
Fortunately, there are a couple things that you can add to your online store to give people peace of mind.
First, you should add some trust seals:
If people see this when they go to order a product, they will have a bit more faith.
In your “How to order” page, you can add a section about security entitled “Your information is safe with us” or something in that vein. In it, you’ll want to describe what the “Secure” SSL certificate in your URL means (complete with a screenshot), along with what your trust seals denote.
Also, you should make your return and refund policy clear to your customers. Let them know that you offer refunds and/or exchanges if they are not satisfied with their purchase. This will reduce the perceived risk of purchasing from your store.
I suggest putting all of this information under the “How To Order” section (you can have a separate page for “Shipping and Returns” if you like, but repeat the information again in the “How To Order” section). This is because “How do I order” will be the most frequent question you receive, so if you simply send them a link to this page they’ll learn how to order, and also read about how safe your website is to order from, thereby alleviating what will likely be the two biggest impediments to buying your stuff.
Chances are only one in every ten people will read it, but it’s better than nothing!
3. HAVE YOUR PRICES IN THE LOCAL CURRENCY
As I’ve mentioned throughout this series, I suggest that you focus on one country when starting your online store. You should be present in that country, and have a bank account in that country in order to be able to receive payments in the local currency. But, if you’re hellbent on selling into other countries in Latin America, or if you’re testing different markets to determine the best country to set up shop, you’ll need to make sure that the prices on your website appear to your customers in their local currency.
I learned this the hard way when I was testing a dropshipping store. I figured that if I just had my prices in USD, everyone would more or less know what that meant in regards to how much things would cost in their local currency.
I was wrong.
Instead I was met with an onslaught of comments asking me how much my products cost in Peruvian Soles, Chilean Pesos, Colombian Pesos, Nicaraguan Cordobas etc., etc., if I accepted _____ currency, how to change the currency on the website…
People get uncomfortable with making a purchase if the product they want is not listed in their local currency.
You’re definitely going to want to invest in a currency converter for your site. This One From Shopify goes for $10/month and will automatically switch the currency of your site based on your customer’s location. It is well worth the money.
4. MAKE IT PERSONAL
Another good idea is to add a nice, sexy “About Us” section to your website. Talk about your journey/passion for your product.
Whatever, really. Just make it engaging.
Personal photos of attractive people doing interesting things will work well here. You don’t necessarily have to include photos of yourself (could put you at risk in some countries), but if you know some good looking people, take some high quality photos of them using your product or in your studio/workshop if you have one, etc.
The bar is pretty low for “About Us” pages in Latin America, so just do something mildly cool and you’ll be ahead of the pack.
Here are a couple random examples.
5. HAVE A PHYSICAL PRESENCE
One of the best ways to establish trust among consumers is by having a physical location where they can come see your products. Earlier in this series, I discussed the option of turning your apartment into a “showroom” of sorts, from which you can sell your goods. Or, alternatively, renting office space and doing the occasional sale out of there. Customers will feel more comfortable and see you as more legitimate if there is somewhere they can go in person to see your goods and do an exchange in person.
The obvious problem with this is that it is sketchy as all hell. By having a physical presence you open yourself up to theft and/or trouble with the local authorities. Unless you’re legally allowed to open a business in the country you’re residing in or you’re located in a remarkably safe city, I wouldn’t recommend doing this – it is not for the faint hearted.
Besides, the whole point of running an online store in Latin America is to avoid the many risks and costs associated with having a brick and mortar in one of the most dangerous regions of the world.
Luckily, there’s an alternative.
Another way to establish a physical presence would be to have your product available in stores around the city. Reach out to local independent shops and see if they would be interested in having your product in their store. Once you get a few places to sign on, let your customers know where they can go to check out your products, i.e “Our products are also available to view and purchase in the following retail locations” ____ ____ ____. These store will either pay you in full for your products and then mark them up themselves, or pay you each month for the sales of your products in their store (if something doesn’t sell in 2-3 months, they’ll generally send the product back to you).
This will give you a benefits of a ‘physical presence’, while sheltering you from the risks of having your own shop.
6. CREATE A SENSE OF URGENCY
OK, so this won’t exactly build trust, but it will help you make sales, so I’ve thrown it on the list.
This is a tried and true marketing tactic. Although it’s definitely overused and undeniably obnoxious, there’s no doubt it works.
And I’d venture to say it works even better in LATAM than in more developed consumer markets, where it’s been done to death.
Having a 20% off sale with an end date will work well to motivate people to make a purchase from your site soon rather than later. You don’t have to be overly pushy, but things like this will drive your conversion rate up.
7. PROJECT SUCCESS (EVEN IF YOU DON’T HAVE IT YET)
Otherwise known as “Fake it ’till you make it.”
Say you’re hungry and walking the streets of a new city. You see two restaurants. One has a good number of people in it, and the other is entirely empty.
Which one are you more likely to eat at?
Online shopping works the same way. People won’t buy from a store that no one else shops at. They’re less likely to trust it. They’ll feel like they’re making the wrong decision.
On the contrary, they will buy from a store if they see that it is doing business. Basically, they just don’t want to be the first to test out your products – they’d rather someone else take that risk.
The obvious problem is, if no one will buy your product until other people have bought your products, how will you ever start doing business?
Here’s a little trick I used to help people gain confidence in my store.
First, I had a stamp made and stamped 50 boxes with my logo. Think something like this (mine looked much less professional…but you get the idea).
Then, I got 50 business cards made with the brand’s logo. Think something like this.
Then, I took a bunch of cool pictures with various products in the boxes w/ the business card in different locations. Mostly different rooms in my apartment and different rooms in my friends’ apartments to give the appearance of different places. Over the next couple weeks, every few days I had a different friend post a picture of the box on their Instagram saying something generic like “Thanks (brand name) I love your (product name). Then I’d repost on Facebook and Instagram saying “Send in a picture of your package when it arrives and we’ll DM you a code for 25% off your next purchase!”
Once I ran out of people to do that for me on Instagram, I’d simply post the different pictures I’d taken on the brand’s Facebook page, saying the same thing. I’d promote these posts with a few bucks so they’d reach more people.
The business cards and stamped boxes in the pictures lent a professional and “cool” factor to the brand (somewhat of a novelty in this part of the world), and also let people know that people were buying things and that they were arriving safely.
Of course, I’d faked it all, but you gotta start somewhere. As far as the customers knew, it was legit.
This got the ball rolling and undoubtedly helped people feel more secure in buying from the site.
Interestingly, although sales went up, only one person participated in sending in their photo to receive 25% off. But that’s OK, that wasn’t the point of campaign.
***I suggest you spend the cash for a stamp and business cards for your brand, or similar branding material. This stuff is cheap to get made (especially in Latin America), and will really help set you apart from your competition down here.
And there you have it!
If you find yourself struggling to make sales on your online store in Latin America, try out these steps and see if they help you.
The cool thing about doing e-commerce in LATAM is that the challenges you’ll face will be quite distinct from what you’ll face in e-commerce in the United States, challenges that your skillset might be more suited to.
For instance, I’m not great with aesthetics. I’m average at best at making things look nice. Same goes for marketing. In the United States, the bar for design and marketing is high. If I were to start a store in the US, I’d be crushed by the competition due to these things. This would probably prevent me from ever being noticed. I wouldn’t even get past the gate.
I’m not great at innovation, either. It’s a pretty safe bet that I’ll never create a revolutionary new product. For innovative folks, the US is the best place to be.
Instead, my talents lie more in perception. For instance, after a short time in a new city, after observing things and talking to people, I can usually draw pretty accurate inferences. I can get a good idea about popular fashion trends, openness of the locals, safety etc, and I can synthesize this information to others efficiently (I like to think My City Guides are an example of this).
In terms of an online store, this means I can identify products that are in demand and are difficult or expensive to buy. In other words, I’m no good at predicting trends (skills that would be handy for the US) but I am good at identifying them once they’ve hit (skills that are good for copycat markets like in Latin America).
It also helps that most businesses have crappy marketing and are outrageously unorganized down here, so simply being raised in a first world country will give you an automatic leg up in those arenas.
And, as for all the nonsense you have to go through with an online biz down here, like explaining to people how to buy online, how to set up a bank account and finding the best way to process payments, I’m a patient person and I enjoy searching for alternative solutions to problems, so I don’t have a issue with that.
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Part 6 – The Best Latin American Countries To Start A Small Business
Finally, I’ll be talking about what I deem the most suitable countries for anyone looking to start a business south of the border.
But before I get into all that, a few comments about how I determined the rankings:
1. The rankings are based on a B2C (Business to Consumer) model as opposed to a B2B (Business to Business) model.
This list addresses a B2B business model rather than a B2C. Think the guy who wants to open a store selling sunglasses as opposed to the guy wanting to sell security systems to corporations.
2. The rankings are based off a combination of research, personal experience in the countries and my own advertising campaigns/sales from a dropshipping business.
I know, it’s not the most scientific of studies. But there are plenty of those out there (I’ll save you the time: Chile usually wins as the best place for business). I wanted to share my opinion and results with you because they run almost completely contrary to the dominant opinions about the best countries to do business.
When I started my dropshipping store, I ran Facebook advertising campaigns in various countries. I spent the same amount of money on ads in each country to gauge consumer interest in an effort to figure out where to focus my attention on. I was soon able to get a clear idea as to what markets were viable. I’ll discuss the results with you in the article.
3. The rankings are based on the best countries to start a small business. Not large scale businesses or start-ups
I assume most of my readers that might be interested in this kind of stuff aren’t looking to start the next Wal-Mart or Amazon in Latin America. Normally, people who move to LATAM to start a business are looking to start something small that doesn’t require outside investment or much initial capital, perhaps with the ability to scale in the future.
Let’s get it going.
***Note: The dropshipping store I will be referring to throughout the piece is in the women’s fashion industry. For two weeks, I advertised a photo gallery with pictures and prices of my products, as well as a giveaway for one of my products. I did this in the following countries: Mexico, Costa Rica, Panama, Colombia, Ecuador, Peru, Chile, Argentina. My ads were designed for gaining Facebook followers and gauging interest rather than for making sales (although I did make a few sales).
Mexico has relatively high credit card penetration as far as Latin American countries go, which is good news if you’re looking to start an online business – a decent number of people will have access to credit cards, and they are more accustomed to buying things online than in other countries. Also, the country has both a growing middle class and a low cost of living. This means that one: you can start a business for relatively cheap, and two: many locals will have the disposable income to afford what you’re selling!
Its proximity to the United States is also a huge bonus. You can easily travel back and forth between the two countries if you find that your business needs something that is hard to get in Mexico. Also, the close relationship between the two countries often means that the newest trends in the United States will also be popular in Mexico. Many businesses have been wildly successful simply on account of being the first to bring a pre-existing American trend down south.
Finally, Mexico is consistently ranked as one of the easiest countries in Latin America to do business. Although things will be a bit tougher for you as a foreigner, there is much less bureaucratic nonsense than in most other LATAM countries.
It will be hard to find a demand here that hasn’t already been filled. With its proximity to the United States, as well as having Mexico City, one of the world’s biggest metropolises, there isn’t much people can’t find in Mexico. And if there is, the richer Mexicans that know how to buy online would probably just purchase what they can’t in Mexico on their next trip to Gringolandia. Also, many US and European companies already have a presence in the country and are able to sell their products at a much cheaper price than you could reasonably hope to.
Also, if you spot a niche trend in the United States that you think could work as a business down here, you won’t have much time to execute it. Due to its close relationship to the United States, the copycat market moves fast here; if you find a business idea that’s working in the States that you think has potential in Mexico, chances are a handful of Mexicans have already copied it. That isn’t to say you can’t do it better, just that you probably won’t have the advantage of being first.
My Dropshipping Facebook Ad Results
My results here were a bit lower than I was hoping. I had high expectations! Mexico is the country I’m most familiar with culturally, and I consulted a lot of people about what kind of fashion products were in demand, but hard and/or expensive to get. I was confident that there would be reasonably high demand.
In reality, interest was lukewarm.
My campaigns resulted in one sale from Mexico, and put Mexicans in 3rd place for number of Facebook page fans.
Recommended cities to start a business in Mexico
Chile always ranks in the top 5 best places to do business in LATAM. It often takes first place. And it makes sense. Along with Mexico, it is considered the easiest place to do business in Latin America. You can register a business online, it has strong and trustworthy banking institutions, low corruption, a stable economy, tons of free trade agreements and Probably The Best Start-Up Environment in the region.
Chileans are well off by Latin American standards, and that means they’ll have more money to spend on what you’re selling!
Also, the postal system is among the best and most trustworthy in South America. Your packages will usually arrive. This is a huge plus if you plan on doing an online business.
But, perhaps more importantly, and the main reason why Chile beats Mexico in my opinion, is the ease of obtaining a longterm visa. Through Chile’s retirement and periodic income visa for instance, all you need to do is prove that you are earning enough income to support yourself in Chile (so, probably like $750/month+) and you can get a visa that allows you to stay in the country. From there, it’s a fairly straightforward process to temporary and eventually permanent residency. I’m all for doing cheeky little off the books businesses in LATAM, but Chile is without a doubt one of the best options if you want to open a completely legitimate business.
Everything is expensive here. You’ll have to shell out a lot more money for rent (business and home) as well as other living expensive. The cost of labor is expensive, too. If you’re thinking of manufacturing a product in Chile expect to pay very high prices. And if you want to import your goods in big quantities, you’ll pay a whopping 19% VAT. That doesn’t leave very many options.
Another thing is competition. A lot of millennial trust fund babies have chosen Santiago as a start-up base due to its friendly business environment. They’re quickly jumping on gaps in the market that they’ve noticed. You’ll also face stronger local competition than in other South American countries. The people here have a stronger work-ethic and are more organized and efficient than in other SA nations.
Finally, Chileans strike me as cheap. All the Chileans I’ve known have been, well, niggardly. I got this impression during my (admittedly) short time in the country as well. Although they probably aren’t as bad as Argentines, you’ll have a harder time getting Chileans to part with their money or make impulse purchases.
My Dropshipping Facebook Ad Results
Dismal. Even worse than my low expectations. My campaigns resulted in zero sales and very little interest. I attribute part of this to a more reserved culture (one of my campaigns required shares and tagging friends to be eligible for the giveaway…seems Chileans aren’t too enthusiastic about this kind of thing). It also may be that the demand for, in my case, women’s apparel, is being sufficiently met in Chile. I know H&M Is Insanely Popular There. Chile is in 5th place for the number of Facebook fans on my page.
But, alas, I’m able to look past my own failings to recognize that due to its wealth, the ease of doing business and openness to foreigners, Chile is still a solid choice for starting a business in Latin American.
Recommended cities to start a business in Chile
Colombia is going in the right direction. Economic Growth And Investment Are Expected To Rise Into Next Year. The middle class is expanding. There is no threat of a disastrous socialist political turn Venezuela-style. Although it has its share of problems, it’s an economy on the rise, and now is the perfect time to get in.
This is the birthplace of PayU LATAM, the PayPal of Latin America, so people are more accustomed to buying online than you might imagine. And they are heavy users of social media. Facebook and Instagram ads work very well here.
Plus, for people interested in Latin America, Colombia is probably the most desirable place to live.
What makes Colombia a great place to start a small business is the fact that many consumer demands have low barriers to entry. For example, any business related to vanity is big in Colombia (mostly for women, but more and more for men these days too). Clothing, accessories, cosmetics…Colombians like to spend money on these things. And these things are fairly easy to produce cheaply (fabric and labor can be had cheap in Colombia). Now, while no one would argue that Colombia lacks stores related to clothing or beauty, I’d argue that with appropriate branding you could carve out a nice niche for yourself in either apparel, accessories or cosmetics.
Criminality. There are some places in Latin America where I’d feel comfortable attaching my name to a business or even running a showroom out of my home. Colombia is not one of these countries. There is no city, or neighbourhood of any city, where I’d feel at ease with people knowing I was running a business. Anything can go down in Colombia, and the lower your profile, the better.
Another thing is Colombia’s postal service. Their national postal service (472) is not very reliable. If you’re sending stuff within the country Servientrega is OK. Unfortunately, if you want to import products from another country, the shipping will likely be handled by the national postal service. Beware.
Finally, Colombia is a cheap country. Clothing is cheap, food is cheap and personal products are cheap. Depending on what you’re selling, it may be hard to compete on price.
My Dropshipping Facebook Ad Results
My results for Colombia were intriguing. There was a great deal of enthusiasm for the products – Colombians would dish out likes and shares like candy, and participated heavily in the giveaway. They also, by far, sent the most messages to the Facebook page inquiring about products. But, although interest was high, it didn’t result in any sales (I had 2 attempted purchases from Colombia but the cards were declined…lol).
Colombians seemed to want to visit a physical store instead. A lot of the questions I received were asking if there was a location in Medellin, Cali or Bogota. That, or they were willing to buy online but didn’t have access to a credit card (having a Colombian PayU account to receive payments would have solved this and perhaps resulted in more sales).
It’s difficult to say whether or not I’d be able to convert that interest into sales if I had the products inside the country – I suspect the success of my ads for gaining interest and followers is more due to rabid social media use rather than people actually wanting to buy my stuff.
Also, my niche is in women’s fashion and Colombian women are infamous for never having any money at all.
But at the very least, there seems to be potential in the land of sex, drugs and salsa.
Recommended cities to start a business in Colombia:
I never thought I’d be recommending socialist Ecuador as a good place to start a business as a foreigner. But hear me out! There are a few things that make this small South American country a surprisingly good option.
First of all, they use American dollars. Not a currency pegged to the US dollar like the Panamanian Balboa, but the straight-up greenback. This makes things a lot easier in terms of figuring out pricing, and also has other advantages such as the ability to spend your Ecuadorian cash in the US, or vice versa. Second, many consumer goods are damn expensive in Ecuador. Clothing, cosmetics, toys, shoes…basically anything fun costs a lot of money to buy here. I don’t really understand this because their import VAT tax isn’t that bad (12.5%)…Anyway, point is, if you can find an effective way to get products into the country (this is the hardest part), you can very easily compete on price.
Third, the selection in Ecuador for cool, stylish products is awful. At least from what I could skim during my times there. Not many American or European companies have expanded here, and I’ve failed to come across many impressive Ecuadorian brands. That, and the marketing is awful. Watch Ecuadorian TV for 10 minutes and you’ll see what I mean. Plenty of opportunity.
Fourth, like Chile, Ecuador is a county where it is fairly easy to get temporary or permanent residency. Basically, after a little less than two years of temporary residency (pretty easy to get), you’ll be eligible to apply for permanent residency.
Fifth, Ecuador’s economic outlook is looking better each day. Moreno, the newly-elected successor to Correa, isn’t nearly as incompetent or socialist as everyone thought, and he looks to be putting the country on the right track again.
Ecuador isn’t the easiest place to start a legitimate business. It is more bureaucratic than Chile or Mexico.
Also, online shopping had not taken hold as strongly as in other parts of LATAM. Credit card use is not the norm. In fact, there aren’t any good options for accepting online payments, as PayU LATAM doesn’t operate here. If you want to run a successful business in Ecuador, you will have to accept in-person payments and bank transfers.
Crime is also a bit of a problem. Guayaquil and Quito aren’t known for their safety. If I were to set up shop here, I’d want to keep a low profile to avoid becoming a target.
My Dropshipping Facebook Ad Results
A runaway success…much to my surprise. People in Ecuador loved my stuff. Even though the country has a third of the population of Colombia (16 million vs 48 million) my campaigns resulted in nearly 100 more Facebook likes from Ecuadorians than Colombians. Truly remarkable. The other thing is that they actually bought products! I had 3 sales from Ecuador and more attempts from people wanting to pay cash (unfortunately I had no way of accepting it).
I think part of the reason for this is because I had items priced in US dollars on the Facebook ads and, since everything was written in Spanish, people probably assumed it was an Ecuadorian company.
It makes sense – I was offering cheap, stylish clothes to a country where clothes are neither cheap nor particularly stylish. I’m confident that if I someone could deal with the complexities of setting up shop in Ecuador, a terrible postal system and strict import laws they could do a pretty good trade with the right product.
Although, from what I’ve seen, dealing with all of this would be a monumental task.
Recommended cities to start a business in Ecuador:
Peru is THE place to be for business right now, in my opinion. It is one of the fastest growing economies in Latin America, and that growth shows no signs of slowing down.
It’s the perfect combination: a population with rising disposable income, but nobody capitalizing on the increasing frivolous demands of the people. In Lima for example, a city of over 8 million people, it’s not as easy as it should be to find a decent cup of coffee. It’s also harder and/or expensive to find things that are readily available in other major Latin American cities. Like yoga gear. Simple things like cosmetics and face cream cost 2-3x as much in Lima as they would in Bogota or Mexico City. Basically, prices are all messed up here for a lot of stuff. I don’t really understand it. Fortunately, it means that there is plenty of opportunity to capitalize.
There is also Gamarra. And Centro.
Gamarra is an enormous marketplace where you can find basically whatever you want for very, very reasonable prices. They primarily deal in garments and fabric. If you want to produce anything having to do with clothing on the cheap, this is where you need to go. You can find both material and seamstresses here for very cheap. I know of nothing else like it in South America. You’ll need to bring a local along to negotiate the best prices, ideally a local who is familiar with Gamarra.
In Centro you can get all of your marketing and branding material taken care of for reasonable prices at the Central Comercial de Lima and Wilson. Very convenient.
Peru has a extremely centralize economy – anything you need to do or obtain related to your business can be done and obtained in Lima.
Also, Peru’s postal service is better than most LATAM postal services. That isn’t to say it’s any good, just better than most. Serpost is the one that will handle your incoming packages, and they are mostly reliable. Olva Courier will handle the packages you ship, and will arrive anywhere in the country within 3 business days. Both are decent options, which is more than I can say for most countries’ postal services! Also, if you want to ship into Ecuador, Chile or Colombia, Serpost charges about $13 for tracked and insured packages under 250 grams. They’ll usually arrive within 15 days or so. Peru’s location (shares a border with 5 countries) and passably-reliable postal service makes it a good base from which to conduct cross-border sales.
Credit card use and online shopping are also rising bigly in Peru. The banking infrastructure is decent, and makes it easy to send and receive money. PayU LATAM also operates here (unlike in Ecuador), making it very easy to accept all kinds of payment options for your business.
Although online purchases are catching on, they’re still not as prevalent as in countries like Chile, Brazil or Argentina. People are still more comfortable going the cash or bank transfer route. Also, if you’re wanting to start a physical business, note that rent in popular neighbourhoods like Barranco and Miraflores is high. Lima is kind of stuck in a weird place where online shopping isn’t quite popular enough to sustain a purely online business, and rent prices in popular neighbourhoods are high enough to make you think twice about starting a physical one. However, I think that if you get in the online business game now and market it well, you will be in a very good position in a few short years.
My Dropshipping Facebook Ad Results
First place. My ads got the most likes, sales and Facebook fans than in any other country. The style of clothes I had on the site are expensive in Peru, and I was able to sell the same type of things for much cheaper (thanks to dropshipping from China). I’m not entirely sure why I got so many more fans from Peru than Colombia, a country with a similar population, but I’m thinking it’s because clothes are significantly cheaper in Colombia than in Peru. Colombia also has more chain stores, i.e more selection. But I’m just speculating. I was able to raise this number substantially through cross-marketing with an established local company.
Recommended cities to start a business in Peru:
And there you have it! The best cities in Latin America to start a small business.
You may have noticed that I left some obvious choices off the list (namely Brazil, Argentina and Panama). Here’s why.
Brazil: Economy is down, crime is up and the bureaucracy around starting a business is likely the worst in all of LATAM
Argentina: Economy is perpetually shaky & import restrictions are ridiculous (you basically can’t get anything into the country). Manufacturing costs are also high.
Panama: With a population of only 4 million people, the domestic market is very small. But you may be able to find a niche.
Like I said, this isn’t the most scientific of studies, and as far as my dropshipping ad results go, they only apply to women’s fashion. Nevertheless, based on my own research, observations and personal experiences, these are the places I’d hit up for a bit of business.
And, as I mentioned earlier on, I don’t recommend dropshipping as a business model for Latin America. Shipping is simply too unreliable. I’d say 10-15% of items never arrive from China, and if they do arrive, most will take more than 6 weeks to do so (sometimes, up to 3 months!). Once I’ve extracted some more data from the dropshipping site (i.e seeing what products are popular and in what countries), I’ll either shut it down or turn it into a private label store.
And there it is, friends! Some of the more important things I’ve learned about e-commerce in Latin America. As of now, the monthly profits for my products aren’t jaw-dropping (mid three-figures in online stores; high three figures in physical stores). And that’s with a lot of help through cross-marketing from an already well established and successful local business (same thing could be accomplished through paid marketing and shout-outs, mind you). But if I decide to keep going down this route, I imagine I could make some steady increases.
And if not, at least I’ve learned a lot!
To sum things up, your major challenges in setting up a successful e-commerce business in Latin America are going to be the following:
1. Setting up the necessary components for your online store in your country of choice (e.g. a payment processor that works, and a local bank account)
2. Insufficient payment processing infrastructure
3. Low credit card penetration
4. Low trust
5. Smaller customer base (due to lower levels of disposal income and fewer people having bank accounts)
6. Inefficient shipping (particularly if you want to sell across borders or import your goods)
7. Cultural differences
Some advantages you’ll have include:
1. Less competition than USA or Europe
2. E-commerce is growing rapidly
3. Low start-up/production costs
4. More untapped markets/opportunities for arbitrage
Whether or not you decide to walk this trail will depend on your skills, level of patience (eg. having to explain to people how to buy online. Every. Day) and, in some ways, your willingness to disregard local laws…at least, for awhile. Like, until you decide your business is worth registering.
More than anything, the point of the mammoth article is to show you that it is possible to carve out a living down here in a way that doesn’t involve teaching English. But it will take a bit of creativity and more than a few headaches.
If sales and e-commerce interest you, and you’re dead set on living in a particular Latin American country, I suggest trying to get in early on this e-commerce boom.
Or, if you’re like me, and are still torn between what country to live in, building a successful store in one country will make it easier to expand to or replicate the process in another country (at least I hope this is the case – I’m not sold on the idea of tying my horse to Lima, Peru just yet).
Another plus side is that, after running your business on the down-low, you can eventually register it as an LLC (or the equivalent thereof), hire yourself as an employee and obtain a work visa to stay in the country you want to live in. This is possible to do as a foreigner in many Latin American countries.
Just keep in mind that if you do this, you’ll be taxed twice (as a corporation, and as an employee), so you can kiss most of your profits goodbye. But, hey, at least you’ll be able to get residency and call yourself a business owner!
Alright folks, I reckon I’ll leave things here. I hope this has been of interest to some of you.
I won’t be talking much about this little venture on the blog – I simply don’t think it’s relevant to many of my readers.
That being said, if any of you want to hear more about this sort of thing, I’m thinking of putting together a cheeky little ebook on e-commerce in Latin America (about twice the size of this article).
If this is something you might be interested in, please leave a comment below!
Until next time,
Have any thoughts or questions about e-commerce Latin American style? Please post them all in the comment section!
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