COVID-19: A Boost for E-CommerceBy Adalberto Flores Ochoa | Wed, 01/13/2021 - 13:08
The COVID-19 crisis is accelerating the expansion of e-commerce among new firms, customers and types of products, likely involving a long-term shift of e-commerce transactions from luxury goods and services to everyday necessities. It also highlights how policymakers can leverage the potential of the digital transformation in retail and related areas to support business adaptation and to enhance social distancing while ensuring that no one is left behind.
In Latin America, the intensive use of cash has been endemic for reasons both cultural and practical. But now, the use of cash has decreased in all markets, largely due to increased electronic payments and the requirement to limit social contact during the COVID-19 crisis. Sixty-two percent of consumers report using less cash due to COVID-19 and 40% have reduced their cash spending by at least 20%. Brands are having to adapt and be flexible to meet changing needs. The effect of the COVID-19 crisis on e-commerce is not uniform across product categories or sellers. In Mexico, for example, a surge in demand was observed for items related to technology, fashion and accessories and furniture, while demand dropped for items related to travel and formal clothing, although these categories have slowly started to recover.
The health crisis has become a catalyst for e-commerce in the world and, specifically in Mexico, we have seen an increase in the adoption of digital financial solutions. While survey data show that women are more likely to be concerned about the effects of COVID-19, the data also show that men are more likely to have it impact their shopping behavior.
A study conducted by Kueski Pay identified that users prefer to make purchases online through financing instead of using their credit or debit card, with 66 percent of people prefering to make purchases online if they had the opportunity to finance them and 87 percent saying they would increase their average ticket if they could buy now and pay later. We have also seen that the perception of security among online shoppers has been improving since the start of the pandemic. Other factors that users value when making online purchases are the payment options, the ease of the process and the security of the online store. The number of users who bought online with a payment preference of cash, cash on delivery or deposit at convenience stores also changed dramatically to digital payment methods and many people requested banking services, mobile telephony and to make payments for services for the first time, a positive change in behavior if we consider the superior user experience and greater safety in terms of physical health.
Google searches for delivery options have almost doubled and search interest related to retail has spiked globally over the past few months as people try to find things they need. And as people limit their trips to grocery stores, there is growing search interest for things like “can you freeze” in the U.K. and “home delivery” in France. We’ve also seen rising search interest for “short-term work employee” in Germany, “how to make antibacterial gel” in Mexico, and “mortgage rate suspension” in Italy.
Mexico has the most fintechs among countries in Latin America. Currently, the Mexican regulator CNBV has mapped more than 515 fintechs that operate in Mexico, so we have a very dynamic ecosystem that generates the right conditions to generate solutions that attack the four main challenges of e-commerce and payment methods: logistics, fraud, financial inclusion and trust.
As a country, the e-commerce industry only represents between 2 and 5 percent of GDP, which is very little if we compare it with world leaders such as China where this percentage increases to 29 percent. That is why the methods of payment are so important. This provides a clue to the importance of reducing the credit access gap and generating secure, contactless, easy-to-use and quality solutions to rural and underserved areas, improving financial inclusion and fostering confidence and the acquisition of skills to participate in electronic commerce.
One of the ways to grow the e-commerce ecosystem in Mexico is through information and training for greater professionalization since this generates a greater commitment within the industry, which in turn, is reflected in more conscious decision-making by users. That there is a correlation between e-commerce and financial inclusion has been proven. This barrier is generated because only 60 percent of Mexicans have a bank account, hence the need to be able to generate solutions that improve this panorama.
The answer then is that the payment industry is on the right track since most actors now truly recognize what is needed to compete and to meet customers’ needs. Given the opportunities that exist for everyone to improve and evolve, we can be sure that in 2021, we will not only see the Mexican consumer evolve but also a financial industry transformed.