Download Growth in E

Electronic Commerce in Latin
America:
The Argentinean Experience
Gloria Robles
Kara Maupin
Kerry Owens
Carlos Nunez
Stephen Kennedy
Marcelo Rozas
Agenda
 Overview
 Conclusions
 Culture,
Economy, and Government
 Infrastructure
 Logistics
 Local vs. International E-commerce Sites
 Future Trends
Overview: Argentina & E-Commerce
 “The
priority of this country is a new
technology revolution.”
--Jose Machinea, Finance Minister
 4%
of households, 3% of workforce
 $40M last year
 Exploding Internet demands
Argentina & the Internet
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
1997 1998 1999 2000 2003
Online Users
Source: Prince & Cooke
Conclusions
 Start-up
 First
mover advantage belongs to local players
 Internet
 B2C
mecca for Latin America
becoming a commodity
& ISP development: linear correlation
 Positive
economic environment for E-development
Economic Background
 The
3rd largest economy in Latin America
 Economic boom through most of the 1990’s
“My government has a simple, clear goal: to grow,
grow, and grow…”
-President Fernando de la Rua
Recent Trends and Outlook
 Rebounding
from a year-long recession
 Changing population patterns
 Trends indicate positive environment for Internet
growth
 Favorable projections
 Highest growth rate in 50 years
Economic Strengths
 Less
government regulation
 Stability
 Low
inflation rate
Economic Weaknesses
 Economy
vulnerable to external shocks
 Unemployment
 High
local cost of capital
Infrastructure Today
1999E
2003E
Argentina
Rest of L.A.
Argentina
Rest of L.A.
Population
37
500
39
531
GDP ($B)
285
1,527
347
1,951
Tel lines per 1000
200
120
232
170
PC per 1000
69
46
121
95
1.6%
1.7%
7.4%
6.9%
Internet Penetration
Source: Morgan Stanley Dean Witter Research Estimates. Population estimates from the US Bureau of Census
E=Estimate
Telecommunications
Total deregulation: competition without restrictions
Today:
• Bottleneck
• Speed problems
• Internet Cabins
Immediate demands
Higher speed connections:
1. First step:
Broad band technologies
2. Second:
DSL (Digital subscriber line)
Cable Modems
3. Third:
Analog modem connections
First step in B2B: Agribusiness
• Industry size: $14 billion
• Difficulties for competing abroad
• 1999: 10% access to Internet,
• 2000: 20% access to Internet
• E-nitiatives: E-commerce savings of 5% to 15% in
fertilizers, seeds, pesticides
• E-suppliers: Agropool & Agrositio.com
Transportation Issue
 Courier
Services
 Local Services: OCA, Correos Argentinos
 International Services: DHL, FedEx, UPS
 Argentinean Courier market represents US$ 60
million, and 34% is served by DHL.
Freight Cost 1lb US to Argentina
$60.00
$40.00
$20.00
$0.00
Airmail Express Mail FEDEX
Service
Payment Issue
 Main
form of payment of e-commerce is using
credit cards
 Argentinean Credit card is served mainly by VISA
(58%) and MasterCard (35%)
 Low access to credit cards in Argentina
Credit Card Holders
100%
50%
0%
US
Argentina
Brazil
Payment Issue cont. ...
 Secure
Electronic Transaction (SET) standard is
not available for local Internet sites
 Average Argentinean does not feel secure doing
transactions over the Internet
 Checking accounts for personal use are not
common among Argentineans
Ambito Financiero. Argentina March 8,2000
Customs Issue
 Buenos Aires
is the main entrance of foreign
products (centralized)
 Argentinean Law is not yet prepared for int’l
e-commerce
 Customs Taxes: 23% ; Value Added Tax: 21%
 Int’l Freight+Duties+Taxes = 60% -100%+
Tatto You (2)
Rolling Stones
CDNOW US$ 25.98
Total Cost
Per unit
In %
Airmail
Freight US$ 7.81
2-5 weeks
US$ 50.79
US$ 25.39
95% more
Customs Tax
Sales Tax
US$ 8.00
US$ 9.00
Growth in E-commerce
 Reviving
economy, partly due to the Internet
 Connections to Europe
 Many obstacles
 U.S. Internet users spend 90% of their buying
inside the country
 South Americans spend 26% inside their countries
Strategies
 Overcome
obstacles
 Leverage new opportunities
versus
 First mover advantage
 Fast followers
Regional Websites
Types of Websites
Alcohol
Food
Collection goods
Apparel
Music
Flow ers
Other
Websites Reach
Local customers
Sell abroad
Sell in city
Mercosur
Regional Websites
Most Popular Websites
Delivery.com
Yenny
Disco
Musimundo
Aerolineas Airlines
Others
Joint Venture Websites
 Scramble
to enter Latin American market
 Mitigate risk
 Access local knowledge
 AOL Latin America
Foreign Websites
 Many
of the most popular Latin Websites are not
Latin American
 Spain’s Terra Networks
 New York’s StarMedia
Financial Backing: Who are the
Investors?
Venture backers
• Local groups (Exxel, Clarin)
• Partnerships
• Foreign operators
• Investment firms
M&A activity:
• PSINet, Terra and IFX (Internet Infrastructure)
• StarMedia (Internet Portal segment)
• Patagon acquired by Banco Santander ($700M)
Future Trends
E-commerce:
Final price for end-user
Infrastructure: VPN,
Web hosting, broadband
access
Strong
competition will increase efficiency
Internet
widespread