MOBILE E-COMMERCE IN COLOMBIA - ANALYSIS

Country Report | Apr 2020

HEADLINES Market Sizes

Mobile e-commerce increases by 23% in current value terms in 2019, to reach COP1.6 Sales of Mobile E-Commerce
trillion Retail Value RSP excl Sales Tax - COP billion - Current - 2005-2024
Rising internet penetration, cheaper internet plans and Wi-Fi hotspots are amongst
the factors helping to drive growth 1649 Forecast
4000
An increasing number of players are launching apps due to the strong growth seen in
e-commerce and the opportunities to expand their sales
Mobile e-commerce is expected to post a current value CAGR of 18% (14% 2019
3000
constant value CAGR) over the forecast period, to reach COP3.7 trillion in 2024

PROSPECTS
2000
Penetration of mobile communications in Colombia continues to grow
The use of mobile phones continues to grow each year amongst the Colombian
population, especially smartphones, which has reached over 100% penetration. This 1000
growth in user numbers confirms that the penetration of mobile communications in the
country is nearing international standards, thanks to the rapid expansion of high-speed
mobile. Likewise, internet plans are giving more navigation capacity at a lower cost, 0
and programmes such as Colombia Digital have been able to offer Wi-Fi hot spots in 2005 2019 2024
more places. These factors give Colombians the possibility to use their phones as a tool
to make transactions, because the entry barriers are continuing to decrease, with
increasing coverage helping to maintain current value growth in mobile e-commerce in
Sales Performance of Mobile E-Commerce
2019. The popularity of smartphones in particular continues to rise. Their appeal across
% Y-O-Y Retail Value RSP excl Sales Tax Growth 2005-2024
all ages has allowed them to become the most popular electronic devices, and despite
the country’s economic situation towards the end of the review period, purchases of
such devices increased, as did the frequency of replacement. The expansion of the gap 22.8% Forecast
between smartphones and other devices has led to the creation of greater content, 200%
boosting usage and dependency. It is expected that the consolidation of smartphones
as the most popular electronic devices in the country will continue to increase mobile
e-commerce, seeing a double-digit current value CAGR and reaching a third of overall
e-commerce sales at the end of the forecast period. 150%

Beyond browsing, consumers increase use of smartphones for

purchases 100%

Smartphones have become increasingly attractive to users, influencing their social

behaviour, use at work, and now in their economic lives through financial and
commercial transactions. Although their use as devices for browsing apps and websites, 50%
searching for products or services, in addition to checking bank statements, has grown,
so has their use for making purchases. Once users decide to use them to make their
first purchase or payment, and providing they have a positive experience of doing so,
they become more regular users of mobile e-commerce. This leads users to switch from 0%
2005 2019 2024
mere web surfers to active online purchasers.

Payment security has improved, but some customers still prefer cash
on delivery
Payment developments offered by intermediaries such as ACH Colombia and PayU,
amongst others, have become crucial for the development of mobile e-commerce.
Security has become a key concern of users, and this is being addressed by those
platforms which offer authentication security solutions of their own, or integrated with
face or fingerprint recognition technologies in the latest mobile phones. However, as in
other categories, formal mobile e-commerce providers, which are usually extensions of
web e-commerce sites, are affected by informal vendors in social media. Although
some consumers are not confident in these merchants, the fact that payment is usually
made in cash on delivery provides some reassurance.

COMPETITIVE LANDSCAPE
Increasing number of apps set to expand mobile e-commerce
Major companies are relying on proprietary mobile applications to expand their e-
commerce sales. The brands of Grupo Éxito, such as Éxito and Carulla, have launched
apps which complement an extensive network of third-party delivery services, such as

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Rappi, Mercadoni and Merqueo, using them to fulfil the last-mile delivery promise to
their customer base. The expansion of mobile e-commerce has also encouraged
entrepreneurs to launch apps to support the activity of small independent merchants
which sell through social media. That is the case of Peiky, an app intended to improve
the informal sales process and facilitate and automatise mobile e-commerce through
predefined selling scripts, product catalogues and responses to clients to facilitate the
activity of independent vendors. Augmented reality is also making inroads in e-
commerce proprietary apps such as Tugó, for consumers to see how furniture and décor
products will look like in the consumer’s actual environment. The function is connected
to the shopping system to convert an exploratory process into actual sales.

Instant messaging and social networks are starting point for mobile e-
commerce
The leading apps are those mainly related to communication and interaction with
others, and the use of instant messaging and social networks is increasingly natural in
Colombia. Therefore, within the competitive landscape, these are the starting point for
companies to attract Colombians to shop via their mobile phones. The expectation is
that if a dialogue is established between consumers and retailers, this will lead mobile
phones to gain greater space as the preferred device of Colombians in e-commerce.

Security of personal information needs to be ensured

A wide range of private information is gathered when using a smartphone, along with
the increasing development of personalised apps based on functions of permanent
learning and data collection that characterise the personal behaviour of users. This
means that retailers increasingly know what to offer them, and invite them to use
mobile e-commerce for their purchases. However, at the same time this makes
companies and their users vulnerable to failing to comply with Colombian regulations
regarding the control and use of the personal data collected. Therefore, companies
must understand this to ensure they obtain express consent for the use of the personal
information which they use to improve shopping experiences, and prevent the release
of any information which may turn users into victims of crime when shopping on
websites using their mobiles.

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