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Smartphone: the present and future of Brazilian e-commerce

EBANX's Beyond Borders survey found that increasing mobile connectivity and penetration - particularly into the C and D / E classes - are reshaping Brazilian e-commerce.

“Economic potential is in Brazilian smartphone-wielding consumers”. This sentence features one of the chapters of Beyond Borders Research 2018-2019 – The Cross-Border Consumption in Brazil, held by EBANX. In addition to identifying the spending habits of more than 3,000 Brazilians on international shopping sites, the survey provides a consistent overview of mobile penetration in the country.

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In recent years, data related to the consumption of durable goods and strong Gross Domestic Product (GDP) growth rates have been largely responsible for attracting investors to the country. Nowadays, what is fueling the Brazilian market is connectivity.

“For digital commerce, there is optimism. I cannot say that in Brazil as a whole there’s optimism. What we currently see is a slow recovery [of the economy]. (…) But, in fact, e-commerce is in a moment of euphoria, more due to the shift [from consumers to digital],” says Head of Ebit / Nielsen, Ana Szasz. And as the numbers indicate, smartphones are driving this shift.

The fifth-largest internet and smartphone economy in the world, Brazil has 236 million mobile subscriptions and 143 million unique mobile subscriptions. And when it comes to smartphone entry, the country is far from saturation.

The point is:  smartphone is the present and future of e-commerce in Brazil. However, what it takes to fully understand the potential of mobile strategies is a closer look at the qualitative aspects of connectivity in the country and consumer reality.  “When we discuss e-commerce, we have to talk about how the internet is used in Brazil, both about how fast, efficient and available it is, as well as which smartphones Brazilians are using,” says Szasz.

Democratization and constraints

The rising connectivity in the country allows, first and foremost, the digital inclusion of parts of the population that didn’t have access to e-commerce, as show data from Cetic, a research center on information and communication technologies.

AMI Associate Managing Director Lindsay Lehr analyzes that the Brazilian market is growing beyond the audience already connected and familiar with e-commerce. “Individuals within a medium-high and high salary rage already make online purchases, but the biggest changes will come from individuals in the medium sector, which are now familiarized with mobile and are beginning to use it for commercial and financial transactions,” points out.

Mobile plays a role in the entry of new consumers and in the increase of purchases among already traditional e-commerce consumers

Ana Szasz, Head of Ebit/Nielsen

The democratic potential of smartphones is also highlighted in the chart below. The lower the purchasing power of Brazilians, the greater the protagonism of mobile phones in their routine. “The market is growing beyond the traditional customer base, expanding to consumers with only moderate purchasing power and who may be underbanked. This is the potential of Brazil: it still has an enormous under-tapped market,” Lehr adds.

It should be noted, however, that not every internet and mobile experience has a good quality in a country where only a restricted portion of the population has access to the latest smartphones and devices. “Often, for them [lower class consumer] to download Uber, they won’t be able to have the Facebook app or to send a photo to their family. They have to choose,” says Szasz.

For these potential consumers, installing an app can be a key factor to give up on the shopping journey. Szasz points out that it is possible to overcome this limitation with simple strategies. “For big marketplaces, it’s OK to have an app. But for niche e-commerce, it’s more worthwhile to develop a mobile browser than an app. You will reach more agility. In some browsers, you don’t even realize you’re not in an app because they’re fast and easy to navigate,” she suggests.

Connectivity today and tomorrow

The development of mobile strategies for Brazilian e-commerce largely relies on the progress of internet quality in the country. In this regard, there are at least two main points of debate: the levels of Brazilian consumer satisfaction with the currently available internet and the arrival of the 5G network in the country.

Brazilians are really interested in the digital world

Ana Szasz, Head of Ebit / Nielsen

Concerning the first point, Szasz highlights the resilience of the Brazilian, who, despite having one of the lowest averages of internet speed in the world, is one of those who complain the least about the connection instability. “In Brazil, we do not have the best speed, our cost is not the lowest and the Brazilian is not the one that complains the most. In Asia, the internet speed is three times higher than that of Brazil and they [Asian consumer] complain more than the Brazilians about instability, ” she explains.

The expected arrival of the 5G network tends to change this reality. The process is currently in a decisive phase for the future of connectivity in the country. The president of the Brazilian Internet Association (Abranet), Eduardo Neger, explains that the discussion is in the Board of Directors of the National Telecommunications Agency (Anatel), the regulatory entity in the country. In the coming months, the institution will define the frequency bands that will be available to each carrier in the auction. The news is that Anatel suggested the entry of smaller companies, in addition to the four major carriers that invested in 4G – Oi, Tim, Vivo and Claro.

“We are still in a preliminary, but very important phase, since it will define what kind of company can compete. (…) The word that sums it all up is competition. The more companies to enter, the more options the customer will have. Higher will be the quality and lower will be the cost,” he evaluates.

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Upon conclusion of the auction regulation, Anatel must submit the proposal to a public consultation on the internet, analyze the contributions of the company and conclude the auction regulation. “We expect the auction to take place in the second half of 2020. From this, companies will look at their cash flow and tell them how fast they will implement [5G technology],” Neger predicts.

It’s mobile time

Even with the hurdles surrounding connectivity in the country, the latest e-commerce results reaffirm the potential of mobile for the coming years. An Ebit / Nielsen survey about the first 11 days of November – the period that comprised Singles Day, celebrated on 11/11, and warm-up promotions for Black Friday – found that orders made through smartphones were the majority: 52.8% of the total. Compared to the same period of 2018, the growth was of 58%.

For Szasz, the growth in mobile share is also explained by the fiercer competitiveness in Brazilian e-commerce. “We did a parallel check and we saw many sites offering free shipping on in-app purchases in response to Amazon Prime. (…) We see retailers moving so as not to be left behind,” she analyzes.

Translated by Anna Lima