electronic commerce in latin america: the argentinean experience gloria robles kara maupin kerry...
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Electronic Commerce in Latin America:
The Argentinean ExperienceGloria 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 $40M last year Exploding Internet demands
Argentina & the Internet
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
1997 1998 1999 2000 2003Online Users
Source: Prince & Cooke
Conclusions
Start-up mecca for Latin America First mover advantage belongs to local players Internet becoming a commodity B2C & ISP development: linear correlation Positive economic environment for E-development
Economic Background
The 3rd largest economy in Latin America Economic boom through most of the 1990’s
“My government has a simple, clear goal: to grow, grow, and grow…”
-President Fernando de la Rua
Recent Trends and Outlook
Rebounding from a year-long recession Changing population patterns Trends indicate positive environment for Internet
growth Favorable projections Highest growth rate in 50 years
Economic Strengths
Less government regulation
Stability
Low inflation rate
Economic Weaknesses
Economy vulnerable to external shocks
Unemployment
High local cost of capital
Infrastructure Today
Source: Morgan Stanley Dean Witter Research Estimates. Population estimates from the US Bureau of Census
E=Estimate
1999E 2003E
Argentina Rest of L.A. Argentina Rest of L.A.
Population 37 500 39 531
GDP ($B) 285 1,527 347 1,951
Tel lines per 1000 200 120 232 170
PC per 1000 69 46 121 95
Internet Penetration 1.6% 1.7% 7.4% 6.9%
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.
$0.00
$20.00
$40.00
$60.00
AirmailService
Express Mail FEDEX
Freight Cost 1lb US to Argentina
Payment Issue Main form of payment of e-commerce is using
credit cards Argentinean Credit card is served mainly by VISA
(58%) and MasterCard (35%) Low access to credit cards in Argentina
0%
50%
100%
US Argentina Brazil
Credit Card Holders
Payment Issue cont. ...
Secure Electronic Transaction (SET) standard is not available for local Internet sites
Average Argentinean does not feel secure doing transactions over the Internet
Checking accounts for personal use are not common among Argentineans
Ambito Financiero. Argentina March 8,2000
Customs Issue Buenos Aires is the main entrance of foreign
products (centralized) Argentinean Law is not yet prepared for int’l
e-commerce Customs Taxes: 23% ; Value Added Tax:
21% Int’l Freight+Duties+Taxes = 60% -100%+
Tatto You (2)Rolling StonesCDNOW US$ 25.98
AirmailFreight US$ 7.81
2-5 weeks
Customs Tax US$ 8.00Sales Tax US$ 9.00
Total Cost US$ 50.79Per unit US$ 25.39In % 95% more
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
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