Transcript 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