The Chilean ecommerce market has expanded significantly, with a 23% increase in 2021 and a total volume of US$7 billion, making it the 31st largest ecommerce market in the world.
That growth is slowing to some degree, but the country’s low fraud rate still makes it a solid investment for new online businesses.
Why has Chile seen so much ecommerce expansion?
Chile’s technology infrastructure development is one reason, as well as strong local sales rules and regulations that support ecommerce development. At the same time, online businesses have to understand how to navigate Chile’s trade rules and customer behavior to strategically approach this market and achieve success.
Ecommerce in Chile Exceeded Expectations
Just as we’ve seen in the rest of Latin America, ecommerce sales in Chile skyrocketed in 2020, reaching US$9.4 billion. In the first quarter of 2021, ecommerce sales were up another 196% nationwide. And, while online sales tapered slightly through the end of 2021, there’s no question Chileans have embraced ecommerce.
In fact, one of the biggest online retailers in Chile, Mercado Libre, realized a 200% increase in 2020 and had to open a dedicated distribution center just to meet demand.
There are several factors that help Chile continue to be an ecommerce powerhouse in the LATAM region. Let’s take a closer look at what makes this market so desirable.
Chileans Are Multigenerational
Chile is a relatively young country: The median age is 36.3, and over 52% of the population is between 18 and 54.
With Chileans mostly spanning Gen Z, millennials, and Gen X, ecommerce businesses have to straddle several generational trends and preferences to succeed. In our original research report, State of Consumer Attitudes on Ecommerce, Fraud & CX 2021, we found that consumers in the millennial and Gen Z markets share some common behaviors when it comes to online shopping.
Specifically, millennial and Gen Z consumers:
- Shop online more often.
- Expect a high level of personalization.
- Are open to mobile payment options.
Gen X consumers tend to be a bit split: Most behave like their younger counterparts when it comes to mobile adoption, but not all Gen X consumers are as open to some of the more recent ecommerce developments.
Chileans Have Embraced the Digital World
By the third quarter of 2020, internet penetration in Chile was at 100%, mostly via smartphones. Chilean consumers fully embraced remote working and education environments with virtual meetings, virtual conference rooms and online classes.
Delivery services were wildly popular during the pandemic as well. In fact, food and personal care were the two categories with the highest growth at over 42%. Brands like Rappi, Uber Eats, and PedidosYa experienced more demand as restaurants and street-side retailers had to close their doors to the public.
Chileans even have an annual three-day event called CyberDay designed to promote online shopping. In 2021, the event had 670 vendors and generated $640 million in sales, which increased almost 60% from the previous year.
High Internet and Social Media Penetration
Internet penetration in Chile was at 92% of the population at the beginning of 2022. That reflects an increase of 1.9 million internet users between 2021 and 2022.
Chileans are active social media users, which they access primarily on their mobile phones, creating plenty of opportunities for social advertising and ecommerce businesses with an omnichannel strategy. Here’s a breakdown of the social media channels Chileans use most often and the ad reach opportunity for each:
- YouTube is hugely popular with 81.1% of users: Its ads reached 88.1% of Chile’s population.
- Facebook accounts for 77.6% of eligible users (13 and older) with an ad reach of 70.6% of the country’s total population.
- Instagram users account for 72.3% of those eligible and its ads reach of 65.8% of the country’s total population.
- TikTok is also popular in Chile, with 57.5% of users and an ad reach of 48.3%.
- Twitter users make up 18% of those eligible, and the platform has an ad reach of 16.4% of the country’s total population.
- Snapchat is used by only 6.8% of those eligible and has an ad reach of 6.2% of the country’s total population.
- One important point of interest: Nearly 80% of Snapchat’s users identify as female. Considering Snapchat is also popular with younger consumers, brands wanting to get in on the ground floor with young women shouldn’t overlook this platform).
Regulations in Chile Help Prevent Fraud
Unlike in many other Latin American countries, the Chilean government has developed a number of priorities that make ecommerce easier and safer in Chile.
Matriz Digital 2018-2022
One such priority is Matriz Digital 2018-2022, a roadmap on national connectivity priorities. Designed to bridge technology gaps, Matriz Digital focuses on three specific areas:
- Define and respect the rights of digital citizens.
- Stimulate investment and infrastructure, including the implementation of 5G.
- Promote digital development.
What’s an example of how that looks in practice? Free internet zones for low-income residents that allow them to connect for 30 minutes at a time, making internet connectivity fully accessible everywhere in Chile.
U.S.-Chile Free Trade Agreement
Implemented in 2004, this free trade agreement amplifies cross-border ecommerce between the United States and Chile by sharing information related to regulations on data privacy, cyber security and intellectual property rights.
National Enterprise for Electronic Certification (NIC Chile)
The Santiago Chamber of Commerce created this initiative in 2002 with the support of the Chilean Economic Development Agency. NIC Chile provides higher levels of security and confidence to safeguard the integrity of ecommerce transactions.
In practice, this translates to assigned Chilean domain names, as well as regulations on how foreign businesses can operate in Chile. Essentially, a foreign company can register a domain name in Chile, but it must have a local presence.
Payment Methods in Chile Are Complicated
The most popular payment types in Chile are local bank transfers and local bank credit; however, it’s important to note that credit cards issued outside Chile are typically not accepted on Chilean ecommerce sites.
Chileans are opening up to digital payments with popular platforms such as MACH, Fpay, and Mercadopago. Chileans choose digital platforms based on security and convenience, and it’s anticipated those priorities will continue.
According to Chilean eCommerce platform Justo, FinTechs may also have some opportunity in the future, as long as those two priorities, security and convenience, stay top of mind.
Chile Sets the Tone for Payments in LATAM
Chile is serving as a model for digital payments in Latin America, mostly because of its high mobile penetration and 73% rate of banked consumers, which makes Chile a natural market for the expansion of payment methods.
The Chilean government’s active role in supporting ecommerce helps as well, especially when it comes to the security measures mentioned in the last section. In that way, Chile serves as an example for an otherwise fraud-rampant region. Granted, digital payments in Latin America have a long way to go, but Chile is the country to watch.
Chile does, however, go through the same struggles as other countries in the LATAM region when it comes to false declines.
Chile Struggles With False Declines
Chile has a much lower fraud rate, thanks to government intervention – something that the rest of Latin America cannot claim. However, just as is the case with the rest of the region, Chilean ecommerce businesses struggle with false declines. Strict filters and restrictions keep the false decline rate in Latin America at a steady 30%. With strong machine learning, these transactions could easily be either flagged for secondary review or approved, instead of being declined out of hand.
So, the question is, how do Chile’s young consumers tolerate false declines?
The short answer: Not well.
Younger generations have no time or patience for false declines, as we discovered in our research: Almost half of consumers under 40 will simply stop shopping at a store — forever — because of a false decline.
To add insult to injury, the high social media penetration in Chile makes for a perfect word-of-mouth storm when a consumer experiences a false decline. It’s easy and natural for younger consumers to take to social media and complain – about 33% of those under 40 will do just that.
If young consumers can get your product elsewhere, they will. So, you must give them no reason to look elsewhere.
Choose the Best Fraud Prevention Solution
We’ve covered several factors to consider as you contemplate an ecommerce presence in Chile. But the bottom line is this: To succeed, your business should make it a priority to create a strategy that’s thorough enough to detect fraudulent transactions without turning away valid customers.
Any business looking to enter the Chilean ecommerce market needs a comprehensive solution to address all aspects of fraud.
At ClearSale, we help companies enter new markets with ease. Online businesses count on us to help them find the balance between fraud prevention and false declines. Contact us today to find out how we can work together toward success in this burgeoning market.