Ecommerce Market Watch: Uruguay
Growth-minded online businesses would do well to consider Uruguay — a market ripe for ecommerce opportunity. However, Uruguay’s younger consumers will have little patience for Latin America’s traditionally high false decline rate. Ecommerce businesses need to find a way to navigate this challenge.
With a population of nearly 3.5 million, Uruguay is the second-smallest nation in South America — but it punches above its weight with an annual GDP of $60 billion. That sets the country up to be a dream for ecommerce businesses.
Uruguayan Ecommerce Is Supported From the Top Down
Uruguay is considered one of the most digitized countries in the world with plenty of research institutes, a high standard of living and an emphasis on education — it’s the first country to roll out a one-for-one laptop to child program. Uruguay is also one of the top software exporters in the world, thanks to a healthy development community.
The Agency for Development of Electronic Government (AGESIC), established in 2005, encourages inclusion and technology adoption along with knowledge management and communication by developing and executing five-year digital transformation strategic plans.
Uruguayan Ecommerce Has Decades of Potential
A country of millennials, Uruguay’s median age is 35.5. More than 40% of the population is between 24 and 54, and only 25% of Uruguayans are 55 and older.
Ecommerce businesses have the potential for decades of success if they can appeal to millennials, Gen Z and, eventually, Gen A. In our original research, 2021 State of Consumer Attitudes Report, we found that consumers in the millennial markets share some common behaviors when it comes to online shopping. Specifically, they:
- Shop online more often.
- Expect a high level of personalization.
- Are open to mobile payment options.
That’s good news for companies with a mobile presence.
Uruguayans Are Mobile-First
Given the technology adoption in Uruguay, it follows that internet penetration is high and mobile penetration is even higher — 88% of ecommerce transactions in Uruguay are made on smartphones. Uruguay’s government plays a role in this phenomenon, continuing to support connectivity and ecommerce by installing fiber in rural areas with the goal of country-wide 4G cellular coverage.
An ecommerce business considering Uruguay must make mobile commerce a core focus and prioritize CX on mobile apps to ensure a successful ecommerce strategy.
Uruguayans Are Loyal Customers
So, what are Uruguayans buying online? Uruguay has a healthy local ecommerce market: 88% of online purchases are from regional sites.
However, cross-border commerce is expected to grow. U.S.-based online giant Amazon.com added Uruguay as an eligible country to sell products through its platform in 2021. And global payments company dLocal is headquartered in Uruguay. The company operates in 29 countries in Asia, Africa and Latin America, which will surely open Uruguayans to global ecommerce.
Ecommerce purchases among Uruguayans fall into four product sectors:
About 36% of ecommerce transactions in Uruguay are on MercadoLibre, a Latin American equivalent of eBay. Amazon wins second place for transaction amounts, followed by Ebay. Other players include PedidosYa, an online restaurant food delivery service, and Woow, a local discount company similar to Groupon.
Uruguay Is an Emerging Payments Market
Uruguayans are like most Latin Americans: They’re comfortable with cash-based payments, which account for about 20% of purchases. However, they do seem to be ahead of some Latin American neighbors when it comes to local and international credit card usage — accounting for 70% of transactions.
The country’s young population and high mobile penetration add more payment options to the mix, including mobile payments. In our Consumer Attitudes Report, we discovered Gen Z and millennials prefer digital wallets over other payment methods.
As payment options increase, however, so does the potential for fraud.
Uruguayan Ecommerce and Fraud
In Latin America, fraud isn’t necessarily the main concern — the fraud rate across the region hovers around 1%. But that isn’t attributed to luck or to an absence of fraudsters.
Just the opposite.
And this is where Uruguayan ecommerce retailers should pay careful attention.
That low fraud rate is due to strict fraud filters and rules that reject transactions at the slightest hint of potential fraud. However, those rejected transactions are often false declines. In fact, Latin America’s false decline rate has been holding at 30% for quite some time.
That’s 30% of legitimate revenue — declined.
But it gets worse.
In a country with such a young average population, false declines can be a death sentence for ecommerce businesses. Younger generations are not forgiving of businesses that decline their transactions. In our original research, we discovered 40% of consumers under 40 will simply stop shopping at a store because of a false decline. Another 34% will take their complaint to social media.
With More Payment Methods Comes More Fraud
As Uruguay continues to shift from cash-based to credit card transactions, the risk of fraud increases.
The high mobile penetration in Uruguay means more potential for hacking, which can lead to fraud, especially as mobile wallets are adopted. Fraudsters have developed innovative ways to hijack mobile phones and then compromise financial accounts on the phone. From there, they can use the consumer’s contact list to take over banking and credit card accounts, leading to account takeover (ATO) fraud.
And that’s when the real damage is done.
Once a fraudster has control of a consumer’s account, they look just like a legitimate customer and are nearly impossible to detect — unless you have an expert fraud prevention partner that recognizes the patterns and signs of evasive types of fraud.
Companies entering the ecommerce market in Uruguay need to have a well-thought-out fraud prevention and protection strategy.
Choose the Best Fraud Prevention Solution
We’ve covered several factors to consider as you contemplate an ecommerce presence in Uruguay, but the bottom line is this: To succeed, your business should make it a priority to create a comprehensive fraud strategy that is thorough enough to detect fraudulent transactions without turning away valid customers.
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.