E-commerce growth in Peru

The ongoing global COVID19 pandemic has pushed us to use with a greater emphasis our electronic devices. Nowadays we see many business owners and entrepreneurs going digital, whilst navigating through the difficulties of owning a physical store in today’s situation. The trend of e-commerce business is expected to continue, as it has grown considerably in Latin America, and although in Peru e-commerce is still a small market, it has grown rapidly and recorded a 31% growth in 2019, generating around US$ 4 billion.

Let’s define the word e-commerce: It means the distribution, sale, purchase, marketing, and information supply of products or services through the Internet, according to the Barcelona School of Management. This means briefly trading online.

This new way of doing business, brings us a positive consequence new business projects, low-cost business maintenance, and potentially exponential growth, given that e-commerce is borderless, as a result, the target market can be anywhere in the world, and pushes e-commerce businesses to create a value proposition to differentiate you from the market competition.

Internet: Key e-commerce tool

For a better understanding, it is known that Peru represented 1.7% of e-commerce in 2009 and over the years, this percentage increased to 5% in 2019, making Peru the sixth largest e-commerce sales in Latin America. This improvement is thanks to the internet penetration shown by Peruvians, which opens a door to this new way of doing business. Internet penetration rate corresponds to the percentage of the total population of a given country or region that uses the internet.

Although Peru is not the country with the highest Internet penetration rate in Latin America, it is important to mention that just because more people have access to the Internet does not mean that they will necessarily make online purchases. According to BlackSip, in the Industry Report: E-commerce in Peru 2019, it mentions that “Peruvians are more likely to interact with online advertising and search for information and products in higher quantities than other countries”. It is worth mentioning that Peru has 72,9% of internet penetration.

One of the great ways to boost e-commerce in Peru, is the campaigns during known sale dates, for example, the Black Fridays and Cyber Days, which benefit internet shopping, where better prices and promotions are offered, therefore, sales are increased and the market is stimulated.

Online Shopping

According to CAPECE’s records, we can mention important facts about this new trade modality and its impact on Peru in 2019:

• Most used devices

E-commerce transactions are completed through mobile devices such as cell phones and tablets; and the well-known and conventional desktop computers. The value of transactions through desktop computers has increased to US$ 2.32 billion, in contrast to the total of purchases on mobile devices, which reached US$ 1.68 billion.

• Domestic e-commerce

Thanks to the promotion of purchases and sales through the Internet in Peru, it was noted that domestic trade reached US$ 3 billion, where 57% of digital buyers are from Lima, followed by Trujillo with 15%, Arequipa with 11%, Callao with 8% and the other cities with 9%.

• Cross-Border e-commerce

Cross-border trade has also shown significant growth.  It was registered that in 2015 it represented 14% of online purchases, reaching 25% in 2019. It reached US$ 1 billion in transactions thanks to e-commerce.

Types of e-commerce

According to PROMPERÚ (Peruvian Export and Tourism Promotion Commission), there are nine types of e-commerce and they are the following:

1. B2B (Business to Business): It is the e-commerce between companies, which means a direct sale of products and/or services between companies.

2. B2C (Business to Consumer): This is the most common form of Internet sales that entrepreneurs choose to make. Some companies sell their products and/or services through websites, social networks, or mobile applications.

3. C2C (Consumer To Consumer): This type of e-commerce involves transactions between people, such as those carried out on OLX, Amazon, and Mercado Libre platforms, among others.

4. C2B (Consumer to Business): This refers to sales made from consumers to companies.

5. B2G (Business to Government): These operations are carried out between companies and the government, here in Peru we have the Government Contracting platform.

6. G2B (Government to Business): These operations are considered public tenders.

7. G2C (Government to Consumer): Here is considered the job offer through the different entities of the Government.

8. C2G (Consumer to Government): This type considers the declaration and payment of taxes, payment of administrative procedures, and others.

9. G2G (Government to Government): Here are considered the contributions and purchases between the governments of different countries.

Challenge of e-commerce in the times of COVID-19

We can say that the COVID-19 pandemic marks a before and after in e-commerce since businesses had to reinvent themselves, which has accelerated the growth of this sector.

According to Niubiz Intelligence, it is known that e-commerce gained 45% of the Peruvian market in June 2020, before the Peruvian quarantine in May this only represented 12.5%.

In the beginning, when the government imposed severe restrictions on trade, this led to the paralyzation of the market, but it recovered with the progressive reactivation plan that was approved by the government. A great example that shows the growth of this sector, is the report of GFK, a market research consultant, which indicated that the country-wide online sales campaign ‘Cyber Wow’, that took place this year, exceeded S/150 million soles, which meant an increase of 132% compared to 2019.

Among the great challenges that Peruvian online businesses had to face was their distribution system; being able to validate the available stock in real-time and to be able to adjust the delivery costs in the sale of their products, in addition to implementing a highly efficient online platform to satisfy the customers’ needs. However, all of these issues have improved over the months.