Smartphone Growth - A Driver of Ecommerce in Latin America | EMQQ
Smartphone adoption has grown rapidly in Latin
America, according to a report by GSMA, which also went on to describe the
potential for further growth in the future.
The report highlighted that the Latin American market is quite diverse with
some countries already at high smartphone penetration rates, but other markets
still in their infancy.
The rapid growth of smartphones has helped the growth of
ecommerce. The expected continued growth of smartphone adoption in the
region offers the potential for ecommerce to continue to grow.
Currently, MercadoLibre (MELI) is one of the leading
ecommerce platforms in Latin America. Continued smartphone adoption may
help MELI to continue to grow.
Where Are We Now?
According to GSMA,
there were 442 million unique mobile subscribers across Latin America and the
Caribbean, accounting for 68% of the population, as of mid-2018.
However, the region
is characterised by varying levels of mobile subscriber penetration. A number
of countries, such as Chile, Uruguay, and Argentina, are approaching saturation
of the total addressable market, while others, including Honduras, Guatemala
and Nicaragua, still exhibit relatively low levels of penetration, highlight
Potential for Growth
GSMA highlighted that
Latin America may account for 10% of all new subscribers globally out to
2025. They also estimate that by 2025, around three-quarters of the
region’s population will subscribe to mobile services, closing the gap on the
average for developed markets, which is 87%.
Higher Speed Internet
May Enable More Sophisticated Internet Use
Currently, most of Latin America is still operating on 3G networks.
However, adoption of 4G has progressed rapidly with 35% of the region on the
platform. Furthermore, GSMA estimates that 4G would be the dominant
network by the end of 2018 and that nearly 2/3rd of the region would
be on 4G by 2025.
The introduction of
5G is not expected until, at least, 2025.
Smartphone Adoption Has Added to Economic Expansion
In 2017, mobile
technologies and services generated 5% of GDP in Latin America, a contribution
that amounted to $280 billion of economic value added. By 2022, the mobile
economy in the region may generate around $330 billion of economic value added
(or 5.2% of Latin America’s GDP), according to GSMA.
And May Further the Digital Economy
The number of Internet of Things (IoT) connections in Latin America and the
Caribbean may triple between 2017 and 2025, reaching 1.3 billion, according to
GSMA. The majority of these connections will probably be in the consumer
segment, due to increased adoption of connected devices within homes.
smartphone adoption in Latin America may also spur the availability of more
online content. GSMA’s survey revealed that millennial smartphone users
in Latin America are among the most engaged users of free-to-access online
video services for their age group globally. Content providers will
likely continue to push to increase their penetration in Latin America.
The Leapfrog Effect
transitioning away from laptops as is the case in developed nations, many
consumers in developing countries are gaining their first exposure to the
internet via the smartphone. As such, the growth of smartphone
adoption has helped ecommerce in Latin America and may spur further growth in
Involved in Ecommerce in Latin America
According to eMarketer,
MercadoLibre (MELI) was the most popular ecommerce site in Latin America during
2018. MELI operates an ecommerce platform
as well as its own payments platform to facilitate both on and off-network
B2W (BTOW3) is also
one of Latin America’s leading ecommerce platforms, operating an online
marketplace, discount site, and finance platform. B2W is majority-owned
by publicly traded Lojas Americanas (LAME4), which is one of the largest
traditional retail chains in Brazil.
CVC Brasil Operadorae Agencia de Viagens (CVC) is a leading travel operator in Latin America
serving Brazilian consumers. CVC operates both physical and online travel
has grown rapidly in Latin America. Furthermore, it is expected to
continue to grow in the future. Companies such as MELI, BTOW3, and CVC
may benefit if the expected growth in Latin America is realised.
Purchasing shares of
EMQQ may provide investors with exposure to the potential growth that
smartphones may bring to Latin America.
Find out more about Emerging Markets Internet & Ecommerce UCITS ETF (EMQQ).
As of 28th June 2019, the Emerging Markets Internet & Ecommerce UCITS ETF held 6.40% of its weight in MELI, 0.75% in CVC and 0.66% in B2W.