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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.[1]  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 growth.

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.

The increased 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

Instead of 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 the future.

Companies Currently Involved in Ecommerce in Latin America

According to eMarketer, MercadoLibre (MELI) was the most popular ecommerce site in Latin America during 2018.[2]  MELI operates an ecommerce platform as well as its own payments platform to facilitate both on and off-network payments.

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 stores.

Summary

Smartphone adoption 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).

Read our EMQQ Whitepaper "The Great Confluence" here

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. 

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