Retail Recap: Q1 2021 in Latin America

eCommerce is on the (rapid) rise and sales growth correlates with higher vaccination rates.

Dive into our other summaries of early 2021 retail trends in North America, EMEA and in the Asia-Pacific region.

This is the final recap of our “Q1 in Review” series, and we’re wrapping it up with a look at the Latin American market.

We begin this summary with an acknowledgment that, similar to our analysis of Q1 in EMEA, Latin American countries experienced a resurgence of COVID-19 cases at the beginning of 2021, leading to “every major Latin American economy reimposing lockdown measures.” As S&P Global notes, this has the potential to significantly delay economic recovery in the region, while contributing to the decline in retail sales seen last quarter.

Also affecting an economic rebound is the reality of vaccination progress. As Bloomberg reported, at the pace tracked in Feb. 2021, “it will take years to inoculate Latin America.” It notes that the only “success story” has been Chile, with the country “on pace to inoculate 75% of its population in six months.” At the time of reporting, Brazil was estimated to take more than two years to reach that same threshold, Mexico more than 3.5 years, and Argentina more than a decade.

Setting the scene with a note on vaccines helps to give context to our Q1 discussion and the outlook for the rest of 2021. With vaccine doses being shared amongst countries more readily, and more people getting the vaccine, these predictions will hopefully be refreshed for a rosier economic outlook. This is important because the three-fourths threshold is what many experts say is the tipping point for a return to normal, and therefore a return to more predictable consumer behavior.

Economic health appears linked to community health

In looking at LATAM sales figures from the past quarter, it’s reasonable to assume that the more a country is trending toward a vaccinated majority, the more likely it is to see growth in retail sales.

It will be interesting to see if this trend continues. I mentioned Chile being an instance of a successfully executed vaccine campaign. Data from CEIC found that retail sales in Chile grew 19.5% year over year in March 2021, compared with a 4.6% increase in Feb. 2021. Now, compare that to retail sales growth numbers from other Latin American countries, also evaluated by CEIC. In March 2021, year-over-year retail sales growth looked like this:

• Argentina, -8.8%
• Brazil, 0.3%
• Colombia, 15.7%
• Mexico, 1.8%
• Peru, -4.5%

With these numbers in mind, other economic observations include the fact that Peru reported that its economy shrank 11.1% in 2020, “the biggest contraction since 1989.” You see from its negative year-over-year growth in March that the country is still fighting its way back from the effects of last year.

Brazilian retail sales fell in Jan. 2021 for “a third consecutive month,” as reported by Reuters. Statisticians say the decline was “in large part due to the expiration…of emergency government cash transfers.” Something similar was seen in our recap on APAC, where we noted how Australia’s Q1 retail market was impacted by the government scaling back its supplemental payment programs. However, Brazil’s marginal growth in March 2021 could be a preview of more growth in the months to come.

The pandemic was a catalyst for  ecommerce

Spanish news outlet Atalayar recently discussed Latin America as “one of the fastest-growing ecommerce markets in the world.” The publication discussed pre-pandemic conditions that contributed to what was once a laggard mentality toward online shopping: “Ecommerce penetration was comparatively low in Latin America, and uptake was hampered by the region’s significant unbanked population, complicated logistical connections, and a general lack of trust in online methods.”

Reuters also noted in a March 2021 article that poor infrastructure contributed to pre-COVID ecommerce use. But estimates from Statista suggest that 13 million people in Latin America made an online transaction in 2020 for the first time, with significant ecommerce growth in Argentina (79%), Brazil (35%) and Mexico (27%).

On the topic of logistics and infrastructure, that same article from Reuters reported how LATAM Airlines is working to “permanently convert eight of its passenger planes into cargo aircraft.” The airline filed for bankruptcy a year ago after “the sudden collapse in air travel,” but it’s now capitalizing on the ecommerce boom for its own business, and for the benefit of other ecommerce players to use its system. This is an interesting example of retail’s impact on adjacent industries.

Mexico showing signs of life around essential retail and department stores

Mexico is Latin America’s second-largest country, and the dynamics there are particularly interesting because of its shared border with the U.S. Pre-COVID, many living in Mexico would regularly cross the border to shop or dine in California, Arizona, New Mexico or Texas, but that changed dramatically with initial COVID-19 lockdowns. Traffic from one country to the other was severely restricted in an effort to contain the virus, with exceptions made for trucking and critical supply chains.

That being said, in a recent conversation with TR Business, Duty Free America’s (DFA) president Leon Falic discussed how stores on the U.S.-Mexico border “are doing well, and maybe even better than before the pandemic.”

Beyond duty-free retail, a few other sectors are seeing signs of improvement. For example, ANTAD – translated to the National Association of Self-Service and Department Stores – reported that March 2021 sales of its member stores grew 6.5% compared to the same month of 2020. This was after drops of 1.5% in Feb. 2021 and 8.2% in January.

One last note on retail in Mexico. I was interested to read that in 2020, Walmart de Mexico opened 63 stores. Its online sales also grew 171% in 2020, prompting the retailer to “ramp up its logistics spending in 2021.”

Follow more trends from one of our LATAM pricing experts

For further reading, JJ Thorne, Revionics’ senior director of customer success, shared his perspective in March. Check out his blog to learn more about how the acceleration of ecommerce in Latin America is impacting pricing strategies: “Tradition Meets Pricing Transformation in Latin America”.

And finally, to bring it full circle, be sure to reference our reviews of Q1 trends in other regions around the world:

• North America
• EMEA
• Asia-Pacific