Latin American Portals Struggle with E-Commerce

Although consumer-oriented portals in Latin America play an "important role" in converting Web users to online buyers, the majority of local and regional portals in the area still have a long way to go before they become a viable e-commerce force, according to a new report released Thursday by research firm International Data Corp. (IDC).

The report warned that the failure of portals to beef up their online shopping capabilities -- and meet surging consumer demand -- will have a chilling effect on the overall growth of e-commerce in Latin America.

For instance, IDC found that only 61 percent of the local portals provided consumers with online payment processing capabilities, while three-quarters of the regional portals supplied this feature.

The report also said that local portals offered just one-third of the shopping assistance features needed to run a fully loaded e-tail site, while regional portals offered about half of those features.

Critical Stage

IDC advised portal operators to revamp their existing e-commerce strategies by diversifying their revenues, which are still largely dependent on the struggling online advertising market.

Like their North American counterparts, consumer portals in Latin America are in the midst of a "significant" shakeout, said IDC.

"Driving this shakeup is the failure of portals to meet consumer demands for communications, content, and e-commerce features and consequently attract and retain loyal Internet users," the report said.

In its assessment of the efforts being taken by dot-coms to combat the industry downturn, IDC said that many regional portals are stepping up their strategies to gain local market share, putting heightened competitive pressure on smaller local players.

In order to make such inroads, the report said, portals will need to greatly expand their offerings.

For example, IDC found that both local and regional portals provide extensive content in the arts, entertainment and news categories, but neither supply comprehensive business and financial content. Moreover, only 17 percent of the local portals and one-quarter of regional portals offer online banking features.

E-Biz Hurdles

Another study released in January by eMarketer also examined the difficulties that online business-to-consumer (B2C) firms have faced in Latin America.

eMarketer found that low rates of Internet penetration, limited personal computer ownership, and a low level of credit card usage are preventing Latin American consumers from spending online. For the region as a whole, eMarketer said the Internet penetration rate is only 2.7 percent, compared with nearly 40 percent in the United States.

Instead, eMarketer said that Latin American e-commerce will be driven largely by business-to-business (B2B) transactions in the coming years.

Looking at the Top Six

To compile data for its study -- entitled "Latin America's Consumer Portals: Identifying Strengths, Weaknesses, Similarities, and Differences" -- IDC examined a total of 26 portals and their role in fostering consumer e-commerce in the region.

Researchers analyzed three portals per country in the top six Latin American markets as well as leading regional players, including America Online Latin America, El Sitio, StarMedia, Terra, Tutopia, Universo Online, Yahoo!, and Yupi.