After an economic contraction never seen by the pandemic, Latin America is finally recovering in terms of income and employment, according to the World Bank. However, there are still challenges to be overcome and the region is growing modestly; The World Bank itself estimates that economic growth will be just 2.4% in 2024 and 2025.
The former, which has as possible causes the global economic contraction, the still high levels of informality and the migratory crisis, affects consumption decisions and motivates Latin Americans to continue to moderate their spending. Downtrading has become a common practice in Latin America, characterized by the search for savings and a reduction in the average ticket. This did not sit well with merchants, many of whom were forced to compete with lower prices.
With that in mind, at Americas Market Intelligence (AMI) we analyze and compile the most striking trends for 2023 among Latin American consumers and the main players or sectors affected.
#1: Latin American consumers look to cut costs
The new normal and last year's financial crises led consumers to moderate consumption. This trend has reached global levels, to the point of changing even domestic practices: 55% of consumers say they reduce food waste, according to data from Euromonitor.
In Latin America, branded products have increased their prices by more than 20% between 2019 and 2021 (current prices), a situation that is even more evident in economies such as Chile, Argentina and Mexico. This has caused supermarkets, for example, to invest heavily in their own private labels to offer their customers low-cost alternatives to traditional branded products.
#2: Latin American consumers care about the environment
We could call "ecoconsumers" those consumers who care about the environment and who reflect this in their purchasing decisions. The most recent report by Who Cares, Who Does by Kantar (2022) indicates that this segment corresponds to 47% of consumers in Latin America. Of these, 14% are “Eco actives”: consumers who “feel an intrinsic responsibility to be sustainable” in their consumption decisions.
At the same time, Mercado Livre reports that the purchase of sustainable products increased by 29% across Latin America in 2022. And in countries like Mexico, for example, data from AMVO indicate that 58% of online shoppers would buy more if the products have eco-friendly packaging.
#3: Latin American consumers plan short-term travel
More Latin Americans are planning their domestic and international travel 0-60 days in advance. During that period, there was a 5% growth in travel planning in the last quarter, according to Expedia.
Even when traveling internationally, Latin American consumers plan their trips very closely. The search for international travel 22 to 30 days in advance had the highest regional growth of the quarter, of 10% compared to the previous quarter. On the other hand, in regions such as APAC and NORAM, the greatest growth was observed in the search for international trips with 61 to 90 days in advance (growth of 30 and 20%, respectively).
Latin Americans also have the highest proportion of consumers globally who plan their international travel with a time window of between 0 and 21 days (see chart below). This could represent an opportunity for travel agencies and airlines to offer "quick getaways" to the Latin American consumer.
Beyond travel planning, a new Visa study offers other insights that marketers can consider regarding trends among Latin American travelers. Some can help with target placement in campaigns, including:
28% of Latin American travelers choose their destination because it offers “new and exotic experiences”
27% of Latin American tourists prioritize “creating memories with family or friends”
25% of Latin American travelers are looking for new and challenging adventures and activities
Others Interesting points to study:
Dominican and Mexican travelers prefer to go to the USA
Argentine, Chilean and Peruvian travelers prefer to travel to neighboring countries
53% of Latin American travelers have an annual budget of US$ 4,000 for their trips
80% of these expenses are paid in advance and rest with cards credit
49% of Latin American travelers use online travel agencies to pay for their trips, 40% use airline websites, 38% use hotel chains and 28% use social networks, another example of the social commerce trend
#4: Latin Americans Prefer Digital Payments
As reported by the World Bank, “In low- and middle-income economies (not including China), more than 40% of adults who made payments to retail merchants in stores or online by card, phone or Internet did so for the first time. since the beginning of the pandemic.” Specifically in Latin America, 73% of the population already have some type of account and 40% of adult Latin American consumers make digital payments to retail companies. This situation was influenced by the COVID-19 pandemic; according to the World Bank, 14% of Latin American consumers made a digital payment for the first time during the pandemic and 15% paid a utility bill for the first time directly from their account. Regarding the latter,
According to the above, at least 35% of banks in Latin America declare to have an innovation area and 43% are updating their digital channels. Furthermore, a 112% growth in the fintech industry in Latin America between 2018 and 2021 was reported, reaching 2,482 platforms.
#5: Latin Americans are leaning towards free content for advertising
Online video has reached a penetration peak among Latin American Internet users, with 9 out of 10 consuming this type of content on free platforms such as YouTube and on social networks. Social networks reached 99% penetration among Internet users with algorithms that encourage video viewing; Also, its developers have embedded advertising in the feed or "infinite scroll" (slide down).
When comparing the previous numbers with the consumption of paid video on demand (Netflix, HBO+, Disney+, etc.), we see that this service has a lower penetration, equivalent to 70%, which remained stable between 2020 and 2022. According to Comscore, 35% of Latin American respondents are considering advertising in exchange for high-quality content, although 65% still prefer to pay without ads.
This is how Latin America is approaching a paradigm shift. Netflix has already launched a plan with advertising content in November 2022 in Mexico and Brazil. Other providers like Paramount+ or HBO Max have launched similar proposals in the United States, which would arrive very soon in Latin America; although in some cases they have the disadvantage of a price increase on ad-free plans.
Source: Americas Market Intelligence.