Product Delivery: The Ugly Side of LatAm E-Comm

MIAMI (03/03/2000) - Bad roads. Byzantine customs regulations. High transportation costs. Inefficient postal services. Excessive tariffs.

Those are some of the barriers to product delivery and fulfillment affecting Latin America's nascent e-commerce market -- barriers that many Internet companies in the region, especially startups, don't take into account when launching their companies, speakers said at Latin Venture 2000 here during a panel discussion.

"Many dot.com startups downplay how complex the fulfillment and distribution is in Latin America," said John Menna, division marketing manager for the Americas region at United Parcel Service of America Inc.

The delivery and fulfillment barriers in Latin America add cost and delays, two elements that run counter to the e-commerce experience.

"People who buy online want things (delivered) fast" with reliability and at a good price, Menna added.

Thus, these barriers discourage Latin Americans from buying online, and vendors from making their products available in countries where they don't have local operations, speakers said.

Courier companies lobby governments for improvement, but consumers and businesses need to speak out and demand the elimination of protectionist customs regulations and tariffs, said Francisco Santeiro, managing director of global trade services for Federal Express Corp. (FedEx).

"Customs clearances present a real barrier to e-commerce in Latin America," Santeiro said. "Consumers have to fight against this. Join us in the effort."

Governments also need to adapt to the faster pace of the new economy, he said, adding that there are countries in Latin America where customs clearance is only granted during weekdays.

Latin America's problems don't do much to entice U.S. retailers, many of which simply don't ship abroad products bought online, including Gap Inc., Bloomingdale's, L.L. Bean Inc., and eToys Inc., thus preventing Latin Americans from buying products they may not be able to get locally, said Peter Weisberg, co-chief executive officer of Skybox.net, a company that specializes in delivery and fulfillment to Latin America.

FedEx, UPS and Skynet all belong to an organization called CLADEC formed in 1991 to improve Latin America's import/export regulatory environment. CLADEC is the Spanish-language acronym for Latin American Conference of Express Companies.

"Net consumers in Latin America must call for reform and convince their governments to change," Santeiro said.

In the meantime, there are Latin American e-tailers, such as El Regalo.com Inc., that need to do business today and have decided to build their own fulfillment and delivery infrastructure in the countries they do business in.

By having a fulfillment and delivery infrastructure in place locally, El Regalo can guarantee a delivery time of no more than four days, said Abraham Chihebar, the company's managing director.

El Regalo currently sells a variety of retail items, such as books, flowers, toys and food via the Internet in Uruguay and Colombia, and plans to set up shop in Puerto Rico, Chile, Argentina, Brazil, Venezuela and México, he said.

Market researchers forecast a significant increase in online sales in the region in the coming years, but they also point out that e-commerce barriers must be overcome for this boom to materialize. Business-to-consumer online sales are expected to reach US$8.3 billion in 2005 in Latin America, up from just $194 million in 1999, according to Jupiter Communications Inc.

Latin Venture 2000 ends today. More information about the event can be found at http://www.latinventure.com/.

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