The e-commerce tsunami created by the pandemic earthquake has thrust both consumers and businesses into a new transactional reality. With 75% growth in e-commerce transactions in 2020 and 6% growth in 2021, home and garden retailers in Latin America continue to experience increasing pressure related to the arrival of global powerhouses like IKEA (Mexico, Chile, Peru ). , and Amazon’s regional expansion.
Although recent growth already indicated that all players needed to adapt and excel in the online environment, the rapid developments of the pandemic represented a hard landing for those players who took the time to act as many struggled to understand the needs and to meet consumer expectations. These expectations, along with pressure from new entrants who have immediate scale, consumer awareness and a strong reputation for e-commerce sales, are driving competitors to improve the online shopping experience offered and to invest heavily in improving both pre-sale and post-sale to invest -Sales experiences.
The socialization paradox manifests itself in the motives behind why shoppers choose online
The reopening of physical stores means that consumers experience different levels of comfort when interacting with other people. According to Euromonitor International’s 2022 online shopping survey in Latin America, a significant proportion of consumers who use online channels to target interactions with other shoppers (12%) or even with the sellers (11%) to avoid making a clear isolation decision. in physical stores. How do you lure consumers back into stores via in-store experiences when they want to avoid the very discomfort of human interaction?
Source: Euromonitor International Passport data, Home and Garden, 2022 Edition
However, the change in motif did not affect all areas of the house and garden equally. Garden products are usually presented in well-ventilated spaces or outdoors, which helps the e-commerce penetration spike to be noticeably smoother. Gardening saw growth of 9% in 2020 and 7% in 2021, all at constant levels.
During the pandemic, Latin American consumers also began to put their own DIY projects into practice, leading the DIY category to grow 22% at constant value — but we can see to what extent that growth was more dependent on the shift to the internet Shopping. Do-it-yourself is closely related to assisted selling as buyers need to ensure their home project is feasible while seeing the true colors of the home paint and the patterns of wallpaper or flooring. Physical interaction with products and sales advisors is therefore important – which makes the increasing reliance on the online shopping experience even more so.
There are other categories where consumers want to interact with the product in even more detail before deciding to buy it. Household goods and especially home furnishings fall into this psychology as they have a taste driven selling process that goes through a tactile or at least visual experience before the buyer closes the deal. The growth of online sales in these categories (in terms of constant value) made the difference between declining or maintaining stability, realizing small growth (household goods grew 3% and 4% respectively in 2020/2021; home furnishings grew by 1% and 4% in the same years). These categories in particular needed improvement in the online shopping experience as they became more and more dependent on e-commerce.
Breaking the physical barrier in the pre-sale phase
Regional leader Sodimac has launched its “Online Assisted Selling” and “Online Decoration Reviews” services in Chile, giving customers the opportunity to receive product, home design and decoration tips from experts via video call. Sodimac has also invested regionally in 3D visualization and augmented reality capabilities, providing its customers with tools to conduct a virtual product sample at home, so they can be sure it will suit their personal taste and the space available in their household.
Source: Google Play – App Sodimac Homecenter Colombia
Store locations and sizes pose additional challenges. With less space, companies cannot display their entire portfolio, resulting in less brand diversity on the shelves. The solution is that instead of showing many SKUs, companies offer consumers a physical space to test and feel their products and decorative furnishings, and encourage the completion of the sales process via the online environment where a larger portfolio is available. These Experience Centers, also known as Guide Shops, are key to cultivating consumers’ final purchasing decision for products that require more attention and are a central part of Sodimac Homecenter’s strategy.
Optimized logistics and technology: the recipe for a successful fulfillment process
MadeiraMadeira, one of Brazil’s newest ‘unicorns’, started out as an online-only store but has just opened its 110th brick-and-mortar store. The company acquired logistics start-up iTrack to monitor and manage deliveries and pickups, allowing the customer to track the process. It also founded the logistics company Bulky Log, as investment in distribution centers is proving critical to operating in large countries (like Brazil) that cannot centralize their logistics in a single city without compromising speed of service.
While MadeiraMadeira continued its expansion by opening a fulfillment center in the Northeast, another Brazilian player, Mobly, made a similar move and opened its fourth distribution center (the first in the Northeast) to reduce freight costs for consumers and handle around 30 % of its business in the region. Mobly also has its own logistics division called Mobly Log.
After facing a number of delivery time difficulties during the pandemic in Chile and Argentina, Sodimac also focused on improving its fulfillment process. The company invested in a new distribution center in the Santiago metropolitan area and is also building an additional distribution center for cyber sales events.
Latin American retailers are pushing their online businesses hard to stay afloat in the race for experience, but are facing increasing competition. New entrants like IKEA and Amazon, leaders in direct-to-consumer sales, are increasing the pressure on this formula, and as brands improve their services, the pace and scale of change will only increase.
Businesses pursuing the path to excellence in online selling need to gain a deep understanding of consumer behavior when shopping across different categories. Efforts made must bridge the gap between the digital environment and the physical purchase drivers in each category, providing a satisfying and fulfilling shopping experience at all stages of the customer journey.
For more insight, read our World Market for Home Improvement and Gardening report.