Sarah Elizabeth
Ecommerce in Peru is a fairly recent phenomenon, which can be attributed in a large part to the pandemic. The country went from cash-in-store only to 28% in ecommerce growth almost overnight. Today, Peru is the 47th largest ecommerce market in the world, just ahead Greece and behind New Zealand.
It’s an incredible opportunity for retailers, but it also opens the door to ecommerce fraud—especially with so many new and naïve online consumers.
Ecommerce merchants need to think about how they can take advantage of this expanding market while protecting themselves and their customers from fraud.
Peruvians Are Embracing Ecommerce
In 2019 only 1% of Peruvians shopped online, and ecommerce growth wasn’t expected to be much more than 30% in 2020. But by the end of 2021, Peruvian ecommerce consumers accounted for 43% of the population, making Peru the fifth largest ecommerce market in Latin America, just behind Colombia.
The pandemic completely transformed how Peruvians make purchases, setting the stage for even more growth: Industry experts project that ecommerce’s share of retail in Peru will hit 10% by 2024. While 10% doesn’t seem like much, keep in mind that it equates to 42% growth and the equivalent of US$28.2 billion in total sales.
Let’s take a deeper look into the Peruvian ecommerce shopper.
Peruvians Are Predominantly Millennials and Technology-Enabled
By all measures, Peru is a country of middle millennials—the median age is 31.6, and over 41% of the population is between 18 and 44. Ecommerce business have decades of potential within Peru, as long as they understand those markets and what make them different.
In our original research, State of Consumer Attitudes Report 2021, we found that millennials and Gen Z consumers:
- Shop online more often.
- Expect a high level of personalization.
- Are open to mobile payment options.
Growing internet adoption
Peru’s younger population helps contribute to the country’s rising internet adoption. Between 2021 and 2022, the number of internet users increased by 233 thousand—and over 65% of the population is on the internet. (Peruvians spend more time connected to the internet than Colombians and Chileans.)
Where are they spending their time online? Peruvians love their social media and access it almost exclusively on their smartphones. This is a massive shift from before the pandemic, when Peru had the lowest smartphone usage among Latin American countries.
Today, the Peruvian Chamber of Ecommerce, CAPECE reports that Peruvians shop online through three main channels:
- 58.6% of ecommerce purchases were made using a smartphone
- 40% of ecommerce purchases were made using a desktop
- 1.4% of ecommerce purchases were made using a tablet
The chasm between mobile and desktop continues to widen, making it imperative that online stores be optimized for the mobile experience—a “mobile-first” approach will the key to success.
Peruvian Ecommerce Is All About Retail
The biggest online businesses in Peru are local, and retail is the main industry with 53% of the market share.
The most visited eMarketplace sites for retail include:
- Mercado Libre
- OLX
- Linio
- Falabella
- Ripley
- Platanitos
- Wong
- Rosatel
But that’s not the only category that appeals to Peruvian ecommerce consumers. The most popular products based on market share are:
- Furniture & Appliances (23%)
- Toys, Hobby & DIY (21%)
- Food & Personal Care (19%)
- Electronics & Media (19%)
- Fashion (18%)
Peruvian Ecommerce Is Moving From Cash to Credit and Beyond
Most online payments in Peru are made with cash or credit cards, which means the country has a large amount of card-not-present (CNP) transactions.
And the division between cash and credit falls in line with the rest of Latin America, where most transactions are still cash-based, but credit card transactions and even digital wallets are growing in popularity. Before the pandemic, just 12% of credit card transactions were made online and that has grown to 45%.
When ecommerce businesses look at the type of payment options to offer in Peru, they should still take into account generational factors.
For instance, Gen Z and millennials are more likely to adopt new payment types faster. Our State of Consumer Attitudes on Ecommerce, Fruad & CX 2021 Report revealed that these generations tend to default to digital wallets. While those options may not be available in Peru right now, smart retailers will think ahead and be prepared to offer them in the near future.
The same applies to checkout pages, which play a significant role in the overall customer and user experience on a retailer’s website. The more online businesses are ahead of the curve when it comes to Peruvian payment methods, the more successful they will be.
The Biggest Fraud Risk in Peru Isn’t Fraud
Because there are still so many cash-based transactions in Peru, fraud is generally under control and not at levels like they are in Mexico or Brazil.
In Peru, the average fraud rate is about 1%. Even if every customer initiated a chargeback, Peruvian ecommerce retailers would still be at the threshold for most credit card companies’ chargeback rate. (Of course, not every fraudulent transaction result in a chargeback.)
However, another reason why the fraud rate is so low is merchants are so concerned about fraud, they use strict filters and restrictions that cause automatic rejections.
And this results in false declines … at a rate of 30%.
The types of transactions that are being declined are what many retailers in other parts of the world would simply investigate or even approve:
- A gift purchase for someone who lives downtown Lima by someone who lives in the countryside
- An international credit card
- A purchase of more than $200
These are all examples of transactions that could be automatically evaluated with strong machine learning and either flagged for secondary review or approved.
Another concern has to do with Peru’s young population.
False declines cause a lot of frustration for anyone, but especially for younger generations who have little to no patience for them, as we discovered in our research:
- Almost half of consumers under 40 will simply stop shopping at a store just because of a false decline.
- 33% of them will take to social media and complain.
Why? Millennials and Gen Z know there are about a dozen other business who sell the same or similar products, so they’re happy to take their money elsewhere. And because they are on social media so much, it only follows that they would naturally leave a bad review or a negative comment.
This puts ecommerce businesses in Peru in a bit of a bind:
- They face a large number of inexperienced ecommerce shoppers.
- The characteristics and patterns of these shoppers put them at a higher risk for automatic declines.
- If they are falsely declined, the potential lifetime revenue of that customer—and a swath of their followers—is gone forever.
Companies have to think about all of these factors when developing a fraud prevention and protection strategy.
Choose the Best Fraud Prevention Solution
If you’re considering an ecommerce presence in or currently selling into Peru online, you’ll find a multitude of opportunities. But remember to create a comprehensive fraud strategy that is thorough enough to detect fraudulent transactions without turning away valid customers.
At ClearSale, we help companies enter new markets with ease. Online businesses count on us to help them find the balance between fraud prevention and false declines. Contact us today to find out how we can work together toward success in this burgeoning market.
