Is the digital revolution really that far away for Chile and Peru?
One of the common themes from our recent study tour through Peru and Chile was the attitude many business leaders (and representatives) showed toward the digital revolution. This triggered me to think about how quickly i adopted the digital world and the massive impact it has had on companies who have failed to keep up with the tide. My initial hypothesis is that this complacency about the digital revolution is a little short sighted and might sting some of these organisations in the not too distant future.
In 2005 I was using a flip phone with the bare basic features (as measured in todays world), and at the time thought i was the “bees knees”. Within the next decade, my dependence on electronic devices, the cloud and other digital solutions has been tremendous. I have often reflected and been amazed at how life functioned perfectly without the instant gratification the digital revolution now provides society.
High Smartphone Penetration
One of the biggest drivers for the digital revolution is the smartphone. As the penetration of smartphones increases in the region, and low cost competitors (not Apple) continue to bring these handsets into the hands of the middle and lower classes (ie: the B,C,D,E groups of the socioeconomic pyramid), i expect that demand for digital solutions and eCommerce will explode.
Falabella continues to invest heavily in retail space citing the cultural aspects of shopping in malls for many Latin Americans as a big driver for this demand. The company has seen tremendous growth over the past decade and is continuing to expand aggressively throughout the region. When we spoke with the company representative in Chile, she noted that she didn’t see the digital economy as a threat to their business model due to the poor performances of the local mail systems (often taking up to a month to deliver a letter).
Granted that when i was exposed to the digital economy i was in Australia (a place where the postal service operates highly efficiently). Even though this was the case, i often found that many of the parcels i have been ordering online had been delivered by 3rd party couriers (rather than the government owned and operated postal service). Coupled with high smartphone penetration (noted above), a third party courier platform could completely disrupt the traditional means of shopping in Chile and Peru and significantly drive down the returns large retail organisations (such as Falabella) see in their operations.
There are a number of factors which will contribute to the success of these organisations going forward. While they understand their own regions far better than i do, i have experienced first hand how quickly life and norms can be disrupted by technology and the digital economy. I would encourage organisations in Latin America to be aware of this and build in strategies to address what i think will be a rapid adoption of digital platforms and sudden change in demand for eCommerce solutions.
