Ecommerce Investment

By: Nicolás Díaz

The Present and Future of Ecommerce in Ecuador

Everyone agrees that Latin American ecommerce is heating up, though some question whether the region’s politically and economically troubled countries will cash in. For many, Ecuador is at the top of the list of Internet laggards. Those who doubt Ecuador’s Net-potential point to the nation’s political instability, poor economic condition, low PC and credit card penetration rates, and high Internet access costs as the chief obstacles to ecommerce growth.

While there are impediments to Ecuador’s ecommerce development, the country also offers a number of notable opportunities. Many venture capitalists and expanding Internet multinationals see Ecuador as the perfect venue to kick-off a new Web enterprise. The bottomed-out but resurging economy and low cost of doing business that it has spawned top the list of reasons why Ecuador tempts entrepreneurs and swelling Internet companies. Moreover, Ecuador is an attractive stage for online ventures because unlike many countries Ecuador’s Internet market is still in its infancy. In Ecuador, intelligent entrepreneurs with good ideas face little competition compared to what they might face in the United States and Europe.

Due to the small size of the Ecuadorian market for ecommerce purchases, many business people see the future of ecommerce in the country from the perspective of exporting from Ecuador instead of selling to the local market.

When most people think of ecommerce, they think of companies like Amazon.com who sell retail products to final consumers. This model of ecommerce is called B2C or business-to-consumer. Depending on which research firm you ask, between 83% and 90% of all ecommerce is currently B2B or Business-to-Business ecommerce. There are substantial barriers to creating successful, large-scale B2C ventures in Ecuador such as transportation time and costs, difficulties of intercontinental customer service, and cost of returned items, to name a few. B2B ecommerce, on the other hand, is ideally suited for Ecuador’s profile of export products and currently inefficient marketing, sales, and logistics practices.

Ecuadorian ecommerce’s real potential lies in exporting via the burgeoning Business-to-Business (B2B) industry.

Until now most Ecuadorian ebusinesses have been relatively small Business-to-Consumer (B2C) undertakings. However, if ecommerce is to make a substantial impact on the Ecuadorian economy, the country must move quickly into the rapidly expanding international B2B market. B2B is flourishing because it is a highly effective way to find new markets and to make existing channels more efficient. Analysts project that B2B sales will reach 7 trillion by 2005. To put this figure into perspective, it is no less than the amount of the U.S.’s entire gross national product as late as 1993.

Ecuador’s most promising sectors for B2B growth are its historically powerful energy, tourism, agricultural, and food sectors, as well as the inefficient cargo and freight industry. PetroEcuador recently announced that it was considering selling crude oil and streamlining its procurement system via the Internet. The nation’s first large-scale B2B market place, Florastream.com, was launched by MetaMorf S.A.. in June 2000. Florastream.com is a virtual exchange that provides flower growers and flower buyers from around the world with a complete infrastructure for conducting business on the Web. More than 300 companies currently use Florastream, making it the Andean region’s largest B2B endeavor to date.

There is no doubt that B2B holds the most potential for Ecuador. The only question is who and how these virtual markets, consortiums, and exchanges will be developed. As Jason Halberstadt, CEO of MetaMorf S.A.., put its, “Flowers are just the beginning, we and others have plans to sell everything from fruit to shrimp online via various B2B business models.” Ecuador’s profile of export products are ideally suited for B2B. It’s predicted that by 2005, 60 to 70 percent of all food, agriculture, and petrochemical products will be sold via the B2B model. In an economical revolution of this magnitude, those that move into B2B first and do it with a solid business and technological model will be kings of the new Ecuadorian economy.