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Avoid Hitting the ‘BRIC’ Wall: Local Payments Key to Entering Emerging Markets

December 2, 2011 By Souheil Badran
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The exploding economies of Brazil, Russia, India and China (the BRIC countries) have become very attractive to e-merchants looking to get in on the ground floor of these emerging markets. Despite the fact that internet penetration remains less than 50 percent in all four markets, the sheer population of these countries points to tremendous growth opportunity. With a combined e-commerce market value already exceeding $109 billion, the BRIC markets truly have nowhere to go but up.

The challenge for online retailers is in tapping the opportunity. Consumer payment preferences can vary greatly across each local region. As a result, successful market entry requires a specific, unique approach for each country that both caters to consumers’ current buying habits and plays well with existing protocols in each location.

Brazil’s Monthly Mind-Set
With nearly two-thirds of all e-commerce sales in Latin America originating from Brazil, this fifth largest country in the world is becoming a global economic powerhouse. While internet penetration in Brazil is currently less than 30 percent, about half of all users there say they've already made purchases online.

Brazilians prefer to make purchases via monthly, interest-free installments rather than traditional credit card payments. Well over half of all online card transactions make use of installments, which require localized payment programs with local processing partners. Merchants entering Brazil must be prepared to establish a legal local entity in order to participate or partner with a provider that has an established infrastructure to handle the process.

COD Still Reigns in Russia
While cash on delivery (COD) has all but completely disappeared in most Westernized markets, cash is still king in Russia. A general distrust of online transactions among Russian consumers and the desire to touch and feel products before buying has kept COD at the forefront and stymied e-commerce growth. However, the country already boasts the seventh largest internet user community in the world. This population will likely grow quickly as younger, more internet-savvy consumers come of age.

Credit cards account for only 11 percent of online purchases in Russia. While this number is growing, cash-based payments made through kiosk networks or online wallets such as WebMoney and Yandex are still preferred by more than half of online shoppers, especially for digitally delivered products and services. This marketplace demands a strong localized collections system for merchants looking to reach one of the most important e-commerce markets in Eastern Europe.

 

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