Latin America Distribution Channel for Newbies
I often get asked the same questions when I attend an event with Latin American colleagues. These are the topics I believe most Latin American viewers would be interested in learning about. These are the questions I thought would be interesting to answer for anyone new to our channel in this part of the world.
What size is the market?
Latin America includes more than 20 countries and is home to around 550 million people. Their purchasing power isn’t as strong as in the USA and other developed countries, so they are more price sensitive. From a manufacturer’s point of view, the 5% rule is a good rule of thumb. The 5% rule states that your sales will equal approximately 5% of your USA revenue. This is not a set rule, and some companies may reach 10% or higher. However, it provides a good indication of the regional market.
Here are the specific markets: Brazil, Mexico (in descending order), Argentina, Colombia, and Venezuela. These six top countries account for 80% to 85% of Latin America’s total market. Depending on your beliefs, Brazil is the largest, accounting for approximately 45% of all Latin American markets. The remaining 15% to 20% of the call will be made up of all the countries that are not among the top six.
Is there a technology gap
In Latin America, technology was somewhat behind the times in the late ’80s to early ’90s. Although more mature markets were selling IBM ATs at that time, Latin America was still purchasing IBM XTs. This was due in part to a lack of awareness by the Latin American market about the latest technologies. Latin America has been up-to-date with the most recent product offerings from Asia, Europe, and the Americas since the late 1990s. Today, however, there is a financial gap in certain countries, not a technological one. What is a financial gap? It all comes down to purchasing power. If a bank branch manager makes $12k a year and orders 500 LCD monitors, they will choose the smaller size LCD due to the price difference. For a 500-unit deal, the difference in price is US$20. This is nearly equivalent to one year’s salary. The difference between an LCD monitor in the USA and other mature markets is US$20. Most consumers choose the larger, more expensive models, as US$20 is not a large amount of money.
Is this a sign that you will only sell older technology in this area? It doesn’t. The Latin American channel is very familiar with the latest technologies. This example applies to certain countries that may offer the opportunity to move products from your warehouse. But don’t treat Latin American customers as inferior technologically. This is a surefire way to get them to purchase your products.
Do customers expect credit terms?
The simple answer is yes. Many large and well-established companies are in the market, so they expect payment terms. Many will request 60-day terms based on the fact that the product takes longer to arrive. However, the vast majority of companies have net 30-day payment terms. You may be resisted by smaller companies if you offer cash. To protect their receivables against significant defaults on payments, most suppliers purchase credit insurance. You can also share credit information with other channels, such as the NACM (National Association of Credit Management), which monitors familiar customers and has a system to alert you if a customer falls behind with his payments with another NACM member.
Most suppliers who enter the market start with cash terms. They then offer smaller lines of credit as their business grows and they feel more comfortable working together.
Is it safe for me to travel to Latin America?
It’s like traveling to Latin America. There will be a crime in any large city, no matter if it is New York, Tokyo, or Mumbai. It’s essential to be safe, not to wander aimlessly in the streets or stand out from the crowd. It is not a good idea to wear expensive jewelry, watches, handbags, and handbags. It is also not recommended to take a taxi off the street in some cities, such as Mexico City. You can either have a customer drive or use a taxi from the hotel. If the designated cab arrives, they will ask you for your name. I have not had any problems in the 20+ years that I have been traveling around the region. This last line will probably cause me to be robbed on my next trip.
These are the questions I would have asked you. Although the answers are brief and direct, there is not much explanation or space for gray areas. However, it is necessary to do so for the sake of time. These topics could be explored in-depth, but that’s for another time.
For any questions or comments, please feel free to contact me.