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A Deep Dive Into the State of Colombia’s E-Commerce Sector

Over the past decade, Colombia's economic boom has been more than just surprising. It's been historic. Part of the country’s economic turnaround can be attributed to its burgeoning e-commerce industry. Follow us as we take a deep dive into Colombia’s e-commerce sector and analyze its growth.

Written by Sergio Granada

Online Sales

Colombia’s e-commerce industry is expanding at breakneck speed.

In 2018, online shopping increased 24.5% — one of the highest growth rates worldwide — and continues to climb, with experts predicting a 19% increase in online sales over the next five years — almost twice the global average.

What’s more, forecasts for 2021 expect the country’s online sales to double, jumping to $118 billion.

Momentum Shift in the Overall Economy

Colombia’s e-commerce sector, which in 2018 represented about 1.5% of Colombia’s economic output, is buoyed by overall economic growth and a budding consumer class in the Andean nation.

Before the COVID-19 pandemic, Colombia’s Gross Domestic Product (GDP), had been on a steady increase since 2017, growing 3.3% in 2019 according to the International Monetary Fund (IMF).

At the same time, the middle class — especially in urban areas — is growing, and poverty rates have decreased from nearly 50% at the turn of the century to 27% in 2018, according to the country’s statistics agency DANE.

Colombians are also increasingly gaining access to financial services to help formalize their growing wealth as well. As of 2018, 83.3% of Colombians counted at least one financial product, and 100% of municipalities in the country had received some form of financial coverage, according to the Inter-American Development Bank.

Digital financial services, such as Nequi and PayU, are relatively new to the market, however, increasing access to technology and the internet will fuel their adoption.

Internet Penetration

Colombia’s jump in online sales is also footed in a speedy adoption of the internet across the country.

Today, out of Colombia’s roughly 50 million inhabitants, about 35 million are using the internet. In other words, the country has an internet penetration rate close to 70%, and the share of people going online is growing fast: In 2019, the number of internet users increased by 9.7%, a trend that is likely to continue while the economy continues its upward trajectory.

According to the U.S. Commerce Department, online sales in Colombia improved substantially last year. Growth drivers are greater accessibility to web services, for example, through smartphones, and an increase in online services, such as banking and online payment services, it said.

It’s important to note that connected Colombians shopping online tend to purchase mostly clothing and footwear followed by consumer electronics and entertainment, while experts predict home improvement and gardening, home furniture and video games to be the fastest-growing product categories for Colombians in the coming years.

Rappi: The Colombian eComm Unicorn

In early 2015, three Colombian entrepreneurs launched an on-demand delivery service. Their intent was two-fold: Take advantage of the increased cell phone and internet penetration in the region, as well as an abundance of informal low-wage workers in the country.

Three years after its founding, Rappi reached unicorn status — being valued at over $1 billion and the company currently counts over 100,000 contractors delivering everything from food to household items in countries like Argentina, Brazil, Chile, Mexico, Peru, Ecuador and Uruguay.

The company, along with other e-commerce disruptors like ride-hailing app Uber, have sparked a regulatory debate in Colombia and around the region about labor rights, transport laws and e-commerce statutes, which is ongoing.

This homegrown unicorn is a testament to the burgeoning e-commerce market in the country, and could be a sign of the fruits of Colombia’s steady economic growth over the decade, its increased technological penetration as well as its growing consumer class.