eCommerce handbook 2017

June, 2017

1

2017 eCommerce handbook key takeaways

eCommerce growthat 24% CAGRthrough 2020

global eCommerce sales worth U$1.9Tn in 2016 and

will reach U$4Tn by 2020

19M eShoppersin Mexico,

73% aged 22-44

eCommerce in Mexico is worth U$16Tn and is growing at 46% CAGR

Travel accounts for54% of eCommerce

in Mexico

eCommerce will account for 15% of total retail

sales by 2020

8% of eCommerce in Latam is rejected

by fraud (vs. 4.8% Europe)

53% eShoppersglobally by

2020

2

Average yearly spend per person

U$1,189

1.6 Billion people worldwide purchased products online in 2016

Total value

U$1.9Tn

People purchasing via eCommerce

1.6Bn

Penetration

of Internetuser penetration

39%Mobile

commerceGlobal eCommerce

22%

Source: eMarketer, August 2016.

3

Global eCommerce sales(US$ Bn, 2010 – 2020F)

24%CAGR

% of Total Retail Sales

Digital buyer penetration*

3.8% 4.4% 6.3% 8.7% 11.5% 14.6%

38.3% 42.3% 44.8% 47.3% 50.1% 52.6%

$476 $768 $1,234

$1,915 $2,860

$4,058

2010 2012 2014 2016 2018F 2020F

eCommerce sales, by region(2016)

57%22%

16%

2% 1%

Asia Pacific

North America

Europe

Latam Middle East & Africa

Impressive eCommerce growth worldwide

Source: eMarketer, August 2016. Note: *as % of Total Internet users.

4

US eCommerce sales, by category(2016, not including travel)

32%

19%16%

11%

8%

7%4%

2%

Other

Apparel & accessoriesComputer &

electronics

Auto & Auto-parts

Books, music & video

Food & beverage

Health & personal care

Toys & hobbies

US set to cross half a trillion USD in eCommerce sales by 2018

Source: eMarketer, February 2017. Note: *as % of Total US Internet users.

US eCommerce sales(USD Bn, 2016)

8.2%of Total

Retail Sales

$389Bn

77%Digital buyer penetration*

14%CAGR

2008-2020F

5

B2B eCommerce is expected to reach U$1.1Tn by 2020 in the US

Source: Forrester, April 2015.

88%of executives purchase business products online

93%want to seepeer reviews

92%want to view product in action before purchase

While purchasing products online, business executives are looking for:

24%33%33%41%43%47%51%

CorporateWebsites Salespeople Trade

Publications Conferences Distributors Word of Month Social Media

Executives locate the business products and services they need through:

65

eCommerce in Latam reached $37Bn USD in 2017

Source: eMarketer, September 2016.

Latam eCommerce sales, share by country(2016, % of total sales)

6%

9%

14%12%

17%

42%

Argentina

Mexico

Brazil

Colombia

Chile

ROLA

7

eShoppers GDP Population Internet Users

SmartphoneUsers

MM % of Int. users $USD Bn MM MM MM

Mexico 19 29% $1,144 127 65 53

Brazil 41 34% $1,775 208 120 64

Argentina 12 40% $583 43 30 16

Colombia 9 31% $292 48 29 19

ROLA 48 47% $1,254 164 103 47

Total Latam 129 37% $5,048 591 347 199

Latin America reached 129M eShoppers, 37% penetration

Source: eMarketer, November 2016. The World Bank, 2016. eMarketer, August 2016. AMIPCI, “Estudio sobre los hábitos de los usuarios de Internet en México 2016”, 2016. eMarketer, September 2016. eMarketer, April 2016.

8

$1.8 $2.9 $4.4 $6.5

$9.5 $12.1

$16.1

2009 2010 2011 2012 2013 2014 2015

Mexico eCommerce sales(USD Bn, 2009-2015)

Mexico eCommerce sales by category(USD Bn, 2009-2015)

0.1% 0.4% 0.5% 0.8% 1.0% 1.2%

16.4% 18.3% 23.0% 28.4% 31.3% 32.3%

% of Total Retail Sales

Digital buyer penetration*

54%46%Travel

Not travel

46%CAGR

The Mexican eCommerce industry is growing at 46% per year

Travel includes leisure and unmanaged business travel sales booked via any device.

Source: AMIPCI, “Estudio Comercio Electrónico en México 2016”, December 2016. Note: *as % of Total Mexican Internet users. eCommerce sales figures converted from MXN to USD using the yearly FX average.

vs.

73%in 2011

-

-

98

4%8%

12%12%16%16%18%20%20%22%24%

28%

42%

12345678910111213

Online product purchase by category, not including travel(2016, % of affirmative answers)

Apparel &accessories

Sports &wellness Computers Digital

downloads Electronics Furniture Jewelry &watches

Videogames

Books &magazines

Officesupplies

Eventtickets

Music &movies

TravelEquip.

Mexicans are purchasing a wide variety of products, content & services

Source: AMIPCI, “Estudio Comercio Electrónico en México 2016, December 2016.

10

eCommerce transactions vary by device in Mexico

Desktop SmartphoneTabletRank

Banking transactions eMagazines & eBooks Taxi

Airplane tickets Videos / Movies Music

Hotel reservations Entertainment tickets Food delivery

Groceries andhome appliances Music eMagazines & eBooks

Clothing Food delivery Entertainment tickets

Source: IAB, “Estudio de Consumo de Medio y Dispositivos entre Internautas Mexicanos”, 8th edition, March 2016.

1110

Research online & purchase offline(% of respondents)

24%24%28%35%

43%45%

34%36%

21%

43%

18%19%

Research online & purchase online Research online & purchase offline

Online is a core driver for online and offline commerce

Source: Google’s Consumer Barometer, 2014-2015; A.T. Kearney analysis. Note: Numbers do not add up to 100 because results are derived from a variety of samples.

1211

46%female

54%male

19MMexican online

shoppers

87%urban

73%aged 22-44

Most eShoppers are 22 to 44 years old and seek price

Source: AMIPCI, “12º Estudio sobre los Hábitos de los Usuarios de Internet en México 2016”. PWC Total Retail Survey (2016, ATKearney eCommerce Mexico 2016).

Key demographic for the Mexican online shopper(Millions of people, % share)

12%

19%

23%

45%

50%

69%

77%

Devices used to go online(percentage of respondents, 2016)

Smartphones

Laptops

Desktop computers

Tablets

Smarts TVs

Videogame consoles

Other mobile devices

13

Online & offline payment methods used by digital buyers(percentage of respondents, 2016)

PayPalDebit card

Personal credit cardBank transfer

Commercial credit cardMercado Pago

Prepaid cardGift card

Referenced bank transfer 12%14%

16%16%17%

27%51%

56%62%

9%10%10%

22%30%Oxxo

Bank deposit

7-Eleven

Pay on delivery

Pharmacy

Online

Offline

PayPal is the prefered online payment method for Mexicans

Source: AMIPCI, “Estudio Comercio Electrónico en México 2016, December 2016.

Main influencer for buying online(% of respondents)

36%

58%

48%

32%

16% 10%

Mexico USA

Convenience

Price

Other

1413

There is a wide variety of eCommerce platforms

Top eCommerce platforms(cloud-based commerce platforms designed for small

and medium-sized businesses)

Top eCommerce gateways(service provider that authorizes credit-card or direct

payments processing)

Source: SWS research, February 2017.

15

Online fraud is still higher in Latam vs. the world

Chargeback index on invoiced order volume Rejected orders

Latam 1.4% 8.0%

USA & Canada - 2.8%

Europe 0.8% 4.8%

Mexico 1.9% 14.3%

Brazil 1.5% 4.6%

Argentina 0.8% 8.2%

Colombia 1.9% 10.1%

Source: CyberSource, 2016. RSA Security, 2016.

Top merchant categories affected by fraud(2016)

46%

16%

13%

9%

5%

11% Airlines

Moneytransfer

Computerelectronics

GeneralRetail

Clothing

Other

1616

Accelerators Barriers

Weakening Mexican Peso

Wider banking and credit

card adoption

Greater smartphone/data plan affordability

Suburb growth and high levels of commuting

Investment by leading

multi-nationals Business model

innovationLack of clear cost

advantages for online shopping

Lack of supply chain and back-end

development

Lack of logistics

infrastructure

Cost of developing eCommerce

platform

Cultural preferences to

pay in cash

vs.

Source: A.T. Kearney, Kantar Retail Analysis.

Mexico has clear accelerators and barriers to be addressed

17

Shop Gateways CRM Market Places

Control +Visualization

OnlinePromotion Logistics

Tools needed to launch an eCommerce business in Mexico

Source: SWS Research, April 2017.

18

Mexico´s tech ecosystem has seen the rise of 100´s of startups

Source: SWS Research, April 2017.

1917

Cyber NovemberConsumers spent US$400 Bn Nov 16’

(100Bn more than 15’), hence the entire Christmas season will kick off

early November every year.

Real-time customizationJust as search results differ from one person to the next, 2017 will see the emergence of

an online shopping experience that is unique to each consumer.

Data-as-a-ServiceRetailers are working with data aggregators to

compile data on products: pictures, descriptions, price comparisons, specifications and comments.

Artificial Intelligence2017 will be the year where consumers will

have their first interaction with Chatbots. These will become as common as automated phone systems, only much more interactive

and interesting.

Shipping “Uber-ization”Smaller stores, local drop-off points and same-day

delivery. In 2017, many consumers will receive their first same-day delivery, whether at home, or

at a drop-off point of their choosing.

Predictive AnalysisBy exploiting the amount of Big Data collected

through customer interactions and profiles, merchants can use predictive analysis to better

understand purchasing habits, preferences, and, even their next purchases.

Unified CommerceInstead of adding a digital storefront to the

in-store infrastructure, merchants will instead integrate their stores (physical or digital) into a centralized infrastructure.

DisintermediationBuyers want to interact directly with brands and

retailers are being cut out of the equation. Automated processes and CRMs are used

more than ever to maintain relationships and to simplify the ordering process.

Global tech eCommerce trends to follow in 2017

Source: Absolunet, “10 eCommerce trends for 2017”.

2018

8 tech events to attend in 2017

Source: SWS Research, March 2017.

Premier event for the eCommerceindustry, with over 800 retailers and

400 companies attending.Boston, MA

14 July

IRCE brings together eCommerce industry leaders

from the largest online retailers.Chicago, IL

6-9 June

JulJunApr May DecNovOctSepAug

Programmatic marketing summit.Scottsdale, AZ

31st May

Immersive event bringing together commerce and creativity to explore

trends, opportunities and disruptions. Montreal, Canada

24-26 May

Design professionals from all over the world gather for the premiere design

conference.San Francisco, CA

29 August

Premier event for the eCommerceindustry, with over 800 retailers and

400 companies attending.London, UK

25-26 October

The definitive conference on conversion rate optimization

since 2010. Las Vegas, NV

19-20 April

20182017

Main Sources

Juan Saldívar Paula Velasco

Ari Davidoff

José Vázquez(Design)

Credits

SWS is a hands-on consulting firm specialized in disruptive and results-oriented strategy.Our client list includes global players and local industry leaders in search for solid futurepositions that embrace the powerful benefits the connected world can offer.

Focused on both the US Latino and Mexican markets, our strengths comprise provenexpertise in the telecom, media, marketing and digital space.

Rise Capital is a global investment firm that focuses on making expansion-stageinvestments in Internet businesses in Emerging Markets.

We back industry-leading businesses run by world-class entrepreneurs who attack largeaddressable market opportunities. Leveraging our experience as Emerging Market Internetoperators and investors, we strategically guide these businesses to scale.

info@sws.ms | sws.ms

info@risecapital.com | risecapital.com

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