Why Latin America is Choosing to Buy Local
Faced with natural or social disaster, the human reaction we see during the first days or weeks is always the same: a contradiction between those that band together to help each other and those that are looking out for their own interests. Among the latter, we see social disruption, hoarding of toilet paper and sanitization products at the beginning of a pandemic, which are some examples of what have become postcards of the last ten years of Chilean history. But these acts of individualism taken to the extreme, have also triggered an opposite response that has opened the door to a society that acts in solidarity, with a strong sense of community.
The pandemics influence on conscious consumerism
As we moved to the next stage of the pandemic, we witnessed how Chileans’ consumer behaviour shifted from one that used to always prefer legacy brands to one prioritizing buying local or smaller. Why the change? The answer is twofold: 1) After experiencing a period of panic-buying wholesale toilet paper and sanitization products in early 2020, today they have become informed and aware of the consequences of their buying behavior. As a result, 85% declared that the pandemic has led them to limit food waste and 70% are making more environmentally sustainable or ethical purchases.1 2) The health, social and economic instability brought about by the pandemic has led many Chileans and Latin Americans to consider entrepreneurship as an option for generating income, and by becoming conscious consumers, choosing to buy local and small has become our way of showing solidarity.
Prior to COVID-19, we observed a trending preference for buying local and small by a more conscious consumer, and after the arrival of the pandemic, this trend has continued at pace. Today, 41% of Chileans have increased their purchases from small and/or local brands, while only 12% has declared to increase their preference for large and legacy brands. On the flip side, although 3% of Chileans has decreased their purchases from small and local, 28% has decreased choosing large and legacy brands. [i]
Social media’s role for small and local businesses
But reality says that to generate a sizable pull of entrepreneurship with a real chance to make a long-lasting impact, societies need more than just conscious consumer demand motivated by a pandemic that will eventually end. In juxtaposition, we see different fields of technology at the service of this trend that are helping to bridge the digital divide. On one hand, social networks have served as a showroom and foot traffic for entrepreneurship: 85% of small and medium-sized companies in Mexico use social media as a vehicle to sell their products, and this itself has meant that 75% of Facebook's ad revenue comes from these types of companies.[ii]
Latin America is a region with a high penetration of social platforms, but it also leads in time spent on them. If brands, big or small, can't find us there... then where? Social networks are becoming the place where users go in search of new products, without something specific in mind; window shopping has become screen shopping thanks to them, with the user carrying out their entire Consumer Journey online, from discovery to purchase.[iii] But small and medium-sized companies cannot just thrive and survive from the benefits of social media. They also need backend and frontend Martech solutions that easy to use and affordable. Among these, we now have several options of CMS platforms such as Shopify or Latin American unicorn VTEX, which facilitate the creation of online sales platforms, or fintech companies that democratize banking products for consumers and payment methods for brands.
What has been the response from large and legacy brands, especially big Latin retailers? If you can't beat them, join them. In the last few years, we have seen acquisitions of these technological partners by legacy retailers as their main focused to stay relevant. Falabella bought the Linio Marketplace, where 84% of its products are offered by SMEs.[iv] Ripley's response, meanwhile, hasw been to launch and strengthen its own Marketplace. And although Cencosud's strategy does not seem to follow this same tactic to the letter, its recent purchase of Cornershop is not far away either, whereby providing technological and logistics solutions for all types of companies, they have also managed to remain current in the world of entrepreneurship.
Brands that ask why consumers are moving towards more entrepreneurial brands, may need to stop seeing scale as priority, and position motivation as the key factor driving consumer intent.
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