September 2011

In Latin America, a little respect goes a long way

By Ari Kertesz and Bernardo Neves

Latin America is the world’s second-largest emerging market. The combined GDP ($3.2 trillion) of its 571 million people in 20 countries and territories corresponds to 80% of China’s, with about half its population. While Latin American consumers do not get the headlines of those in China or India, it is still a massively important market.

For retailers, whether local, regional or multinational, the biggest draw is the region’s large population of relatively wealthy consumers. GDP per capita is almost $8,400—triple that of China and seven times that of India. That purchasing power is widely distributed, too, with two-thirds of all consumers characterized as middle class and 25 percent belonging to the upper class. McKinsey has found that in many cases retailers are not meeting the needs of Latin America’s burgeoning middle class. This is not so much a matter of what is on sale, but how it is sold. There are three major complaints.

The retail experience

A per capita GDP of $8,400 is not lavish; most Latin Americans have to work hard and spend carefully to make ends meet. And when they shop, they want the experience to deliver some of the ease and convenience that the rest of their lives may lack. Consumers place a high value on factors like breadth of choice and in-store ambiance —routine attributes in developed markets, but less so in Latin America. Long  lines, poor service, a lack of credit options, and the need to pay for extra services are common—and too often make shopping a shabby experience.

 In a survey launched by McKinsey in partnership with the Coca-Cola Retailing Research Council, four out of 10 said they have “stopped going to a  store because of a bad experience.” Done right, grocery shopping can be a form of entertainment—44% said it was one of their family’s favorite activities--and retailers who recognize this will benefit.

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