Colombia - Commercial Guide

Describes how widely e-Commerce is used, the primary sectors that sell through e-commerce, and how much product/service in each sector is sold through e-commerce versus brick-and-mortar retail. Includes what a company needs to know to take advantage of e-commerce in the local market and reputable, prominent B2B websites.

Last published date: 2019-10-13
eCommerce eCommerce in Colombia has improved substantially within the last year. There were 30.3 million internet connections registered in 2017, a 6.4% increase over 2016. According to the Colombian Chamber of Electronic Commerce (CCCE), eCommerce grew at an annual rate of 64% in 2015 and represented four percent of Colombia’s annual economic output (GDP). Factors that are driving growth in eCommerce in Colombia, particularly in the B2C segment, include greater accessibility to web services (through smart phones, etc.) and an increase in online services, especially banking and online payment services. B2B eCommerce in Colombia is becoming more common but is constrained by poor infrastructure, especially highways that connect to sea ports, which complicates supply chains.
Table 1: Colombia eCommerce as a Percentage of Annual Gross Domestic Product (GDP), 2015-2017

YeareCommerce as a Percentage of Annual GDP
Source: Colombian Chamber of Electronic Commerce (CCCE)

The United Nations Conference on Trade and Development (UNCTAD) B2C eCommerce Index 2017, which ranks levels of eCommerce based on internet use, secure servers, and credit card penetration, among other factors, ranks Colombia 71st out of 144 countries, behind other Latin American countries like Uruguay, El Salvador, Argentina, Mexico, Panama and Ecuador.
Colombians’ preferred method of payment continues to be credit card and bank account debit, according to the CCCE. However, Cash on Delivery (COD) is a popular eCommerce trend in Colombia and the use of digital payment systems such as PayU is also common.
The main statutory provisions in Colombia for eCommerce are found in three laws: Law No. 527 of 1999 (the “eCommerce Law”), Decree No. 333 of 2014, and Decree No. 2364 of 2012. The eCommerce Law regulates information that is generated, transmitted, received, or stored through electronic, optical, or other similar means, such as electronic data interchange (EDI), the Internet, and email. The law also regulates other issues in connection with eCommerce.
In line with the precedent set by the original eCommerce Law, Articles 15 and 16 of Law No. 1676 from 2013 establish that documents or agreements that constitute guarantees upon mobile assets can be contained in data messages without losing validity or enforceability to the extent that there is evidence of mutual consent for the establishment of the guarantee on the assets. Similarly, Decree No. 805 of 2013 allows for merchants to keep their business and corporate books in data messages.

Decree No. 2364 of 2012 regulates all types of electronic signatures, whereas Decree No. 333 of 2014 specifically regulates digital signatures and certifying entities. The most significant contribution of these legal norms is to confirm the validity of digitally signed electronic documents, as long as they are verified by a certifying agency or a reliable and appropriate method to identify the signatory has been used.

On April 18th, 2016, the new electronic invoicing model adopted by Colombia officially went into effect. This new model is defined by Decree 2242 of 2015, which seeks to expand the use of electronic invoices in Colombia, bringing with it the benefits expected by DIAN (Colombia’s National Tax and Customs Directorate) both for those who invoice electronically and for those who acquire goods and receive electronic documents, facilitating the conditions of issuance and interoperability among all participants.

According to BMI Research, Colombia offers a weak operational environment for eCommerce, particularly because of poor internal transport networks that are underdeveloped and inadequate to meet demand, causing significant costs and delays to supply chains.

Smartphones are ubiquitous in Colombia and internet service is relatively affordable and fast. Wi-Fi internet connections are available at most coffee shops, hotels, shopping malls, and many retail outlets. These factors bode well for purchases made online and the future of eCommerce in the country. Many of Colombia’s major banks, such as Davivienda, are offering online payment apps for mobile phones that allow one-click payment linked to credit cards and bank accounts.

According to the “Mobile Commerce Study” presented by IAB Colombia and Mercado Libre, in Colombia approximately three out of 10 monthly purchases are made through mobile devices. Internet users in Colombia prefer computers to make purchases by 94% while 49% use smartphones. Only one in four buyers who have a tablet uses it to make purchases online. The recent trend in “mobile shopping” has seen strong growth in Colombia where smartphone penetration is higher than in many other countries in the region.

Despite a general mistrust of eCommerce in Colombia, the growth of internet connections and use of smartphones are allowing for an increase in online transactions. Colombians’ online purchases can be broken down as follows: Government (13%), Financial (17%), Communications and Technology (11%), Transport (nine percent), Other Services (three percent), Commerce (15%), Education (six percent), Public Services and TV Subscriptions (four percent), Health and Beauty (four percent), Housing (two percent), and Enterprise Services (seven percent).

Digital marketing in Colombia has exploded and changed the traditional marketing mix. The changes have been fast and today to reach upmarket and professional audiences the internet is a core part of the strategy. Tools like Google AdWords or social networks such as Facebook Ads are used in Colombia to launch simultaneous campaigns at affordable cost, reaching the people who meet the audience profile to be targeted. In Colombia, social media is used to promote eCommerce websites and is a powerful tool of communication that some companies use to reach customers and to position brands. Facebook, Twitter, Instagram, Pinterest and YouTube are the most popular.

Most of the users on Facebook in Colombia are between 25 and 44 years old. Instagram has been among the fastest growing social networks with 10 million active users, 8.2 million of whom are interested in content related to shopping and fashion, while 7 million focus on food and beverages. Twitter has five million users in Colombia and is used primarily to find out about transportation and entertainment; Transmilenio, Avianca and Tu Boleta (concerts and events) are the brands with the most followers.

Companies in Colombia can use online retailing to sell products of third-party merchants on sites such as Linio and Liniofashion and as a channel that allows them to reach a wider audience and create a stronger presence. The most prominent Colombian online commerce platforms include Mercado Libre, OLX, and Dafiti. Most Colombians are currently shopping directly from websites. However, this trend is changing because the younger generation is using social media like Instagram to buy online.

The most common eCommerce challenges companies will face when entering the Colombian market are the local payment methods (credit card, bank account debit, cash on delivery/COD, and digital payment systems such as PayU) and local regulation. According to Allpago, tighter rules have been introduced to regulate the industry. Institutions such as Incocrédito are highly involved in managing and monitoring merchant information to minimize fraud, as is the Finance Superintendence, which recently introduced a Financial Inclusion Bill. As an example, Decreto 587 from October 2016 lays out specific rules about chargebacks and the protection of the online customer.

Intellectual property right laws in Colombia do not provide adequate protection at international standards and need to be updated. The IPR regulatory regime for eCommerce in Colombia falls under the Copyright Law 23 of 1982; Decision 351 of 1991; Cartagena Agreement, decree 162 of 1996; and Trademark Rules decision 486 of the Cartagena Agreement.