Ecommerce in Panama in 2024

Central America is currently positioning itself as an emerging ecommerce region, with rapid growth and an expanding market.

Known for its biodiversity and rich cultures, the region's developing economy and increasingly digitally engaged population present an attractive opportunity for online retailers.

Central America's unique market dynamics, along with increased internet penetration and consumer purchasing power, create fertile ground for ecommerce initiatives.

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Understanding the ecommerce market in Central America

With more than 60 million residents and over half of the population using the internet, Central America has the potential to reach a vast number of online consumers.

According to Statista, the figures seem to indicate that, although slowly, purchasing products and services online has already gained popularity in this region.

What are online shoppers buying?

Although the range of products available for online purchase is broad, fashion and technology are almost unanimously the most lucrative online categories in Central American countries.

As technology evolves, ecommerce is becoming central to the fashion industry, providing personalization and tailored results for digital shoppers.

Fashion-related online purchases generated around US$429 million in Panama in 2022, while in Costa Rica they reached as much as US$310 million.

The outlook is similar in Guatemala, aside from notable growth expected in the future. In terms of revenue, online food sales were forecast to surpass fashion by 2024.

The rise of online retailers

For many companies, the COVID-19 pandemic served as a catalyst for business digitalization. From 2020 to 2021, the number of companies selling online in Guatemala doubled, while by early 2022, nearly half of large and midsize companies in Honduras used ecommerce.

Online retailers in both countries primarily favored the open-source ecommerce solution WooCommerce to sell their products and services online, followed by the website building and hosting platform Squarespace.

In Panama, WooCommerce has also been the leading ecommerce platform used by online sellers.

Shopify and Wix also saw a larger share of online retailers using their platforms.

Ecommerce in Panama

According to data from EcommerceDB, Panama is the 65th-largest ecommerce market, with projected revenue of US$1,173.0 million for 2024.

Revenue is expected to show a compound annual growth rate (CAGR 2024-2028) of 7.5%, resulting in a projected market volume of US$1,566.7 million by 2028.

With an expected increase of 10.0% in 2024, Panama's ecommerce market will contribute to the global growth rate of 10.4% in 2024.

Electronics is the largest market, accounting for 24.0% of ecommerce revenue in Panama.

It is followed by Fashion at 21.1%, Hobby & Leisure at 21.0%, Furniture & Homeware at 11.2%, DIY at 8.5%, Care Products at 8.3%, and Grocery with the remaining 5.8%.

As part of our commitment to merchants in the region and to help you succeed in the region's ecommerce market, we at Tilopay have prepared this guide with essential tips and information for selling online.

How to succeed in Panama's ecommerce market

1. Understand consumers

The region's ecommerce market has evolved in recent years.

Today, it is a mature market that shares certain characteristics in terms of infrastructure and major shopping events.

Some of the main drivers for online shoppers in the region include competitive prices, the convenience of direct home delivery, and ease of purchase.

However, when choosing where to shop, consumers place a strong emphasis on simple, hassle-free return policies, exceptional customer service, and an overall satisfying shopping experience.

2. Operational efficiency

Consumers in the region are becoming increasingly price-conscious.

A recent survey indicates that most online shoppers are actively trying to reduce their spending due to current economic uncertainty.

Achieving operational efficiency will be key for your business to remain competitive and maintain a healthy profit margin.

Reducing failed transactions by increasing approval rates and controlling the costs associated with each online transaction are crucial to the profitability of an ecommerce business.

Here are some key factors to consider and strategies for managing these costs:

Transaction costs

Payment processors such as Tilopay, PayPal, Stripe, and others charge a fee for each transaction, which generally includes a percentage of the transaction amount and a fixed fee. It's important to understand these fees and how they affect your profit margin.

If your transaction volume is high, you may be able to negotiate lower rates with payment processors. Comparing providers and choosing the one that offers the best rates and terms is an effective strategy.

Shipping costs

Consumers love free shipping, and it is a key factor when deciding whether to purchase a product online.

That benefit comes at a cost to your business, including fees based on the product's weight, destination, and delivery speed.

If you handle a high volume of shipments, you may be able to negotiate lower rates with carriers such as UPS, FedEx, DHL, and local postal services. Some carriers offer volume discounts or special rates for small and midsize businesses.

Using appropriately sized boxes and packing materials can reduce shipping costs. Smaller, lighter packages cost less to ship.

To reduce shipping costs, try in-store pickup. It eliminates delivery uncertainty and is a very popular option among Central Americans.

Return costs

Returns can be costly. Implementing a clear, precise return policy and offering incentives for in-store returns (if you have a physical store) can help minimize these costs.

If you use warehousing and fulfillment services such as Amazon FBA, understanding and optimizing these costs is crucial. Maintaining efficient inventory and avoiding excess stock can significantly reduce storage costs.

Customer acquisition costs

Although they are not directly part of the transaction, customer acquisition costs from marketing and promotions can affect your profit margin. Optimizing your advertising campaigns and using more effective digital marketing strategies can reduce these costs.

Controlling the costs associated with each online transaction requires balancing customer satisfaction with profitability. With careful management and a well-designed strategy, you can significantly reduce these costs and improve your ecommerce business's profit margins.

Despite this shift toward more frugal spending, online consumers continue to show strong spending behavior.

3. Focus on reviews and free delivery

Investing in customer feedback and reviews, along with optimizing delivery services, is important for online retailers targeting the Central American market.

Reviews and ratings tend to significantly influence purchasing decisions, with nearly half of online shoppers checking them before deciding to buy.

The importance of efficient fulfillment processes cannot be overstated.

However, delivery efficiency is equally vital. Customers expect timely delivery, and any delay can significantly impact their trust, potentially discouraging future purchases or brand loyalty.

4. B2B commerce: the big opportunity

The B2B ecommerce sector in [country] is considerably larger than B2C. This substantial growth in B2B is largely driven by consumer ecommerce trends, leading to significant investments in digital commerce technologies.

The COVID-19 pandemic further accelerated this growth, with a significant annual increase in B2B online sales.

The future of ecommerce in Panama

Success in this market will depend on understanding consumer preferences, achieving operational efficiency, and adapting quickly to trends.

Ecommerce in the region has a promising future. Companies that focus on these trends are well positioned to capitalize on continued growth and emerging opportunities in Panama.