Author: Annabel Thorburn, Director of Retail Services, eCommera
And whilst eCommerce still only accounts for a small proportion of overall retail sales (just 2% in 2015), Mexico is an exciting and dynamic market, with great potential for retailers across the globe.
The launch of a full Mexican Amazon site last year further underlines the market’s appeal, with regional marketplaces such as MercadoLibre and Linio experiencing particularly strong growth. As more and more businesses tap into the eCommerce opportunity, consumer attitudes are changing and trust in the online channel growing. This, combined with increased internet access and smartphone ownership in the region, all means that the Mexican consumer is more eager than ever to leverage the benefits of digital commerce.
So what do retailers need to know when considering expanding into Mexico? Despite the strong growth in eCommerce, the market is not without its challenges – including poor infrastructure and fraud. Here are five key considerations for those thinking about launching a presence in Mexico.
1) Consider if your brand is relevant in Mexico
First and foremost, be very humble in understanding if your brand is relevant in Mexico. Gain a thorough understanding of your target market there and understand what you need to do to make your brand relevant in the local market.
Think about what makes your customer experience better than your competitors. This might be in terms of the classic components such as price or service, or it might involve inventing a new type of experience (think Uber). If you’re looking for volume, focus on promotions and having an aggressive pricing and discounting strategy in place - Mexicans like deals and paying in instalments.
2) Don’t get caught out by hidden delivery charges
Despite several limitations in terms of logistics and infrastructure in Mexico, local consumers are becoming increasingly demanding and often expect 24-hour or 48-hour delivery, especially in the larger cities. New logistics networks such as iVoy.mx and convenience store lockers are helping retailers to meet these expectations.
However beware that delivery costs in Mexico are extremely high because they incorporate insurance payments due to security issues. This is less of an issue in larger cities, but outside of the main cities, you might end up paying $6-10 for delivery on a pair of jeans costing $20, so ensure you factor such costs into your plan.
3) Carefully consider which payment methods to offer
Until quite recently, everything in Mexico was paid in cash; but now things are becoming increasingly digitalised. As a result, debit now accounts for the lion’s share of transactions, as it is accepted by more and more merchants. However, fraud is a significant issue, with fraudulent transactions for new players accounting for around 30-40% of all online sales. As a result, retailers have to invest a lot of time and effort in improving security.
Consider which payment methods work best for your business and customer base. Many retailers have started using PayPal, as it means that they don’t have to pay for fraud. One of the most important options to offer is split payment – for 3, 6, 12 and 24 months – with no interest. And OXXO, which is the largest convenience store chain in Mexico, is still a relatively popular payment option too, allowing shoppers to go into the store to pay by cash.
4) Don’t ignore seasonal shopping events such as El Buen Fin
El Buen Fin is the Mexican equivalent of Black Friday, spanning a full weekend every November and offering shoppers the best prices from retailers all over the country. Hotsale, an online-only shopping event in June that originated in Argentina, is the next most popular event.
Such events offer retailers a great promotional opportunity, with Hotsale seeing sales growth of 147% across its three days this year. However be aware that many customers wait for such events to go shopping – particularly for electronics – which creates the same issues as Black Friday in the UK and US.
5) Don’t neglect the role of bricks and mortar
Despite the growing importance of the online channel, stores still play a fundamental role in introducing your brand to the Mexican market. Consider using a combination of flagship stores and extensive advertising to raise brand awareness. Collaborating with a local partner to run operations can work well, but ensure this doesn’t negatively impact your brand proposition.