The Land of Tequila, Chili and Chihuahua
Mexico offers many things within its magical land. Tacos, nachos, tequila, Chihuahua dogs and so much more. Tijuana and Cancun beaches have become the landmark for the country. Mexico is the home of wild fun, chilies and the world’s second richest person Carlos Slim after Bill Gates. Mexica is very famous for its night clubs, food and beverages but also its art. Frida Kahlo was a Mexican painter, Salma Hayek is a Mexican actress, Octavio Paz is a Mexican poet.
The culture of Mexico has many components sourced from the Aztec, Maya and Spanish cultures. The flag of Mexico tells the story from that culture. According to the story a tribe of Mexican people were looking for a home in early 1300s. They believed that their god Huitzilopochtli would show them a sign for their new home. They were supposed to see an eagle at the top of a cactus and that would be the place to build their city. But there is another speculation about the colors of the flag. It is said that red symbolizes tomato juice, green symbolizes lime juice and white symbolizes tequila which are all consumed together in the Mexican culture. Also the trademark of the country has become the Mexican Wave after the 1986 World Cup.
Let’s Learn About Mexico
Mexico has a population of 118 million and it is the most populous Spanish-speaking country in the world. Mexico grew 2.6 percent in 2014 and the recovery of the economy is promising. According to OECD’s report on Mexico, in 2014 the fiscal policy was expansionary but the fiscal stance will return to a neutral position in 2015 and will tighten in 2016 according to the foreseen fiscal framework of the government. Mexico exports 90 percent of its goods to U.S.A. and also the Mexican workers in U.S.A. create high returns to the country. The rebound of the economy of Mexico is due to factors such as diversified economy and foreign investment. Mexico is the second biggest economy in Latin American countries (LATAM) following Brazil.
Mexico provides a great opportunity in the online market. The growth will excess 20 percent and mobile is taking off. Cisco Systems stated that Mexico has a market with hyper growth. The broadband internet system has grown over 2,100% in only five years. Cisco is investing a big part of its LATAM investment budget to this market.
Mexico’s access to internet has an annual growth rate of 17 percent and has 45 million users with a 36 percent penetration rate. The E-commerce sales have reached 11,43 billion dollars in 2014 with a rise of 20 percent. The digital sales are expected to compound annually. The increase of the internet penetration has affected the online shopping positively and created a new purchasing habit which may lead to an explosion of E-commerce markets around the world.
The highest share of the online retail market of Mexico has been captured by the electronic retailers. Interestingly the 35 percent of Mexican online shoppers only make purchases from national companies which can imply that the familiar brands and physical presence of the companies are a part of their decision. Either way the market shares of the national companies can be hard to get for the new competitors in the market.
In the year 2013 the number of Mexican online shoppers has reached 8.4 million which are expected to grow more by 114% reaching 18 million online shoppers by 2018. Considering the average transactions of 952 dollars which is higher than Brazil ($741), Argentina ($428) and the LATAM average ($620) it is possible to say the uneven distribution of income in Mexico can explain these differences.
In the purchasing process Mexicans mostly care about the shipping information. The best promotions according to the Mexicans are free shipping or no interest payments for a period of time. Even though the investments are improving the delivery infrastructure it still needs to grow more. The payment methods are mostly by credit cards. There were 25 million credit cards and 98 million debit cards in the year 2012. The number keeps on growing due to the fact that average Mexican Internet users have at least 2 or 3 bank accounts. Even though there are security concerns about card purchases the online payments trend is likely to increase. Other payment methods are electronic money transfer (20%), cash on delivery (12%) and PayPal(16%). The variety in the payment methods can be a good way to capture new market shares.
Main categories in the online shopping are:
- Travel 36 %
- Financial 12%
- Media and Entertainment 11%
Online Retailers of Mexico
Without a doubt, today, supermarkets play an important role in Mexico’s trade. Soriana, in its field, has achieved tremendous sales; and over the years was positioned in the minds of consumers as number one. This goal has been achieved through the redirection of efforts towards the market target by implementing functional and innovative strategies. Another important aspect is that Soriana has the cutting edge in e-commerce. Forty years after its foundation the company goes far beyond the expectations of its founders and today is among the most important companies in Mexico.
El Puerto de Liverpool has retail stores and shopping centers located in Mexico’s largest cities. Technology, Sports, Home Electronics, Health and Beauty, Fashion and Baby care products are the main product categories. In 2013, the weakened consumer spending and increased competition threatened the business environment in Mexico. Liverpool responded these challenges by making a huge capital investment. In 2013 they invested $ 878 million in the technology platforms and supply chain in order to sustain the growth and development. They are aware that online-shopping has become increasingly important in customers preference. They invested cash to decrease delivery time and improve search engine of the e-commerce site.They are continuously looking ways to better their current business. They plan to open 40-50 stores more in 2015, which means a growth rate of about 70%. Sustainable profitability is one of the pillars of their strategic thinking.
Coppel – a holding with 402 outlets – has headquarters in the city of Culiacan. The company was founded in 1941. Coppel become one of the leading distributors not only in footwear, but also cell phones, clothing, televisions and furniture. Coppel is today one of the 50 largest companies in Latin America with higher sales than stores like Sears, Palacio de Hierro and Famsa. Currently the company has branches outside of Mexico in the countries of Argentina and Brazil.
More About the Market
Marketing and showrooming are important tools in terms of creating sales. Half of Mexican Internet users seek offers online in social networks and 57 percent of Mexicans are researching the products before buying. Channels such as the online shopping websites or the social media are the main sources to gather information for the Mexicans. It is important supply good content to create an active user community.
The increasing number of smartphones and tablets in Mexico is exceptionally big. It is expected to rise from the current 22.6% to 43.6% in 2017. Mexicans admit they would prefer mobile payments over the physical payments. Also the smartphone users purchase 3 times more things than uses with other devices.
The growing market of Mexico catches the attention of big companies too. The local companies such as Bodega Aurrera, Soriana, Chedraui and Oxxo are trying to diversify their customer base by going to the smaller cities. The country’s online sales are localized on the big cities mostly so to increase the customer number going local is a good strategy. Meanwhile the international companies such as H&M, Payless and Grupo Axo are opening physical stores in Mexico.
The key to success in Mexico is to identify the possible threats and opportunities. Some of the main issues are the low-income consumers, lack of confidence for the website security, low credit card penetration rate, limited marketing campaigns, undifferentiated pricing and promotions and high shipping costs. To solve these problems the companies can provide free shippings, create a better delivery infrastructure, differentiate their prices or do promotions and do the marketing for the campaigns. Also the low-income consumers could be attracted to low prices, free shippings and store credits. The website security could be improved and payment types could be diversified.
Mexico has a completely different culture and different life style. It is important to understand the target audience before entering the market. The country holds a lot of problems but also a great potential. There is a long way for Mexico to go but with the right planning and investments this market can become a valuable land for the whole world.
Nil Erden – Marketing Executive – firstname.lastname@example.org – Prisync.com
We, as Prisync team, will be covering e-commerce markets of different countries from all around the world and will focus on the insights that are specific to each respective market.