eCommerce is starting to gain momentum in Mexico. According to the estimates by eMarketer, the Latin American country is expected to be one of the fastest-growing markets for B2C eCommerce in 2014. The independent market research company calculated that sales would increase by 20% this year, which is almost equal to US$11.43 billion. Sales would continue to expand at a 17.6% annual growth rate up till 2017, pushing the total to $15.11 billion by the end of the company’s forecast period.
One of the biggest reasons behind this growth is the increasing internet user base. Numbers show that 21.3% of the population (10.4 million people) have web access now, which is more than the 16.5% recorded in 2013. Of this 21.3%, the Competitive Intelligence Unit (CIU) reported that 71% have at least made one digital purchase, starting from ringtones to other micro-purchases.
Interestingly, most digital transactions have been made through computers rather than mobile devices. CIU reports that 84% of eCommerce and internet users in Mexico used computers whereas 22% relied on mobile phones, 7% on tablets, and 1% on video game consoles. These statistics shouldn’t come as a surprise considering that Mexico is yet a developing country. CIU pointed out that computers reign eCommerce operations because the Mexican population still distrust security of mobile devices and don’t have much experience handling them. However, buyers may start shopping with their devices before sealing the deal on their computers.
One of the first companies to tap into the growing eCommerce power is the Mexican branch of Wal-Mart. Despite a 1.3% drop in revenues due to a countrywide economic slowdown in 2013, the chain recovered this year through its online shopping services. By offering same-day delivery and extending the same advantage through its local upscale subsidiary Superama, Wal-Mart has been able to ensure that 92% of Mexican retail purchases on the web belong to both. Online shopping further pushed the performance of physical stores; more than 50% of the population have started shopping from Wal-Mart, making it the highest-earning supermarket and a top contributor to total retail revenues at 61%.
With such a warm welcome, Wal-Mart intends to triple the number of its stores by the second half of this year. This way, it can provide grocery deliveries quickly to its online shoppers, as well as an extensive consumer electronics stock. The U.S. based retailer also plans on opening a few dark stores – retail outlets that exclusively handle online orders and act as an order fulfilment platform – in 2015. With limited Amazon’s services in Mexico, and eBay took its first steps last week, Wal-Mart may successfully dominate the market. It’ll even profit immensely as its pickers, i.e. the people in charge of assembling online orders and at times providing customer support, are paid $360 a month while deliveries cost $1.5 per delivery. Additional costs like health care and fuel are covered by the delivery men themselves. Wal-Mart is also installing in-store costumer service modules for eCommerce clients to address a better UX.
Other companies are bound to jump on this opportunity as well, especially U.S. based ones. Fredjoseph Goldner, CEO of Aeropost, told the audience of Multichannel Merchant’s Growing Global conference that Mexico among other countries has a predisposition towards U.S. merchants. “[Latin countries] have good logistics, and in Mexico in particular most of the transactions are in cash at the store or through consumer financing. It’s a great market, and a piece of the eCommerce pie no one is paying attention to.”
With internet users expected to reach 78.2 million in Mexico with new telecom reform, online retailers and eCommerce website owners are bound to make a handsome profit. In addition, going the delivery duty paid (DDP) route will be very helpful as consumers hate paying more on delivery and the experience of delivery duty unpaid (DDU) since it’s a hassle going to the post office to pick their purchases and pay by cash. Still, Mexico´s banks and authorities have set plans for increasing access to credit card to lower income population.
Now, maybe B2B and B2G eCommerce will follow the path of the growth. And if NAFTA can go further, maybe eCommerce will become a regional indicator of growth.
Photo credit: Sleepy beagle dog in funny glasses near laptop by soloway / Bigstockphoto.com
The economic transformation brought on by President Enrique Peña Nieto’s energy reforms are expected to impact more than Mexico itself. Different countries, including the United States, welcomed the changes, especially as they allow foreign investment in energy sectors after more than seven decades of nationalization. However, while opening many doors to Mexico’s northern neighbor, California especially believes that it will benefit the most from Mexico’s unique opportunity due to its location and commercial ties.
In August, the Mexican President and California’s Governor Jerry Brown shared the stage to discuss different aspects, mainly business opportunities. Peña Nieto’s visit was expected after Brown traveled south on a trade mission in July, accompanied by many business representatives and lobbyists who eagerly paid to tag along. State energy officials are quite optimistic about these visits, especially after the president signed legislation to facilitate investment and development in both the electricity and oil and gas industries, and considering the high energy potential of the country. “These energy reforms significantly alter the structure of Mexico’s energy industry,” they said. “California’s innovative policies send a clear signal, provide incentives and generate market demand.”
California Energy Commission (CEC) Chairman Robert Weisenmiller and the California Governor’s senior adviser Michael Rossi believe that California has many companies which can help Mexico effectively carry out its reforms while reducing emissions and promoting the use of renewable energy sources. “By doing so, California and U.S. energy companies will create more jobs and tax revenue on both sides of the border and build an even stronger economic partnership,” Weisenmiller and Rossi said. Mexico has made a plan to reach 35% of electric generation with clean energy by 2024, and so opportunities abound for developers and technology companies.
Having strong ties with Mexico is also important for California due to trade. The Latin American country is the state’s largest export market. In addition, two-way trade between both reached more than $60.1 billion in 2013, a number which Weisenmiller and Rossi believe would grow now that both regions are closer than ever. “The energy reforms in Mexico allow for this collaboration to continue and result in greater economic growth and the achievement of climate and clean energy goals on both sides of the border.”
Energy and trade relations aside, the electronics industry at both ends is bound to expand in the future. While Californian companies build the components of cellphones, computers and other electronics, it is actually Mexican factories that assemble the final products. International trade advisor Jock O’Connell from Beacon Economics pointed out, “Largely because of the very high cost of doing business in California, we don’t make an awful lot of consumer goods. It tends to be stuff that goes into stuff, the components that go into more complex products.” This expansion is inevitable as Mexico’s workforce has grown more skilled. In addition, after recent Chinese government crackdowns on American companies, many are expecting California to limit its focus on trade with China to concentrate on its new Mexican ties.
Though California seems to be the most eager for ties with Mexico, the United States as a whole would benefit from its southern neighbor. Despite dealing with migration and drug issues, the U.S. cannot deny that Mexico is the world’s eighth largest producer of automobiles and fourth largest IT exporter. It is also growing into a world-class aerospace and electronics manufacturer, a feat possible due to the United States’ support and exports.
With so much to offer, California and other states are bound to update their views of Mexico. The Golden State has already taken a positive step during Brown’s trade mission by striking an educational exchange agreement, which is a first of its kind between the Mexican government and an individual U.S. state. However, this is just one step in a longer journey that would result in stronger ties between the neighbors now that Mexico has evolved into a willing and able economic partner.
Last visit of Eric Garcetti, LA Mayor brought a share of the new Mexico City airport (US$9 bn) to Parsons Corporation, one of the LA Firms that came with economic mission. So, the question is how far California and Mexico want to be integrated.
California Green Road Sign and Airplane Above with Dramatic Blue Sky and Clouds by Andy Dean Photography
Photo credit: Infinitum box by Alberto Esenaro
#HackTelecomMexico is a series of posts exploring the new Telecom Bill, in discussion at the Mexican Congress. Follow the series here http://mexicanlawblog.com/tag/hacktelecommexico/
“In Law, deadlines are fatal”, you learn that in Law School. No matter what type of process, they are fatal. Here is another one. “Due process of law”. Any act of authority has to follow rules according to statutes.
I do not have big data validation to back this up, but due process of law is the first cause of rants for non-lawyers in Mexican telecom industry.
Now, the proposed telecom law is in debate at the Congress, and there should be also a debate on the process itself. Here is why:
1. According to the new telecom law, any legal gap in process would be fulfilled by the following laws: General Ways of Communications Law, Administrative Proceeding Law, Code of Commerce, Federal Civil Code, Federal Code of Proceedings, in that particular order.
2. On the other hand, the authority and proceedings for telecom antitrust are relied on the recently published Competition Law (to be in force next July 7, 2014).
3. Then, the new Competition Law, fulfills its legal gaps on the Federal Code of Civil Proceedings. The Administrative Proceeding Law expressly excludes antitrust matters from applicability.
4. To add elements, the IFT is the exclusive telecom regulator and telecom antitrust body. Cofece, as transversal antitrust body, constructs the antitrust regulation, except for telecom. However, at some point, its construction will still influence construction of IFT on telecom antitrust. Litigators will sure invoke that.
5. It also means that IFT cannot accumulate cases that have regulation and antitrust components so easily. Such accumulation would require neurosurgeon precision for following due process of law for both.
6. Now, courts specialised in telecom and antitrust are constructing law and could decide up to what extent IFT has to follow Cofeco criteria and resolutions. Case law will increase at fast pace.
7. Finally, new competition law provides for a mechanism to define jurisdiction on matters that could fall into telecom or general antitrust, i.e. Media and other tech convergent industries. In this age, most businesses are tech convergent. Controversies between those bodies are ultimately decided by specialised courts.
Are you following this maze?
Now imagine issuing an antitrust opinion for participation in tenders (TV tender dates were revised today), which would follow antitrust proceeding, and the granting of the respective title, which would follow telecom regulation proceeding.
Then, add up the construction for determining and applying preponderant, dominance, essential inputs and entry barriers regulations to the tender. This is not an easy ride.
Maybe is time for STEM lawyers to step up. Trust me, it will be fun and there will be profit.
According to research from Futuresource Consulting, consumer spending on video and TV entertainment in Mexico reached USD 4.2 billion in 2013, recording a 9% growth. The company is also optimistic and expects more growth this year, enabling the market to reach USD 4.5 billion in 2014.
The company’s senior market analyst Joanna Wright commented, “2013 was an extremely strong year for pay-TV in Mexico – growing by almost two million subscribers (+14%), with consumer spend reaching USD 2.9 billion and a further 10% growth expected in 2014.” She later added, “This has been driven by an increase across all platforms, as digital cable grew by 790,000, satellite homes 630,000 and IPTV 60,000.”
The Mexican government takes pride in its creative industries as they contribute to the country’s economic development, producing over 500 billion USD annually. The industries also provide numerous job opportunities while making use of state-of-the-art technology before introducing them to parallel industries.
A 2011 ProMexico report called the Roadmap for the Creative Industries predicted this growth earlier. According to the document, the film subsector will grow due to the increase and implementation of 3D titles whereas online and mobile device games will display the highest growth. Meanwhile, the music market will improve due to more digital distribution. Combined, this subsector was expected to grow at 4% between 2009 and 2013.
As for television, TV advertising was expected to be slow since it is recovering and adapting to the new, very young consumers. Despite falling at a rate of 11.9% by 2009, the subsector was expected to recover by 2013. On the other hand, the internet was expected to thrive thanks to higher download speeds, richer content, and better upload speeds. As a result, the subsector’s global market forecasts predicted a growth of 9.2% until 2013.
Unfortunately, while the packaged video market is a significant Mexican sector that has held up well so far, it’s starting to suffer. It recorded its first two-digit decline last year. One of the reasons behind this is Blu-ray’s enhanced performance, which led to a 15% growth rate by 2013 and the title of the fifth largest market globally.
Digital video also performed extremely well in the past year, growing by 91% to USD 86 million. Come 2018, the industry is expected to double its worth to reach USD 360 million, especially due to the high demand for subscription video on demand services (SVOD).
Wright says, “SVOD accounted for 66% of overall digital spend in 2013 and with 70% growth expected in 2014. Key drivers of this growth were the introduction of Netflix in 2011 and new entrants to the market in 2013 helping further raise awareness of the service. As the broadband infrastructure improves, SVoD services have the potential to generate significant consumer spend in Mexico.”
The predicted numbers can either go higher or down depending on the changes the Mexican telecom reforms will create. However, even then, due to the increased competitiveness in the market, the creative industries will thrive.
#HackTelecomMexico is a series of posts exploring the new Telecom Bill, in discussion at the Mexican Congress. You may follow the series here http://mexicanlawblog.com/tag/hacktelecommexico/
Virgin Mobile announced the launch of a MVNO in Mexico by Q2 2014 partnering I-New (“MVNO-in-a-Box”) and under the infrastructure of Telefonica, Recently, Virgin announced the appointment of Cecilia Vega as CEO, so the launch is pretty close.
Telefonica has been backing a few MVNOs like Maxcom and Coppel, but since December 2011, I have been following the launch of Virgin Mexico, which I consider a key metric of this market.
The arrival of a new mobile (even a MVNO) will put some pressure on quality and prices to current operators. Virgin Mexico could ignite a series of effects to the industry. These are some possibilities:
1. A British Invasion. Big telecom companies like BT and BBC have operations in Mexico. However, the successful landing of Virgin Mobile could validate the market for other UK telecom companies. Think Cable & Wireless, Easynet, Thus, Vodafone, Freeview, BSkyB or ITV. Virgin, BBC and BT could escalate business, too. After all, there are some tenders like TV and satellite, rulings and other conditions that could make Mexico attractive to them.
2. The Resellers Revamped. Resellers have been an on/off discussion for regulators and operators. A MVNO is a reseller of mobile minutes under its own brand. The authorisation of Virgin could force IFT to issue an upgraded regulation for resellers, and find an appropriate model. Resellers are pushed by operators, competitors and customers. They indirectly invest in active telecom infrastructure, and need to profit from the network under fair conditions. An ignition to the reseller market could happen if regulation learns to read the market.
3. The Talent is back. This phrase of Richard Branson could inspire this market: “Train people well enough so they can leave, treat them well enough so they don’t want to”. Before 1997, long distance service was exclusive to Telmex. Many companies invested into the market to get a juicy share. Not many survived the IP and P2P. Sunken investments did not stand a chance to get a ROI. Same happened in other services. That, combined with lack of competitive conditions and other factors led to M&As, bankruptcies and talent rotation. Some talent went indie or rogue. Training was left behind. Now, market is growing and law is opening opportunities, so things could change. A mix of veterans and rookies is a to-do for any company trying to grab the market.
These possibilities need big data validation. However, the sole fact of a major brand jumping into Mexican market, makes the investors wonder: Should this market be invested?