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.