E-commerce continues to expand in Mexico

E-commerce has evolved rapidly in recent years, companies of all kinds have been encouraged to explore the opportunity outside traditional stores. Electronics, clothing, self-service and furniture businesses have found a great space on the Internet; with challenges, but also with many opportunities.

E-commerce continues to expand in Mexico
E-commerce continues to expand in Mexico

E-commerce is in its infancy in Mexico and has great growth potential, "it is still in a spectacular moment, we are about to explode, to see the best," says Jose Ramon Alonso, CEO, and founder of TuGow. "Two years ago when we started the market it was greener. Amazon was entering Mexico, Mercado Libre was in a restructuring of its entire system. We believe that Mexico is about to experience the best part of e-commerce business," he says in an interview with Economía Hoy.

The study Venta Online en Mexico 2019, conducted by Netrica by Netquest, indicates that in 2017 only 7% used e-commerce on a weekly basis, during 2018 that figure rose to 38%.

In the country, e-commerce continues to grow at double digits annually, it was growing at levels of 50% until 2016 and from there it has been advancing to levels of 20 or 25%, said Francisco Belgodere, CEO of Banwire: "It continues with a very good growth dynamic.

Fernando Álvarez Kuri, Kantar's vice-president, also contemplates an important growth in e-commerce. "Many of the barriers that were around this, reliability or the danger of data, have been overcome, these types of perceptions have been significantly reduced," he says in a telephone interview. "We are at a developmental level and it is growing significantly, we believe there is still room to grow. As we see the trends and the movement year by year, we believe that we can continue to grow at double digits in an important way," he adds.

Without fearing the current competition or the imminent arrival of Ikea in Mexico (with whom they share a little of the business model), the founders of TuGow furniture responded to the mistrust, one of the fears of online consumers, by opening a showroom and a strategy of digital content made "at home" to corroborate that this is a serious company.

Banwire's executive points out precisely the lack of trust as the main challenge of e-commerce. "We remain the OECD country with the highest rate of online fraud, the highest number of cases of identity theft. That's a noisy business," he says.

Netrica's survey points out that the reasons for purchase are receiving home purchases (58%), saving time (53%), finding more promotions and discounts than in the physical store (48%); they also highlight the ease of comparing prices and variety (47.4%), and finding products that are not available in the physical store (47%).

Francisco Belgodere sees in delivery a great opportunity for e-commerce, because he believes there is room for action to strengthen it with "smarter ways". "We depend on being at home to receive the package you buy, or on receiving it at the office. There is not yet a chain, a network built of places where you can pick up your purchases," he says in an interview.

Today only Amazon has implemented a distribution network through Oxxo convenience stores for payment and delivery of purchases made on their platform.

The market is getting used to buying online, to know all the security around the purchase and this benefits the online stores. José Ramón assures that another of the great challenges to be faced in e-commerce is logistics, because although companies have made great strides and there are more and more allies, there are still opportunities to meet the needs of customers who are behind computers or mobiles.

"For us, it has been a challenge to find Mexican suppliers that are aligned with e-commerce. There are many and very good ones, there are huge factories in Mexico; but they are very used to supplying retail customers, to working and delivering in one distribution center. And e-commerce requires other needs," adds Jose Ramon.

"What is happening in Mexico I experienced before in Colombia, Chile, Brazil, Russia," says Yannis Guillemet, co-founder of TuGow. "I think Mexico is about 8 years behind in comparison with countries like the United States, Germany, France, and England, which are the countries that sell the most in e-commerce worldwide," confesses Yannis in an interview. "But that is a super opportunity, because it means we have a couple of years of growth assured. In addition, since Mexico is a large country, it attracts a lot of attention to investors.

Another area of opportunity that TuGow's founders envision for e-commerce in the country is growth related to financial inclusion. "It's true that not everyone in Mexico has debit or credit cards, but as banks implement their strategies to increase charging, the growth (in the number of potential e-commerce customers) will continue for a longer time. The work of the banks will benefit the future," says Yannis.

José Ramón points out that "for those who do not have credit cards we have the option of offline payments, SPEI transfers or going to deposit in an Oxxo, for example. The tools already exist, they just need to communicate more and more customers to try them out". "As soon as you make a couple of purchases online you realize the whole situation. Then it's just a matter of time before the market gets used to it," adds the furniture store's CEO.

For TuGow's investors, it's only a matter of time before more and more people are confident about shopping online. Banwire's CEO also sees in the banking the main barrier, although he says that "the CNBV, the Bank of Mexico and the AMB have put the focus and have begun to walk on regulatory issues that are evolving e-commerce in Mexico, demanding information security levels of international standards.

Francisco Belgodere points out that another major challenge to be faced is bank acceptance, "today - according to data published in the Bank of Mexico - only 59 out of 100 times pass the credit cards when you are buying online. He says these are dramatic figures, because "it means that businesses do all the work of attracting the customer to the site, to keep him or her and make a sale - at the price the customer wants, that he or she is willing to pay, that he or she puts in the right method of payment, that it works all the time - and that 4 out of 10 fall down, because it's a whole issue.

Kantar's vice president agrees that bank acceptance is a barrier between consumers and e-commerce, although "we see that banked and unbanked people keep coming in, it's always like one of the main barriers. The payment mechanisms around this".

Fernando Álvarez Kuri adds in an interview to Economía Hoy that "today there is a 40% probability that you will join the world of e-commerce and this probability can increase significantly if you improve navigation, the design of the sites and make sure that there is a correct functioning and a clear guarantee in the delivery times, etc.

In the study 'eCommerce on', Kantar identified that time, money and effort are the elements that buyers consider most important when making a purchase online, not only in The Good End or The Hot Sale, which are issues that consumers always consider.