Can't Get Online, Can't Pay: The Rise of eCommerce in Mexico Despite Significant Challenges
When most people think of Mexico, they probably think of the beautiful beaches, the colorful history or the delicious cuisine. Rarely, however, are they likely to think of eCommerce. They aren't likely to do so because retailers attempting to grow their eCommerce operations in Mexico have long struggled to overcome two systemic and extremely challenging hurdles: limited broadband internet access outside of the main cities and limited usage of credit cards.
Most people in the US have come to expect access to a fast internet connection: a broadband internet connection is as close as any of the 15,000 Starbuck's stores, and in many cases, access is both unlimited and free. In Mexico, however, availability is much lower, and costs are much higher. Fewer than half the population (45%) has access to the Internet at all, and the World Bank estimates that only about 12% of the entire Mexican population had fixed broadband internet access at the end of 2015.
For a variety of reasons, credit card usage is equally anemic: in a country of 119 million people, only about 23 million credit cards are in use today. In contrast, there are just over twice as many adults in the US (250 million), but almost 30 times as many credit cards in use (644 million) as there are in Mexico. That's right: there are almost thirty times as many credit cards in use in the US versus Mexico, with only two times as many adults.
Think about that combination of challenges for Mexican retailers: shoppers can't reach you online, and even if they can reach you, most don't have a way to pay you. Not a very compelling mix…
An Indicator of Changing Times
And so it was with this background when, on October 27th, I had the pleasure of speaking at e-Retail Day in Mexico City. The event is an initiative of the Mexican Association for Online Sales (AMVO) and aimed at educating and promoting digital transformation for retailers. This initiative is one of the most important eCommerce events in Mexico, with more than 650 industry professionals coming together to discuss the future of the eCommerce retail industry. The popularity of the event is a reflection of the changing conditions for eCommerce in Mexico.
Mobile connectivity is on the rise across all of Mexico, and smartphone adoption is climbing as well. Mexico's mobile connection base will reach 90% by the end of this year, and over 70% of users accessing the internet will do so via smartphone, according to eMarketer. So it appears that connectivity issues are slowly but definitely being addressed and that they will soon be mostly overcome. Which still leaves the problem of online payments, but I believe that retailers are getting creative to overcome this problem. In December of last year, Amazon began offering gift cards that could be bought with cash at over 13,000 Oxxo stores across the country. Linio, a very large online retail presence, accepts PayPal and cash on delivery options at the same 13,000 Oxxo stores.
The list of retailers finding creative ways to open the online channel is growing every day. As a result, Mexico is now on the list of countries with the greatest potential in eCommerce across Latin America. For the first time, according to "The 2015 Global Retail E-Commerce Index" study, Mexico was ranked at among the top 20 global markets that are most attractive for electronic commerce.
A Gathering of Influencers that Can Affect Change
AMVO president Eric Pérez-Grovas is definitely bullish on eCommerce in Mexico. He said, "eCommerce in Mexico has enormous potential, but is underdeveloped as compared to other countries in the region with similar income. An event like the eRetail Day is an ideal place to discover and learn the opportunities of eCommerce and get in contact with vendors and experts on the matter. This is a forum that allows us to analyze and discuss growth factors, such as generating initiatives by banking institutions to strengthen the means of online payment…creating diversity beyond credit cards and integrating debit card or prepaid systems and electronic payment methods."
I must say that I, too, am bullish on the growth potential of eCommerce in Mexico. I am truly impressed by retailers' creativity and tenacity, and I am optimistic that expanding the eCommerce business will lead to benefits that reach far beyond the online channel. I believe that Mexican retailers that successfully catapult their online sales will simultaneously increase their stores' numbers thru the deployment of customer-centric convergence initiatives that provide a differentiated customer engagement experience across channels.
And so, despite the many challenges, I am truly inspired by the recent progress we have made in Mexico, and I can't wait to see what happens next.
Editor's Note: The Mexican Association of Online Sales (AMVO) is a civil non-profit organization founded in Mexico in 2014 with the aim to support and promote the development of Electronic Commerce. The AMVO brings together more than 130 Mexican and international companies (start-ups, retailers, marketing agencies, software vendors and eTailers) in the sectors of retail, fashion, travel, financial services, among others, seeking to develop its e-commerce knowledge and promote industry best practices. www.amvo.org.mx . In 2016, Aptos became an active member of this association to contribute toward the country's digital convergence evolution.
