Mexico’s e-commerce sector is on a steady incline. According to the Mexican Internet Association’s latest available data, the Mexican e-commerce market was valued at $21 billion in 2017 and grew at an annual rate of 20%—a fact not unnoticed by e-commerce giants, and one, in particular, is willing to invest heavily in the growth.
Amazon’s Mexico Growth
In August 2019, Amazon inaugurated its biggest distribution center in Latin America. With more than 100,000 square meters, the new center located in Tepotzotlán, Cedis, is Amazon’s third in Mexico. According to Euromonitor, Amazon led Mexican e-commerce for the second year in a row at the end of 2018, with 36.54% of market share compared with 35.26% for Mercado Libre and 15.38% for Walmart.
Amazon’s last Prime Day saw record sales during the two days of the event (July 15 and 16) with customers purchasing 175 million products. If you’re looking for a sign to start expanding into Amazon Mexico, this may be it.
Mexico is an emerging market heavy-weight. Using purchasing power parity which accounts for exchange rate changes over time and adjusts for government manipulation, Mexico’s GDP in 2018 was $2.6 trillion.
Mexico’s output was much less than its primary trading partner, the United States whose 2018 GDP was $20.5 trillion. However, it was still larger than the other North American Free Trade Agreement partner, Canada whose GDP was only $1.9 trillion. While Mexico’s geographic size is equivalent to Saudi Arabia’s, it supports 5x as many people (over 120 million) while only exporting 25% of the oil.
Mexico is a young country with 50% of the population in their 30s or younger. Given their affinity for the latest tech and willingness to explore new purchase options, Mexico’s youth is a favorable factor for e-commerce growth.
In 2008, Mexico’s Internet penetration rate was 30%, or 27.6 million people. In 2018, according to data from the Consejo Nacional de Población (Conapo) and el Instituto Nacional de Estadística y Geografía (Inegi), the rate has climbed to 67%, representing 79.1 million Internet users.
Apparel and electronics make up a large portion of consumer purchases online, an easy opportunity for international sellers. Where things begin to get more difficult is the payment side.
While we’re used to paying with credit cards in the US, Mexico’s shoppers still prefer cash transactions. Understanding this, Amazon in Mexico began accepting cash payments in 2017 at several convenience store chains, including 7-Eleven. Earlier in 2019, the marketplace giant announced that it will be accepting cash payments at Mexico’s top corner store chain, Oxxo.
Partnership with Oxxo opened Amazon to 18,000 stores, and now payment gateways, across Mexico where nearly 60% of the population lack bank accounts.
The numbers say “yes, expansion to Mexico is absolutely worth it!” Mexico is a young nation that promises accelerated growth. Getting in early can be a huge payoff. However, it won’t come without work. This isn’t a path that’s been paved and you’ll still need to figure out the shortest path to profit for yourself.