The Potential Boom of Mexico’s E-Commerce
:: By James Story, Search Laboratory ::
While the U.S. proves to be at the forefront of e-commerce traffic and digital transactions, the same cannot be said of its neighbors, Mexico.
While Latin America is seeing digital business-to-consumer sales increase online, Mexico has been unable to fully capitalize, though its national market is brimming with economic potential.
Increasing Online Availability
The simplest way for Mexico to boost e-commerce turnover is to increase Internet availability to its residents. Mexican President, Enrique Peña Nieto, recently announced the federal government is expecting to surpass its goal of setting up 100,000 free Internet hotspots across public areas in Mexico by the year’s end.
With the country currently housing 65,000 broadband hotspots, 96 percent of the more than 2,000 municipalities in Mexico have at least one hotspot available to its residents. President Pena Nieto reiterated the importance of internet access in Mexico, stating:
“It is not enough anymore to be able to read and write, it is not enough anymore to speak a second language.
Today, it is important that everyone know how to use, and has access to, information technology, to the Internet... so that all the people may expand their knowledge and growth options.”
Preferred Payment Methods
Despite increased Internet access, e-commerce sales in Mexico still make up a small proportion of total retail sales for the country.
2015 is forecast by eMarketer to see only 1.5 percent of the country’s expected $386.6 billion of retail sales to come from e-commerce and though double digit growth is forecast for the future, Mexico’s e-commerce is set to contribute just 2.6 percent of the country’s retail sales in 2018.
A hindrance to e-commerce growth is the preferred payment methods of Mexico’s citizens. Most payments are made with cash, through convenience stores such as Oxxo, wherein printed vouchers for their online payments can be scanned and processed.
Combining this with the country’s preference for debit rather than credit cards (meaning a much lower capability to carry out international purchases), Mexico is inevitably held back by a lack in diverse online sources of payment.
Slowly Increasing E-Commerce
While overall growth seems slow, online shopping is gaining an audience as more than half of online sales are made by Mexico’s three largest cities (Mexico City, Guadalajara and Monterrey).
Non-material purchases such as travel arrangements are purchases that Mexican citizens are comfortable making online, with travel comprising 36 percent of internet sales. However, inconsistent distribution networks have discouraged the purchases of consumer goods, particularly outside of large cities.
One company that has taken advantage of Mexico’s online potential is Walmart. By offering same-day delivery to customers that lack other online grocery options, Walmart has targeted wealthier citizens and dominated the Mexican market, making up a colossal 92 percent of all physical goods purchased online (including Walmart’s local subsidiary, Superama).
Growing Smartphone Market
The largest increase in Internet adoption is easily the Mexican smartphone market, which more than doubled in 2012 and has seen steady growth to 28.7 million smartphone users at the end of 2014. eMarketer forecasts that by 2018, 40 percent of Mexico’s population will use a smartphone, comprising 62.6 percent of the country’s total mobile phone audience.
If smartphone providers can find ways to attract lower earning citizens (which has previously been a problem due to low market competition) and boost their online activity, a larger number of non-affluent customers could start to build confidence shopping online.
Perhaps the biggest factor in helping Mexico’s e-commerce market grow is the confidence its consumers have in online payment options. If a greater number of citizens can adopt digital wallet services such as PayPal, and online payments become more secure as more of the population adopt smartphones, the country’s e-commerce market will blossom.
Bio: James Story is a Content & Online PR Executive for Search Laboratory, an award winning digital marketing agency with over 200 clients in 18 countries worldwide.