How important is e-commerce in Mexico?
In recent years, e-commerce has experienced exponential growth around the world, and Mexico has been no exception. With the advancement of technology and the proliferation of mobile devices, more and more people are choosing to shop online. In this post, we will explore the opportunities and challenges that e-commerce presents in Mexico, an emerging market with great potential.
The e-commerce boom in Mexico
Although the e-commerce boom in Mexico seems recent, the truth is that it is nothing new, in fact it is a path that has been forged for several decades. E-commerce began in Mexico in the 1990s, with the creation of subdomains and the need for companies that made digital transactions.
Today, it is estimated that the value of e-commerce in Mexico is 33 million dollars, which positions it as the second largest e-commerce in Latin America, only behind Brazil.
Although most of the share of the electronic market is held by three large companies (Mercado Libre, Amazon and Walmart with 15, 13 and 9 percent respectively) it does not mean that a good part of the Mexican population is not shy to buy from small and medium businesses, in fact according to El Economista digital sales of retailers and the retail sector have tripled the value they had in 2019.
Factors driving the increase in online shopping in the country.
Although the boom year for e-commerce was 2020, as a consequence of the pandemic, e-commerce continues to be a profitable business model for Mexican businesses. In 2022 alone, 63 million Mexicans made an online purchase, and have identified ease of use and home delivery as crucial factors for preferring this type of consumption.
E-commerce in Mexico is gaining ground in all socioeconomic levels and in all age ranges, as 76% of digital buyers range in age between 25 and 64 years, although young people between 18 and 24 years remain the main buyers.
Another factor driving e-commerce in Mexico is the Internet access at home, which in recent years had a considerable increase, according to INEGi by 2021 24.3 million Mexican households had an Internet connection, fixed or mobile; that is 64.4% of the country’s total, of course this facilitated the electronic market to extend beyond the big cities.
Opportunities for e-commerce in Mexico
The outlook for online commerce in our country is more than encouraging and will continue to grow, however there are some noteworthy aspects such as: greater participation of women than in traditional commerce or the new options for retail trade.
Largest market
In 2015 only 1 % of commerce in Mexico was done through the Internet. Sales and in general most of the volume of online shopping was only in large cities such as Mexico City, Monterrey and Guadalajara. However, the pandemic changed this scenario, as it forced more consumers to make their first online purchase, but it also forced parcel and logistics companies to expand coverage and improve waiting times. So, this is the main opportunity for those who want to start their business online, as there is an audience beyond the big cities that expects to make purchases in a simpler way.
Opportunity for women entrepreneurs
The ease of starting a business on the Internet is opening the way for women, and according to some statistics, women entrepreneurs are the ones who are taking advantage of the opportunities. According to a study by Alegra.com, 59.3% of the stores that have recently opened in Latin America are run by women.
The democratization of different platforms is one of the key factors to understand the increased participation of women in online businesses, however the most important factor is that most of the businesses run by women that succeed do so because they are based on a collaborative business model.
Challenges of e-commerce in Mexico
Undoubtedly, e-commerce in Mexico is a new opportunity for entrepreneurs and several companies, however there are still aspects that can stop or slow down its growth, such as:
Banking: one of the most important advantages of e-commerce is the ease of economic transactions. In online commerce, payments are made automatically, as well as refunds, and although there are several payment methods, most of them depend on the customer having access to a bank account. According to the National Financial Inclusion Survey 2015, 32% of the population in Mexico does not have any type of financial product, so this may be the main obstacle to buying goods and services online.
Logistics problems: Logistics and distribution continues to be one of the main problems for those who want to start an online business. The transition from traditional to e-commerce logistics is a more complicated process than many businesses expect and involves a greater investment of time and resources that many companies are not willing to make.
Another problem that online businesses face in achieving efficient logistics is that Mexico is a large country with a challenging transportation infrastructure. Even the south of the country has a marked disadvantage compared to the center or north of the country, as only 46% of the population has access to the Internet.
Consumer distrust: The third problem facing e-commerce is the Mexican consumer’s distrust of online shopping and payment security. The truth is that this fear is well-founded, as it is estimated that online fraud has grown by 400%, with credit card cloning being the most common.
Strategies to take advantage of the potential of e-commerce in Mexico
As we have seen throughout this article, the challenges for e-commerce are still many, however in recent years it has been shown that with the commitment of SMEs to improve their security systems and user experience, consumers are willing to continue consuming more and more in the digital market. Here are some of the strategies to continue to take advantage of its full potential.
Improve logistics and transportation
One of the main reasons why online shopping is preferred is because the purchase arrives directly at home, so improving delivery times and conditions, along with expanding new routes, may be the key for customers to prefer you over the competition.
Improve security and payment measures
To gain the trust of consumers, it is necessary to strengthen security and data protection measures. It is essential to implement multiple payment methods and a comprehensive and secure payment gateway.
We have seen that payment in e-commerce is one of the factors that most generates distrust, the solution to this is to implement several payment methods, in addition to card payment, especially cash payment, which is gaining more popularity. Also, implement a robust payment gateway so that any customer can complete their order online.
Improve the customer experience
A fundamental aspect for customers to continue preferring your online store is the design, so prioritize that it has an intuitive and simple design, and that it can be navigated from any device, remember that, currently, most purchases are made from cell phones.
E-commerce in Mexico presents a promising scenario full of opportunities for entrepreneurs and merchants. While there are challenges to overcome, such as logistics and consumer confidence, the continued growth of the middle class and increasing Internet penetration offer fertile ground for e-commerce in the country. With the implementation of appropriate strategies and collaboration among various players, Mexico has the potential to become a major player in the e-commerce arena. Now it’s your turn, tell us what do you think is the future of e-commerce in Mexico?