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The Mexican economy experienced strong growth in 2021, due in part to the US government’s aggressive stimulus measures. However, the growth rate will slow down in 2022 and remain sluggish in 2023-2026, due to weak institutional effectiveness, a global economic recession, the ongoing conflict in Ukraine, and President Andrés Manuel López Obrador’s resistance to many of the reforms from the mid-2010s. This will limit the potential of Mexican economic growth, especially in consumption.
Economic forecasts for Mexico have been adjusted downward due to these factors, with 2023 GDP forecasted at 0.9-1.6% by different organizations. The retail sector will be negatively impacted by the weak economic growth, with consumer confidence dropping to its lowest in 17 months in August (rising slowly throughout to year end.). Retail sales growth will be hindered by high inflation and interest rates. While record-breaking inflows of remittances from Mexicans and Mexican-Americans living in the US will partially offset the negative effects of inflation.
The demand for e-commerce remains high, with sales growth outpacing overall retail sales expansion. The sector has significant scope for expansion, assuming that logistics and supply chains continue to improve. Major e-commerce retailers in Mexico include MercadoLibre, Walmex, Inditex, and Amazon, which became the largest online retailer in the country in 2017 but was surpassed by MercadoLibre during the pandemic, according to data from Euromonitor. Walmex recorded a 36% increase in online sales and 40% in GMV in 2021, while Liverpool recorded a 20% rise. More retailers are expected to offer online purchase and delivery options, and new e-commerce startups will be established.
Walmex, the Mexican subsidiary of Walmart, is the largest private employer and main national retail player in the country. With close to three thousand stores, it has refocused its sales efforts towards its core food sector and developed its online presence, resulting in a 9.4% increase in sales in 2021. However, its dominant market position has caught the attention of the competition regulator, Comisión Federal de Competencia Económica (Cofece), which announced an investigation into possible monopolistic practices by Walmex in November 2020.
Despite the investigation, Walmex’s leading market position is unlikely to be threatened. Soriana is the second-largest retailer in the country with 807 stores, while Chedraui is the third-largest player with over 300 outlets and plans to expand further in 2022.
However, most of them are now finding stronger growth in their online channel, competing with pure-play online marketplace e-commerce like MercadoLibre and Amazon, which has long dominated the online space. This trend is mainly driven by some consumers sticking to their shopping behavior change during the pandemic.
Department stores in Mexico include Liverpool, Coppel, El Palacio de Hierro, and Sanborns. Despite investment in digital sales channels, sales contracted sharply in 2020 due to the pandemic. However, all of the main retailers are investing more in expanding their digital sales channels, as the pandemic has increased demand for delivery services. The Asociación Mexicana de Venta Online (AMVO) reports that e-commerce revenue grew by 27% in 2021 and that online retail is expected to account for more than 3% of the total retail market in 2022.
Chilean home-improvement chain Falabella, are also investing in their online presence. Falabella entered Mexico in 2018 and purchased Linio, a Mexican e-commerce firm, in the same year.
Plague of Fraud: Fraud continues to be a persistent issue in Mexico’s e-commerce industry, causing many consumers to be wary of using credit and debit cards online and instead opting for cash-on-delivery. To address this, e-commerce companies are making efforts to assure customers of the security of their transactions. In 2020, click-and-collect services became widespread. With the outbreak of the pandemic, many stores began offering the option of ordering online and picking up the items in-store, often without the need for physical store entry. This trend was observed among both grocery and non-grocery retailers. Click-and-collect is often favored by older consumers who still have some level of mistrust in e-commerce, partly due to concerns about fraud.
Strong Adoption of Smartphones: The widespread adoption of smartphones has been a key factor in the growth of e-commerce businesses in Mexico. The COVID-19 pandemic has further accelerated the use of these services, particularly for grocery delivery. With growing familiarity, the usage of e-commerce services is spreading to older and lower-income segments of the population.
Growth in Last-mile: The pandemic has led to a surge in various forms of grocery e-commerce, particularly in the last-mile delivery sector in Mexico. Key players in this sector include Cornershop, Rappi, and Mercadoni. A major grocery retailer, Soriana, has joined forces with Cornershop to provide delivery services
Rise of Social Commerce: Walmart’s Superama grocery store format launched a unique form of e-commerce in 2019, which quickly became popular among Mexican shoppers. It accepts orders through the messaging service WhatsApp, offering a convenient home delivery option with a personal touch through messaging rather than app ordering. The service was initially launched in Mexico City but has since expanded to other areas. In addition, the click-and-collect option, where customers can place orders online and pick them up at the store, has also greatly expanded in 2020.
In Mexico, There are about 9.5% of people use credit cards, and 24.6% of people use debit cards. While there are 7% of people purchase on the internet, there is only 7.4% of people with online banking accounts.
For E-Commerce Customers in MexicoWhat are the major driving factors to purchasing online?
There is 57.51 million consumer goods e-commerce users in Mexico, and they spend total of around 39.10 billion USD dollars in 2021. That makes a per capita spending on consumer goods e-commerce of around 680 USD. Also, in those e-commerce users, about 37.7% of them purchase through their mobile phone.
Our consumer research practice tracks what customers spend and how they make decisions across major economies in the world.
