This is part 2 of a blog series on channel strategy in Mexico. The first post can be found here.
The expansion of e-commerce has been rapid over the last few years, but continues to lag behind in share of total sales across industries and against other major markets in Latin America. Low credit card penetration levels (leading to a preference for cash transactions) and limited confidence in the security of online transactions have stymied the growth of online sales, though the rapid increase in smartphone adoption is expected to help buoy persistent incremental growth.
The current potential for e-commerce within a multinational’s channel strategy is different industry-by-industry:
E-commerce for B2C companies
Current state of play: Recent moves by major retailers are driving increasing interest from B2C companies, but the opportunity remains relatively small and focused on a few major subnational markets. E-commerce’s relatively limited penetration have limited its importance for B2C companies, with in-store retail sales still representing over 98% of total retail sales. Additionally, 57% of e-commerce sales are cross-border sales, largely from the United States. The entry of Amazon into the Mexican market has, however, led to increasing focus on the potential for faster-than-previously expected growth in the channel, coupled with the additional investments made by established modern retail companies (including Walmart de Mexico) in their e-commerce channels
Key factor to consider: B2C companies that sell highly commoditized products should use online marketplaces or large online retail stores to both drive and support sales, while companies that offer specialized goods should leverage their own e-channels or use specialized online retail stores. The relatively low level of development of the e-commerce channel in Mexico does make selling through an online-marketplace and retailers a more relevant and viable short-term avenue for growth in Mexico
E-commerce for B2B companies
Current state of play: B2B e-commerce in Mexico remains a largely email-driven affair for most companies, with an increasing number of B2B companies leveraging their online platforms for marketing-driven sales generation. B2B sales efforts are also highly contingent on in-person relationship building, which compounds the challenges facing e-commerce growth in Mexico
Key factor to consider: Despite the relatively low level of sophistication and development so far, B2B companies that sell specialized products or complex solutions should not disregard e-commerce, which can help them shorten sales cycles and boost total sales. The biggest misconception among B2B companies that sell complex solutions is that they cannot use e-commerce to drive sales, even if access to specialized B2B marketplaces remain limited in Mexico
E-commerce for pharmaceutical companies
Current state of play: Although e-commerce use by pharmaceutical companies is highly restricted, many of the fast expanding pharmacy chains are leveraging their expanding online presence. Multinationals in the pharmaceutical space can piggyback on the rapid growth of modern retail in the private healthcare market, with major players such as Del Ahorro leveraging their on-the-ground retail infrastructure to provide home delivery for medications. Pure-play e-commerce vendors such as Mercado Libre and Farmalisto will have to closely hew to Cofepris guidelines to continue to operate, while the online pharmaceutical market will likely continue to suffer from significant illegal e-commerce websites that drag down confidence in this channel
Key factor to consider: Online sale of prescription-based pharmaceutical products is limited, while online sales of non-controlled substances is a growing challenge in Mexico.
The report goes into greater depth on how to integrate e-commerce into your overall channel structure, along with best practices for mitigating and even exploiting the barriers to faster growth of the e-commerce channel for your business in Mexico. The next blog post will focus on best practices along the channel lifecycle in Mexico, from selecting and signing partners, developing a distributor management process, and planning for future transitions. FSG clients can learn more about leveraging e-commerce in Mexico by reading FSG’s Channel Strategy in Mexico by clicking here.