Mexican Retail Industry: An opportunity for emerging business models

 

Mexico has the leading retail industry in all Latin America, the second biggest in the American continent, only behind the United States. With $7.13 trillion MXN in sales from 2016-2019 (Sabanoglu, 2022), Mexico has stood out as a key emerging market for the industry. For the last decade, this sector has had the potential to exceed Mexico’s average future growth: with a compound annual growth rate of 5.48% (Technavio, 2022), it is currently achieving it. Mexico holds very attractive opportunities for growth and exploration of new consumer trends and business models in an emerging market.

Business concepts for a complex demographic

Mexican culture and its complex and diverse socio-demographic and economic dynamics have given birth to a dual system of consumer trends. Modern retail stores and multinational franchises (such as Starbucks, Inditex, Adidas, etcetera) are constantly growing and attracting new audiences through innovative lifestyle marketing strategies that appeal to an upper-middle and upper class demographic in Mexico. Alongside these multinationals, traditional retail concepts such as markets, ‘abarrotes’ and supply centers persist, having been a core of Mexican consumer culture for decades and remaining a tradition, especially in Mexican lower-middle classes.

There is a third concept that has managed to adapt to Mexico’s complex environment and attract broad audiences from all different socio-economic demographics: Brands like such as OXXO, Farmacias Similares, Walmart, etcetera, are some examples and have become a staple in Mexican retail. Understanding the Mexican approach to shopping and consumer trends is essential for a successful business strategy in the industry.

Changes in behavior after the pandemic

The pandemic has affected industries worldwide, retail being no exception, and it has changed consumer behavior and trends, which represent attractive opportunities for companies in the sector. Mexicans are more willing to invest in themselves, as health, beauty and selfcare products have seen a boom in sales.

A recess in the pandemic has brought optimism in Mexican consumers: retail sales in Mexico increased 6.4% in February 2022 over the same period in the previous year, compared with market expectations of 5.7% (INEGI, 2022), despite inflation and an economy that has not fully recovered. Along with an upturn in sales, consumer confidence in Mexico rose to 44.3% in April of 2022, with improvements seen in the current assessment of Mexico’s economy (Trading Economics, 2022).

Mexicans are a very social-oriented population, and their shopping behavior translates to that as well. Mexicans like to spend their leisure time in shopping centers and malls, regardless of their social status. It is a social and consumer experience. The expansion of the middle class contributed to an increasing number of shopping centers. However, the pandemic modified this behavior, adding a new option for the Mexican buyers.

Use of new technologies

A need for social distancing during the pandemic gave e-commerce and the supermarket channel a big impulse, registering robust growth in sales revenues (EMIS, 2022). New technologies have introduced digital channels and online shopping experiences, becoming a permanent option in how Mexican consumers shop in this new post-pandemic reality.

This change represents an opportunity for bigger investments in digital platforms, direct-to-consumer operations and last-mile delivery services. Social media platforms have become increasingly important as they facilitate interactions between businesses and possible clients and is an easy tool to use to get one’s business across multiple audiences. They also represent opportunities for innovation in media engagement, digital consumer data, and optimization of digital marketing to expand reach for companies.

The surge in online platforms and last-mile delivery services as a new business model require investment and development of infrastructure for these services. Improvement in delivery strategies and tech solutions for platforms and payment methods are in high demand in Mexico as the country adapts to its new consumer behavior. It is expected that as infrastructure and services evolve, more and more of the Mexican population will adapt to these new technologies.

Mexico continues to be a key market in the retail sector. Its broad socio-economic environment provides opportunities for a wide variety of business models and innovative technologies to cater to new consumer experiences and to develop new business models in this post-pandemic area, while providing a secure environment within an industry that continues to grow despite current economic challenges.

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