Mexico and Its Leap in E-commerce Thanks to COVID-19

Currently, Amazon accounts for almost 50% of all e-commerce

The supply chain today is more complex than ever, especially for a traditional retailer striving to be omnichannel. We refer to not only covering hundreds of stores but millions of homes.

Amazon was one of the pioneers in managing millions of stock units instead of thousands, to avoid running out of inventory.

Conventional retailers have to accept the fact that today, users like to shop both online and physically. And most online shoppers expect their shipment to arrive in less than 2 days, and that its execution is practically flawless.

These characteristics are something that Amazon has taken care of in great detail, which is why it is not surprising that this platform has so many fans.

Despite this, there are also large stores and retailers that have successful digital platforms, such as Walmart; a company that increased e-commerce sales by 43% year-over-year in its last quarter of 2019, exceeding estimates for the holiday season.

COVID-19 Accelerates E-commerce Adoption in Mexico by Up to Two Years

An unprecedented increase in e-commerce has been noted in Mexico amid the coronavirus pandemic.

For this year, it is estimated that online sales in Mexico will grow between 60% and 70% - Worldpay Merchant Solutions.

Since the quarantine began in Mexico, e-commerce has become the best alternative to acquire products without leaving home. However, the over-demand for orders exposed the weaknesses of the most used e-commerce platforms.

An example is delivery delays of up to a month. Even in the Prime service, speaking of Amazon, when users pay extra to receive their orders in one or two days maximum.

In the two and a half months of the contingency, online purchases grew 26% worldwide.

What Do They Buy More?

Many people who still couldn't imagine shopping online were forced to do so due to the confinement conditions we are in. Also, people who already shopped online increased their consumption level through these platforms by not being able to buy certain products in physical stores.

The question is whether this change will be lasting. Various studies show that the loyalty rate of people who make their first online purchase is 91%. Therefore, a drop in demand is not expected once the extraordinary distancing measures end. On the contrary, growth will continue to be constant.

Which Industries Benefit the Most from This Change?

While almost anything can be sold on the Internet, these are some of the sectors that have positively increased their sales, presenting a demand growth of up to 300% in some cases.

• Groceries, basic foods
• Pharmacy
• Grocery stores
• Personal hygiene
• Cleaning
• Pet food
• Digital products (Music, movies, video games)
• Food service

69% of online consumers are middle class

One must consider access to the Internet and digital banking. This means that the lower middle or lower class often does not have a bank account, as digital banking services are not yet so mature in Mexico for these segments.

How Can Your SME Integrate into E-commerce?

"We estimate that only 6% of Mexican SMEs, which did not yet have a digital strategy, will be in a position to respond with a digital strategy in this coronavirus, this is directly related first to the lack of knowledge about a property of migration strategy to digital channels," noted Barrientos.
 

First Step

The first thing you should consider is your brand's digital presence. Having a website is the best digital showcase for your products/services. Learn more about how to achieve this with our article Your Website as a Sales Tool

Second Step

The second thing is to achieve a balance between the cost of your products and the cost of maintaining your platform. What do we mean? I can't sell a $5 product that is not wholesale in my own online store because the cost of advertising and maintaining my store will eat up my profits.

Remember that not paying a physical rent does not mean you won't have to invest in other factors for your e-commerce to work.

Third Step

It is important to allocate a fixed monthly budget for your advertising. That's right! Remember that investment we mentioned in the previous step? It is essential that you understand that the "fuel" of your digital business is constant advertising.

Fourth Step

You must resolve the logistics strategy. This can be with your own resources or by helping yourself with e-commerce platforms that already have a logistics strategy. Choose a platform that allows you to have national or even international reach, depending on your commercial objectives. Consider the shipping cost offered to the final customer, as this is an important factor in decision-making when buying.

Without a doubt, selling online will continue to be one of the first options for consumers in the coming years. Let's remember that the COVID-19 situation has given a 180º turn to our country's consumption habits. It is estimated that even after isolation ends, most businesses will continue to sell online. Will you be part of this transformation?

If you have questions about how to start or need advice. Do not hesitate to contact us.

Sources:

Reporte Indigo, 2020. https://www.reporteindigo.com/indigonomics/e-commerce-a-prueba-por-covid-19-y-sobredemanda-productos-ventas-entregas/

Forbes, 2020. https://www.forbes.com.mx/tecnologia-ecommerce-coronavirus-adopcion-mexico/