Mexico’s retail sector entered 2018 in an interesting environment. In large part due to fluctuating exchange rates, inflation was approximately 6% in 2017. Mexico’s July 2018 presidential elections and the victory by Andrés Manuel López Obrador created further uncertainty. At the same time, consumer values and habits continued to shift towards retail channels offering convenience and digital tools, allowing consumers to make easier, more informed purchases across all channels.
Retail sales growth in 2017 was healthy, despite the drop in consumer confidence due to geopolitical tensions. Convenience and price-based channels saw the strongest performance, reflecting consumers’ priorities.
Mexico has a strong traditional grocery sector, owing largely to the proximity of traditional outlets to homes and workplaces. 2017 saw several grocery players introduce smaller formats to compete with traditional and convenience stores.
All major grocery players in Mexico have been investing heavily in online grocery, and several delivery start-ups have appeared. While online grocery sales are low, some brands already see sales coming from e-commerce.
As technology continues to become more prevalent in Mexico, direct sellers turn to the internet to connect with their customers. Incorporating e-commerce tools helps direct sellers maintain personal connections and flexibility, but has the risk of upsetting direct sales consultants due to cannibalisation of sales.
While retailers have introduced innovative solutions to some of the pain points associated with e-commerce in Mexico – specifically payments – more needs to be done to boost consumer trust in the channel, such as more flexible return policies, greater levels of customer service, and more transparency in delivery.
The change in government is not expected to cause major shifts in consumption, and the impact on retail sales should be limited. The medium- to long-term outlook depends on the initial policy agenda of the administration.
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