eMarketer Mexico eCommerce January 2013


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Interesting article about the eCommerce Market in Mexico

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eMarketer Mexico eCommerce January 2013

  1. 1. Copyright ©2013 eMarketer, Inc. All rights reserved.A Small but Growing Market 2Consumers Are the Key 3The Plaza vs. Home Delivery 6What Shoppers Are Buying 7eMarketer Interviews 8Related eMarketer Reports 8Related Links 8January 2013Executive Summary: Ecommerce in Mexico expanded faster than anticipated in 2012, spurred by widespreadincreases in internet and mobile usage. But online purchasing is far less common in Mexico than in other large LatinAmerican markets, and nowhere near maturity.149610Travel, event tickets and virtual goods are the leading categories ofonline sales in Mexico. But sellers of physical goods are beginningto make inroads when i comes to prompting purchases.This report assesses the current state of ecommerce in Mexicoas well as some of the factors that will affect its growth incoming years. These considerations include Mexico’s relativelylow rate of credit card penetration, creative efforts to easeonline purchasing for those consumers in Mexico without creditcards, and infrastructure improvements related not only totelecommunications but also to physical delivery of purchases.In the meantime, eMarketer projects ecommerce sales inMexico will reach $7.98 billion this year and will continue togrow at healthy double-digit rates through 2016, when annualsales will near an estimated $13 billion.Key Questions■ What is the size of B2C ecommerce in Mexico relative toother similar economies?■ What are the challenges faced by B2C ecommercecompanies in Mexico?■ How are B2C ecommerce companies getting around Mexico’scash-driven culture and low credit card penetration?billions and % changeB2C Ecommerce Sales in Mexico, 2010-20162010$2.8544.2%2011$4.1846.7%2012$6.1647.3%$7.98$9.88$11.40$12.92B2C ecommerce sales % changeNote:includes travel, digital downloads and event tickets purchased viaany digital channel (including online, mobile and tablet); excludesgambling; converted at the exchange rate of US$1=MXN13.16Source: eMarketer, Jan 2013149610 www.eMarketer.com2013 2014 2015 201613.3%15.4%23.8%29.6%Osbaldo Francoofranco@emarketer.comContributorsChristine Bittar, Tobi Elkin, Martin UtrerasMexico Ecommerce:Delivering Value to a GrowingDigital Population
  2. 2. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 2A Small but Growing MarketOnline purchasing in Mexico has come to life.As aresult, eMarketer has sharply increased its estimates forecommerce growth in both 2011 and 2012. Our previousestimate of business-to-consumer ecommerce, madein July 2012, put total sales at $5.02 billion that year; therevised estimate puts the total at $6.16 billion.Looking forward, eMarketer has also increased the estimatedcompound annual growth rate of B2C ecommerce in Mexicofor the 2010–2016 forecast period from 19% to 29%.The upward revision reflects sharper than expected increasesin internet adoption, social networking adoption, mobileadoption and smartphone adoption.billions and % changeB2C Ecommerce Sales in Mexico, 2010-20162010$2.8544.2%2011$4.1846.7%2012$6.1647.3%$7.98$9.88$11.40$12.92B2C ecommerce sales % changeNote:includes travel, digital downloads and event tickets purchased viaany digital channel (including online, mobile and tablet); excludesgambling; converted at the exchange rate of US$1=MXN13.16Source: eMarketer, Jan 2013149610 www.eMarketer.com2013 2014 2015 201613.3%15.4%23.8%29.6%149610Despite those gains, Mexico continues to trail similarlydeveloped economies worldwide in adoption of digital media,including ecommerce. As with internet adoption, mobilebroadband adoption and online banking adoption, consumersin Mexico have been slow to embrace online purchasing.eMarketer predicts that, among the three largest economies inLatin America, Mexico will have the smallest number of digitalbuyers in 2013 with 8.4 million. By comparison, Argentina, withless than half the population of Mexico, will have 9.2 milliondigital buyers; Brazil will have 26.7 million.Though digital media adoption in Mexico has often beenheld back by factors beyond the control of consumers,such as lack of competition in the telecom market, highinternet costs and insufficient investment on infrastructureby telecommunications service providers, B2C ecommercehas been limited by other factors within consumers’ control,including an apparent lack of interest in online purchases.A May 2012 Asociación Mexicana de Internet (AMIPCI) andElogia study found that transactional activities were hardly topof mind for a majority of internet users in Mexico. According tothe AMIPCI study, less than three in 10 of internet users polledthat month said they made online purchases.% of respondentsOnline Activities of Internet Users in Mexico,May 2012Send/receive email80%Access social networks77%Search information71%Send/receive instant messages55%Online banking44%Online purchases29%Search for job18%Sign in/create/maintain a site16%Sign in/create/maintain blogs16%Online matchmaking7%Other11%Note: n=2,329Source: AMIPCI (Asociación Mexicana de Internet) and Elogia, "Hábitos delos Usuarios de Internet en México," May 17, 2012141530 www.eMarketer.com141530A separate AMIPCI/Elogia study, focused on online bankingin Mexico, found that 55% of online banking clients inAugust 2012 used the internet to transfer money betweenaccounts and 44% paid credit card bills, but only 19% of themperformed transactions directly related to B2C ecommerce.Despite the hurdles, retailers in Mexico are moving ahead withefforts to encourage ecommerce, working out more efficientshipping solutions with reasonable costs, addressing privacyissues and offering an ever-expanding array of creative paymentmethods to satisfy the diverse needs of an online population thateMarketer predicts will reach 51.7 million in 2013.As a sign of retailers’ ambitions in Mexico, the 2012 editionof an AméricaEconomía Intelligence and Visa-sponsoredecommerce and e-readiness study found Mexico led LatinAmerica in number of “large” online retailers (23). Brazil, Chileand Argentina had 21, 8 and 5, respectively.
  3. 3. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 3eMarketer’s estimate for B2C ecommerce sales in Mexico in2012 is in line with AMIPCI’s latest report on ecommerce.TheAsociación Mexicana de Internet in December 2012 put Mexico’secommerce for 2012 at MXN79.6 billion, or $6.04 billion.Anotherestimate of the market’s size came from AméricaEconomíaIntelligence and Visa.The jointly released study estimated that2011 ecommerce totaled $6.1 billion, well above eMarketer’sand AMIPCI’s approximately $4 billion estimates for the year—and presumably signaling a similarly higher number for 2012. [Afigure for 2012 had not been released in time for the publicationof this report.]billionsComparative Estimates: B2C Ecommerce Sales inMexico, 2010-2016eMarketer*, Jan 2013AMIPCI**, Nov 2012AméricaEconomía, May 2012Boston Consulting Group,March 20122010$2.9$2.8$4.3$2.02011$4.2$4.1$6.1-2012$6.2$6.0--2013$8.0---2014$9.9---2015$11.4---2016--$12.9$10.0Note: *includes travel, digital downloads and event tickets purchased viaany digital channel (including online, mobile and tablet); excludes gambling;converted at the exchange rate of US$1=MXN13.16; **converted at theexchange rate of US$1=MXN13.25Source: eMarketer, Jan 2013; various, as noted, 2012149388 www.eMarketer.com149388Consumers Are the KeyPerhaps the most telling statistic when consideringthe state of ecommerce in Mexico is the number ofdigital buyers in the country. eMarketer estimates thatin 2013 there will be 8.4 million, defined as those whohave made a purchase via online, mobile or tabletwithin the past year. That figure is the lowest amongthe top three digital economies in Latin America.Digital Buyers in Mexico, 2011-20162011 2012 2013 2014 2015 2016Digital buyers (millions) 5.8 7.2 8.4 9.6 10.9 12.1—% change 30.1% 24.3% 16.3% 14.5% 13.2% 11.6%—% of internet users 18.3% 19.6% 20.4% 21.3% 22.3% 23.3%—% of population 6.9% 8.5% 9.7% 10.9% 12.2% 13.4%Note: ages 14+; internet users who have made at least one purchase viaany digital channel within the past year, including online, mobile and tabletpurchasesSource: eMarketer, Jan 2013149622 www.eMarketer.com149622Barely 20% of Mexico’s internet users in 2013 will be digitalbuyers. By comparison Argentina and Brazil will havepenetration rates of 46% and 36%, respectively, this year.Though the number of digital purchasers in Mexico is relativelysmall, the amount that those buyers spend is fairly high.eMarketer estimates the average digital buyer in Mexico willspend $952 this year, more than double Argentina’s $428 perdigital buyer and noticeably ahead of the $741 average perdigital buyer in Brazil and the Latin American average of $620.Average B2C Ecommerce Sales per Digital Buyer inLatin America, by Country, 2011-20162016Mexico $1,065Brazil $806Argentina $545Other $553Latin America2011$721$730$365$378$5492012$854$717$380$428$5782013$952$741$428$474$6202014$1,030$792$471$514$6692015$1,049$800$508$532$686 $704Note: includes travel, digital downloads and event tickets purchased via anydigital channel (including online, mobile and tablet); excludes gamblingSource: eMarketer, Jan 2013149588 www.eMarketer.com149588Income and EcommerceThe gap in average consumption per online buyer in Mexico andBrazil may reflect divergent trends in the two largest economiesin Latin America: on the one hand, Mexico’s increasingly unevenincome distribution; on the other, Brazil’s growing middle class.In Mexico, the percentage of the population living below thepoverty line has grown in recent years, according to WorldBank data, reaching 52% in 2010. In Brazil, that percentage hasA Small but Growing Market
  4. 4. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 4fallen steadily, dipping to 21% in 2009, the last year for whichdata is available. Just like the growing gap in poverty levelsbetween the two leading economies in Latin America, thedifference in number of consumers buying through the webwill also widen between the two nations. eMarketer estimatesBrazil will add 3 million digital buyers in 2013, more thandouble Mexico’s 1.2 million gain for the year.To a large extent, the relatively slow growth in the base ofdigital buyers in Mexico is a reflection of the country’s highrate of poverty, as poor consumers are less likely to shoponline. Yet low-income consumers are also a likely driver ofthe country’s high average rate of ecommerce sales per onlinebuyer, albeit unintentionally. Economic conditions in Mexicotilt its digital buyer population toward more affluent internetusers who, being better off, spend more on average thanlower income consumers, and as a result drive up the averagespend per buyer. Furthermore, as these existing higher incomebuyers become more comfortable with purchasing online,their spending rises even further. Lower income consumers inMexico, therefore, aren’t joining the digital buyer communityfast enough to temper the gains in per-buyer spending beingdriven by their better off countrymen.The effect of income on ecommerce uptake can be seenin data from an Ipsos Global @dvisor study conducted onbehalf of Reuters News in February 2012. It found that 47% ofrespondents living in high-income households in Mexico hadmade online purchases. Meanwhile, 37% of respondents frommedium-income households and just 17% of those with lowincome had done so.% of respondents in each groupDemographic Profile of Internet Users in Mexico WhoBuy Products/Services Online, Feb 2012GenderMale 28%Female 18%Age<35 26%35-49 17%50-64 24%Household incomeLow 19%Medium 37%High 47%Total 23%Note: in the past three months; excludes grocery productsSource: Ipsos, "Global @dvisor" conducted on behalf of Reuters News, April3, 2012140230 www.eMarketer.com140230Change could be on the horizon, though. Low-incomeIndividuals are just starting to see viable payment methodsbeing offered for consumers without credit cards.Payment MethodsOf all the factors that may be holding back ecommerce in Mexico,the one point that online retailers seem to agree about is this:Low credit card penetration inhibits B2C ecommerce.There are 25 million credit cards—including corporate andpersonal accounts—circulating in Mexico, and it is likely that thevast majority of the personal cards are in the hands of individualsin the moderate to well-off A, B and C socioeconomic levels.Given that online purchasing is significantly higher in thetop-earning households in Mexico, the AMIPCI/Elogia finding that60% of online buyers in Mexico had used a credit card to payfor purchases made over the internet seems almost obvious.That figure, however, showed a downward movement from theprevious year, when 63% of respondents said they used creditcards for online payment.The same poll found the use of PayPal(28%), electronic money transfers (28%) and cash on delivery(16%) to pay for internet purchases in 2012 increased by 4, 9 and4 percentage points, respectively, from a year before.As more internet users from lower socioeconomic levelsease into online buying, the use of credit cards to pay foronline purchases in Mexico will continue to decrease, thoughmarginally, in favor of alternative forms of payment.While credit card penetration in Mexico is remarkably low, therewere 98.1 million debit cards in circulation by Q2 2012, accordingto data from Banco de México. But use of this payment methodfor online transactions is hindered by security concerns.Because credit cards are relatively scarce, B2C ecommercecompanies have developed a wide range of alternative paymentmethods for virtually any potential online buyer, including:■ Cash on delivery■ Cash or card payment at a brick-and-mortar store■ Deposit at a bank branch■ Money transfer■ Debit or credit card payment online■ Debit or credit card payment upon delivery■ Electronic wallet■ Alternative payment processing services (e.g., PayPal, SafetyPay, MercadoPago)■ SMS■ Charge to mobile or landline bill■ Prepaid card/gift card■ CheckConsumers Are the Key
  5. 5. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 5Online GeographyFrom a geographic viewpoint, serving digital buyers in Mexicomay be less challenging than one would expect in the 14thlargest country in the world by area. According to WorldInternet Project data, 22% of the country’s internet users goonline from the Federal District (i.e., Mexico City). An additional18% do so from Central Mexico, a region surroundingMexico City and where the vast majority of the population isconcentrated in the cities of Puebla and Toluca.% of totalInternet Users in Mexico, by Region, July 2012Source: World Internet Project, "Estudio 2012 de hábitos y percepciones delos mexicanos sobre Internet y diversas tecnologías asociadas," Oct 24,2012147214 www.eMarketer.comNorth18%Federal District22%Bajío16%Southeast16%Central Mexico18%Northwest10%147214Unlike most Latin American ecommerce markets, Mexico’s ismulticity, but its complexity is nowhere near that of advancedeconomies in North America, Europe or Asia.While the origin of online orders varies depending of theproduct sold, Mexico City is invariably cited as the top-sellingmarket, followed by Guadalajara, which is in the Bajío regionand is Mexico’s second largest metropolitan area. Beyondthat, cities like Toluca in Central Mexico, Monterrey in the northand Tijuana in the northwest usually rank high on the list ofcities of origin for online orders.For most online retailers in Mexico, the top three cities usuallyaccount for at least half of all online orders, and often up totwo-thirds.A Brazilian Startup Targets MexicoA pure-play online retailer from its inception in Brazil in2011, Dafiti launched in Mexico in 2012 with one of thelargest “original product” inventories for online sales in thenation. (Original products refer to noncounterfeit items.The term is widely used in Mexico given the far-reachingextent of piracy in the country.)Along with its vast inventory and a polished userinterface, Dafiti offers one of the best assortments ofpayment methods in the country, the most notable ofwhich is a cash-on-delivery option for orders shippingwithin Mexico City, where Dafiti uses its own fleet toassure purchases are delivered in a timely fashion. (Forthe rest of the country, the company relies on localparcel service giant Estafeta Mexicana.)Despite offering payment options that suit buyers in lowereconomic tiers who often lack a credit card or even a bankaccount, a majority of the company’s consumers comefrom top-earning socioeconomic levels A, B and C.Moreover, the company has noticed an interesting pattern.“At first, people use alternative payment methods, likesupermarket cash payments or cash on delivery,” saidco-founder David Geisen. “After one, two, three successfultransactions, they tend to start using a credit card.”Consumers Are the Key
  6. 6. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 6The Plaza vs. Home DeliveryMexico’s “plaza” culture, in which the town squareis the center of a community’s social and economiclife, makes for a population that is open to sharingopinions publicly online, but is not so open to buyingremotely—at least not yet.For people in Mexico, a visit to the “plaza” offers not only achance for social interaction, it also gives consumers theopportunity to compare products and retailers side by sideand assess which offer the best value or quality for the money.Given that online consumer interfaces on many ecommercesites in Mexico are not yet well developed—blurry pictures,lack of multiple product views, intricate payment processes—the experience of purchasing tangible goods at brick-and-mortar stores may seem preferable to many consumers.Some observers believe that shoppers in Mexico are morethan ready to make the jump to online commerce, arguingthat retailers themselves are the inhibiting factor. “There is noshortage in demand. The shortage is on the supply side,” PabloSlough, general director at Google México, told CNN Expansiónin a November 2012 article.But there is a relatively simple tactic that would seem likely tospur increased online shopping and buying: competitive pricing.A November 2012 AMIPCI and Elogia study found thatshoppers in Mexico, like counterparts the world over, werelooking for cheap prices and good deals. Favorable financingdeals and discounts were cited as the preferred promotionsby these online buyers.% of respondentsPreferred Online Promotions Among Online Buyers inMexico, 2011 & 2012No interest for a period of time65%59%Discounts51%49%Free shipping47%47%Buy one get one free29%29%Free gift with purchase20%34%Loyalty program points17%8%2011 2012Note: ages 18+; 2011 n=3,811; 2012 n=3,871Source: AMIPCI (Asociación Mexicana de Internet), "Estudio de ComercioElectrónico México 2012" conducted by Elogia and sponsored by Visa, Nov6, 2012148693 www.eMarketer.com148693Surprisingly, Mexico’s delivery infrastructure, once consideredthe weakest link for the country’s online retailers, is not generallyseen as an impediment to growth. Parcel companies, both localand international, are stepping up their coverage and service.“Shipping was an issue in the beginning, but I don’t think it isnow,” said Francisco Ceballos, country manager at eBay-styleecommerce site MercadoLibre.“It was just a matter of buildingscale and investing in logistics to have good warehouses thatpack and deliver on time.”Digital buyers have grown confident that their purchases willbe safely delivered at a reasonable cost. The AMIPCI/Elogiastudy found that 47% of Mexico’s digital buyers in 2012 hadcome to expect free shipping.On the other hand, among internet users who told AMIPCI/Elogiathey had not made a purchase online, one in five cited fear of notreceiving their purchase as a reason for not buying via the web.Despite delivery infrastructure gains, improvements are still beingcalled for.“Mexico is nowhere near [the US] in terms of logisticcapabilities for parcel delivery yet,” said David Geisen, co-founderof retailer Dafiti México.“Estafeta provides us with a very goodservice level, with perks that are normal in the US but not socommon yet among Mexican ecommerce players, like onlinetracking of your package.”
  7. 7. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 7What Shoppers Are BuyingTravel and intangible goods are usually the firstcategories to be picked up by digital buyers duringthe early stages of B2C ecommerce adoption.Mexico’s internet users fall in line with this trend.In May 2012, Google found that travel (36%), financial services(12%) and media & entertainment (12%) were the leading productcategories purchased online among internet users in Mexico.% of respondents in each groupInternet Users in Mexico Who Purchased ProductsOnline vs. Offline, by Product Category, May 2012Groceries & healthcare99% 1%Retail97% 3%Automotive97% 3%Technology90% 10%Media & entertainment89% 11%Finance & real estate88% 12%Travel64% 36%Total90% 10%Offline OnlineSource: IAB Europe, TNS Infratest and Google, "Consumer Barometer,"July 1, 2012148604 www.eMarketer.com148604In the online travel category, one of the front-runners has beenVolaris, a low-cost airline based in Mexico City. The airlinestarted operations in 2006 with a strong digital strategy. “Weknew we had to have an important digital component fromday one,” said José Calderoni, the airline’s marketing and salesdirector. Having embraced digital media from its inception,40% of Volaris’ ticket sales came through their website duringtheir first year of operations. That portion quickly expanded to55% during their second year. “Since then, online sales [as aportion of total ticket sales] have grown more slowly to reach60% [in 2012],” Calderoni said.Cinépolis, the largest chain of movie theaters in Mexico andfourth largest worldwide, is another digital pioneer. Despite ahistory going back more than six decades in a country wheremany brick-and-mortar companies have resisted digital media,Cinépolis embraced B2C ecommerce in 2005. Since that year,the movie theater giant has seen an average yearly growthrate of 52% in online sales. A whopping 70% increase wasexpected in 2012. As a result, nearly 13% of the company’sticket sales now come through digital storefronts that includeonline, mobile and social platforms.But even the digital leaders are forthright about the challenges theyface.Miguel Mier,global COO at Cinépolis,ran down the list:“Firstwould be internet penetration,[which has been] slower than inother markets.Second would be low credit card penetration,lowereven than other LatinAmerican countries.Third and last would be[Mexico’s] predominantly cash-based culture.”
  8. 8. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 8eMarketer InterviewsMarketing in Mexico: MercadoLibre Offers EasyPayment Methods for Shopping OnlineFrancisco CeballosCountry Manager, MexicoMercadoLibreInterview conducted on December 12, 2012Marketing in Mexico: How MasterCard EncouragesCredit UsageLuis CirerolVice President, Emerging PaymentsMasterCard MéxicoInterview conducted on December 17, 2012Marketing in Mexico: How Dafiti México OvercomesEcommerce ObstaclesDavid GeisenCo-FounderDafiti MéxicoInterview conducted on December 17, 2012Mauricio BravermanProduct DirectorVisa MéxicoInterview conducted on December 21, 2012José CalderoniMarketing and Sales DirectorVolarisInterview conducted on December 17, 2012Miguel MierGlobal Chief Operating OfficerCinépolisInterview conducted on December 14, 2012Bruno PadillaMarketing DirectorMasterCard MéxicoInterview conducted on December 17, 2012Related eMarketer ReportsMobile Mexico: Overcoming Obstacles to GrowthSocial Networking in Mexico: Bringing the Plaza OnlineDigital Ad Spending in Mexico: Advertising GiantsFinally Join the PioneersMexico Online: Usage Grows as Access Obstacles Give WayRelated LinksAméricaEconomía IntelligenceAsociación Mexicana de InternetBanco de MéxicoCinépolisCNN ExpansióncomScore Inc.Dafiti MéxicoElogiaEstafeta MexicanaGoogle Consumer BarometerIpsos Global @dvisorMasterCard MéxicoMercadoLibrePayPal MéxicoRocket InternetSafety Pay MéxicoVisa International Latin AmericaVolarisWorld BankWorld Internet Project MéxicoEditorial andProduction ContributorsNicole Perrin Associate Editorial DirectorCliff Annicelli Senior Copy EditorEmily Adler Copy EditorDana Hill Director of ProductionJoanne DiCamillo Senior Production ArtistStephanie Gehrsitz Senior Production ArtistAllie Smith Director of Charts