Mexico is the 15th largest world economy. By using localized payment solutions, your business can reach more customers in this market.
Mexico’s USD 1.2 trillion economy is the 15th largest in the world, and the second largest in LATAM. Due to its young population (the median age is 28) the market shows strong growth prospects. The same can be said of the e-commerce scene in Mexico. The Mexican e-commerce market is projected to total USD 9.0 million in 2019. Better yet, this is likely to increase to USD 12.5 million by 2023. However, the size of a market is not always the most important reason to introduce your business. We look at five key reasons why the Mexican e-commerce market could drive sales for the international e-commerce merchant.
Mexico’s economy is growing
While it is not essential, a healthy economy is still a good sign. In this respect Mexico is one of the most exciting markets in LATAM. In the past few years, GDP growth has slowed. However, this trend is projected to change in the coming years. Between 2019 and 2020 alone, the GDP growth rate is predicted to increase from 1.63% to 1.94%. By 2023, this will rise to 2.74%.
As we mentioned earlier, this growth is reflected in the e-commerce market too. But one factor in this growth makes it more exciting than similar large economies like Brazil. Mexico has more GDP per capita than Brazil. It is also an easier place to do business. Mexico ranks 60 in the World Bank’s ease of doing business survey with an score of 72.4, well above the LATAM & Caribbean average score of 59.1.
Internet penetration is growing
Alongside a growing economy, internet penetration is also essential for e-commerce success. Internet penetration has been steadily increasing in Mexico year on year. It currently stands at 68% and is projected to grow to 73% by 2023. When taken in hand with a growing GDP, this means one thing. An expanding customer base. There are currently 37.9 million online customers in Mexico. Estimates place this number at 55.3 million by 2020.
The rise of the mobile shopper
Mobile internet usage is increasing. Again, this is a good sign for the international e-commerce merchant. Currently 50% of the population use mobile internet, adding up to 62.4 million smartphone users. Social media is popular among the younger demographic. 96% of 20-30-year-olds use at least one social media platform. This makes advertising to this demographic easier.
However, it is important to note that most online shopping (70% in 2017) still takes place on desktop.
International companies welcome
For many e-commerce businesses, Mexico also represents a logical step in expansion plans as a result of its strong connections with the US and Canada: as one of three partners in the NAFTA trade deal, international online purchases are much more available to the population, allowing them to benefit from a simplified clearance process for low-value goods at the border.
In 2016, 75% of the purchases reportedly made by Mexican online shoppers from international retailers were made through US e-commerce websites.
Amazon is a particularly promising case study. It moved into the Mexican market in 2015. However, by 2017 it was the biggest retailer in the country. It had doubled its sales to USD 502.2 million.
Interestingly, the third largest retailer in Mexico is also American, Wal-Mart. Their entry into the market is promising. Both companies have heavily invested in marketing and advertising, evidenced by their growing market share. This makes entry easier for any international e-commerce businesses which follow.
Localized payment solutions
Finally, we turn to one of the most important reasons to invest in Mexico. The variety and sophistication of their localized payment solutions.
Mexico has a large unbanked population. 63% to be precise. However, this has not stopped these potential customers from making online purchases. Cash based payments can be made through convenience store networks, like those of Oxxo or 7-Eleven. Online purchases can also be made through e-wallets, local credit or debit cards and even international ones. In light of this, it is essential that e-commerce merchants localize their checkout process.
Partnering with a payment aggregator, like BoaCompra, is essential to smooth out this process. Aggregators can work on your behalf to manage payments . They also ensure your customers can pay in whichever way they feel comfortable. In this way, you can reach the widest possible Mexican customer base.