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4.3 Distribution and Import Channels

Overall Retail Scene

Mexico is not alone among emerging markets in Latin America experiencing a rapid transformation of its retail sector, with local and overseas domestic and foreign firms jockeying for market share in a very competitive market. Generally speaking, the Mexican retail sector is fairly organised and modern by Latin American standards. This compares with 10 years ago, when the country’s retail industry was comprised mainly of small and independent stores selling at open public markets, with only a handful of national retail chains. While Mexico’s local retailers are by no means insignificant and still account for half of the nation’s total retail sales, the Mexican retail landscape is increasingly characterised by the presence of foreign retailers, which have been striving to make inroads in the Mexican market in light of the improving purchasing power and living standards there.

Retail Sales by Sector: 2003-2007 (in billion Mexican peso)

 

2003

2004

2005

2006

2007

Stored-based retailing

1,746.7

1,853.8

1,977.2

2,133.2

2,236.0

 Grocery

843.5

865.0

910.5

1,012.9

1,068.2

 Non-grocery

903.2

988.8

1,066.7

1,120.3

1,167.8

Non-store retailing

37.6

41.0

46.2

54.3

57.9

 Vending

1.9

2.2

2.5

2.9

3.2

 Home shopping

3.8

4.1

4.4

4.8

5.1

 Internet retailing

2.0

2.3

2.6

4.0

4.4

 Direct retailing

29.9

32.4

36.7

42.6

45.2

Total

1,784.3

1,894.8

2,023.4

2,187.5

2,293.9

*Preliminary figures

Source: Euromonitor

Broadly speaking, Mexico is dominated by a handful of large retailers, namely Wal-Mart, Gigante, Comercial Mexicana, Soriana and Chedraui. From 2003-2007, Mexico’s retail sales recorded growth of 29%, demonstrating a CAGR of 6%. Store-based retailing increased by 28% between 2003 and 2007, while non-store retailing grew by 54% over the same period, with internet retailing seeing the most rapid growth. As per the latest industry statistics, the Mexican retail sector is mainly composed of 496,717 independent grocers, 7,734 convenience stores, 1,351 discounters, 1,342 hypermarkets and supermarkets, 611 chain stores, 183 shopping malls and 85 department stores.

Major Retail Players in Mexico

Shopping Malls

Department Stores

Hypermarkets / Supermarkets

Santa Fé

Liverpool

Wal-Mart

Perisur

El Palacio de Hierro

Soriana

Plaza Satelite

Saks Fifth Avenue

Comercial Mexicana

Pabellón Polanco

Sears

Chedraui

Antara

Woolworth

Copel

Perinorte

 

 

 

Hypermarkets and Supermarkets

Thanks to their affordable offerings and profuse credit, hypermarkets and supermarkets are important players in the Mexican retail sector. In a bid to satisfy Mexican consumers’ preference for one-stop shopping, many Mexican hypermarket/supermarket chains have renovated their stores and introduced more non-grocery goods such as clothing, footwear and electronics products. Accounting for nearly 25% of the total grocery retail sales in Mexico, more and more hypermarket/supermarket chains have expanded their operations into smaller cities.

On the other hand, among various important recent developments, the expansion of Wal-Mart into banking services is widely considered the most remarkable movement in the Mexican retail sector. The country’s leading retailer, Wal-Mart de México, opened its first bank branch under the name of Wal-Mart de México Adelante in the border town of El Toreo in August 2007. It expects to roll out a total of 85 branches by the end of 2008, making financial services available in one of every 10 Wal-Mart locations in Mexico to a target market of some 44 million medium- and low-income consumers. This movement not only helps diversify Wal-Mart’s business in Mexico and strengthen its leading position in the retail sector, but also further improves access to credit among low-income Mexican consumers and circumscribes the growth of informal markets.

Riding on their growing importance in the Mexican retail sector and vast distribution networks throughout the whole country, hypermarkets/supermarkets are certainly good business counterparts with whom Hong Kong exporters should make contact when planning to tap into the Mexican market. As a matter of fact, some of these hypermarket/supermarket chains have set up offices or appointed agents in the Chinese mainland or other Southeast Asian countries to perform sourcing and quality control. To jump start, Hong Kong exporters can approach the offices of these Mexican buyers in Hong Kong and the Chinese mainland for business as an alternative to flying directly to Mexico.

Shopping Centres

The growing popularity of shopping centres in Mexico has led to the building of larger and better stocked stores. Nowadays, Mexican shoppers look not only for value, but also an improved shopping experience. To enhance the entertainment value of the shopping experience and in particular to appease the younger generation’s preference for modern shopping, many shopping centres in Mexico have undergone renovation and incorporated into their shopping centres more elements like movie theatres, coffee shops, bowling alleys, fine boutiques and restaurants.

To further meet the need of innovative shoppers, quite a few shopping centres have dedicated special areas to hold small-scale exhibitions and fairs to introduce new products on a regular basis during weekends and holidays (such as Christmas). These small-scale exhibitions and fairs may offer new channels for Hong Kong companies to showcase and demonstrate their products as well as receive spontaneous feedback from consumers. Given the centre’s extensive marketing efforts, setting up a regular booth within a shopping centre may greatly help new-to-the-market Hong Kong companies test market acceptance of their products and promote their own brands.

Department Stores

Mexico has a number of department stores, including local Mexican chains such as Liverpool, El Palacio de Hierro, Suburbia, Fabricas de Francia (also belonging to Liverpool) and Sears, and foreign chains like JCPenney and Zara. Running over 60 out of a total of 85 department stores in Mexico, Liverpool dominates not only in terms of number of stores, but also its porousness or permeability in the Mexican fashion industry with regard to trend setting. Specifically, Liverpool holds every year a festival called Fashion Fest of Liverpool, which introduces new fashion trends for the new seasons, setting trends for local Mexican fashion buyers. Hong Kong’s garment exporters, who are considered fashionable, may take advantage of these fashion festivals to bring in their designs and make their debut.

Informal Channels

Mexico has a huge variety of informal markets selling everything from daily necessities to tourist handicrafts at very low prices. It is reported that some 80% of CDs purchased in Mexico come from informal channels, and nearly 50% of the brand and designer clothing is pirated, causing losses of up to US$1 billion to the textiles and clothing industry in Mexico. Among many product categories, electronic devices such as TVs, stereos, video cameras, MP3/DVD players, mobile phones, computers and peripherals are the most popular items in these informal markets, where one can get computer software, DVD movies, music CDs, videogames and consoles weeks before the official release dates in Mexico.

Characterised by crowds and low prices, Tepito is probably the most famous and popular informal market in Mexico, despite active gang activities and drug trafficking. Located a few blocks north of the capital’s main square, the Tepito area covers several blocks where one can find many different products like clothing, footwear, electronics and auto parts. In light of the widespread chaos, crime and violence in the capital city, the new mayor of Mexico City is taking a number of initiatives to sweep the Tepito area. For instance, a building usually occupied by drug traffickers in Tepito, known as La Fortaleza, has been expropriated by the government to build a road and a youth centre. Nevertheless, to avoid the intense competition in the sizable informal market in Mexico, Hong Kong exporters are advised to partner with larger retailers such as hypermarkets, supermarkets, shopping centres and department stores to better leverage not only on their marketing efforts but also their strengths in intellectual property rights protection.

Wholesalers and Importers

While the retail sector is fairly organised and modern by Latin American standards, the Mexican external trade community is fragmented and characterised by a large mesh of small and medium-sized importers and wholesalers. Large-scale importers, wholesalers or distributors are not yet commonplace in Mexico, except for hypermarkets, supermarkets and department stores. However, it is expected to see more organised buying co-operatives, and national and regional wholesalers appear in the market following the retail modernisation to address the economic, demographic and lifestyle changes happening in Mexico.

Import Channels

Bordering the Atlantic and the Gulf of Mexico, Mexico is one of the major shipping hubs in Central America. Given the fact that a large proportion of oil shipments opt for sea transport, it is estimated that approximately 60% of the total trade handled in Mexico is by sea. Accounting for over 60% of Mexico’s total ocean freight, Altamira and Veracruz in the Gulf of Mexico, and Manzanillo and Lázaro Cárdenas in the Pacific, are the busiest commercial ports among a total of around 80 seaports in Mexico. With direct access to the Atlantic Basin and an annual cargo traffic of over 70 million tonnes, the port of Veracruz is the busiest seaport in Mexico, followed by the port of Dos Bocas on the back of heavy traffic in oil shipments.

In terms of relevance to Hong Kong, the port of Manzanillo is the most important port, handling most of Hong Kong’s exports to Mexico. This is not only because Manzanillo is the largest port on the Pacific and the closest port to Mexico City, but also the only port in Mexico capable of providing double-stowage train services, which allow efficient cargo movement throughout Mexico and into Texas, 1,600 kilometres away. Handling a total of some 1.3 million TEUs in 2007, the port of Manzanillo has twice as much container traffic as the port of Veracruz.

Cargo Traffic at Major Ports in Mexico 2007

Port

Location

      Tons

Veracruz   

Gulf of Mexico

72,970,000

Dos Bocas

Gulf of Mexico

24,000,000

Manzanillo 

Pacific Coast

21,205,000

Lázaro Cárdenas

Pacific Coast

17,639,000

Salina Cruz

Pacific Coast

13,418,000

Altamira

Gulf of Mexico

12,182,000

Tampico

Gulf of Mexico

11,847,000

Tuxpan

Gulf of Mexico

10,290,000

Progreso

Gulf of Mexico

4,303,000

Ensenada

Pacific Coast

3,504,000

Source: Administración Portuaria Integral (API)

Concerning shipments, on average, it takes around 20-23 days for goods shipped from Hong Kong to arrive at major ports in Mexico. Regarding shipping routes, Hong Kong (HKG) – Chiwan (CWN) or Yantian (YTN) – Shanghai (SHA) – Busan (BUS) – Manzanillo (MAN) is considered the most common routing for shipments of Hong Kong electronics, clothing and toys. Apart from handling shipments of Hong Kong products, Hong Kong also serves as a major transhipment hub for ports in the Pearl River Delta (PRD), including Huangpu port and Foshan port. 

Content provided by Hong Kong Trade Development Council
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