Interesting article about the eCommerce Market in Mexico

1. Copyright ©2013 eMarketer, Inc. All rights reserved.
A Small but Growing Market 2
Consumers Are the Key 3
The Plaza vs. Home Delivery 6
What Shoppers Are Buying 7
eMarketer Interviews 8
Related eMarketer Reports 8
Related Links 8
January 2013
Executive Summary: Ecommerce in Mexico expanded faster than anticipated in 2012, spurred by widespread
increases in internet and mobile usage. But online purchasing is far less common in Mexico than in other large Latin
American markets, and nowhere near maturity.
149610
Travel, event tickets and virtual goods are the leading categories of
online sales in Mexico. But sellers of physical goods are beginning
to make inroads when i comes to prompting purchases.
This report assesses the current state of ecommerce in Mexico
as well as some of the factors that will affect its growth in
coming years. These considerations include Mexico’s relatively
low rate of credit card penetration, creative efforts to ease
online purchasing for those consumers in Mexico without credit
cards, and infrastructure improvements related not only to
telecommunications but also to physical delivery of purchases.
In the meantime, eMarketer projects ecommerce sales in
Mexico will reach $7.98 billion this year and will continue to
grow at healthy double-digit rates through 2016, when annual
sales will near an estimated $13 billion.
Key Questions
■ What is the size of B2C ecommerce in Mexico relative to
other similar economies?
■ What are the challenges faced by B2C ecommerce
companies in Mexico?
■ How are B2C ecommerce companies getting around Mexico’s
cash-driven culture and low credit card penetration?
billions and % change
B2C Ecommerce Sales in Mexico, 2010-2016
2010
$2.85
44.2%
2011
$4.18
46.7%
2012
$6.16
47.3%
$7.98
$9.88
$11.40
$12.92
B2C ecommerce sales % change
Note:includes travel, digital downloads and event tickets purchased via
any digital channel (including online, mobile and tablet); excludes
gambling; converted at the exchange rate of US$1=MXN13.16
Source: eMarketer, Jan 2013
149610 www.eMarketer.com
2013 2014 2015 2016
13.3%
15.4%
23.8%
29.6%
Osbaldo Franco
ofranco@emarketer.com
Contributors
Christine Bittar, Tobi Elkin, Martin Utreras
Mexico Ecommerce:
Delivering Value to a Growing
Digital Population

2. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 2
A Small but Growing Market
Online purchasing in Mexico has come to life.As a
result, eMarketer has sharply increased its estimates for
ecommerce growth in both 2011 and 2012. Our previous
estimate of business-to-consumer ecommerce, made
in July 2012, put total sales at $5.02 billion that year; the
revised estimate puts the total at $6.16 billion.
Looking forward, eMarketer has also increased the estimated
compound annual growth rate of B2C ecommerce in Mexico
for the 2010–2016 forecast period from 19% to 29%.
The upward revision reflects sharper than expected increases
in internet adoption, social networking adoption, mobile
adoption and smartphone adoption.
billions and % change
B2C Ecommerce Sales in Mexico, 2010-2016
2010
$2.85
44.2%
2011
$4.18
46.7%
2012
$6.16
47.3%
$7.98
$9.88
$11.40
$12.92
B2C ecommerce sales % change
Note:includes travel, digital downloads and event tickets purchased via
any digital channel (including online, mobile and tablet); excludes
gambling; converted at the exchange rate of US$1=MXN13.16
Source: eMarketer, Jan 2013
149610 www.eMarketer.com
2013 2014 2015 2016
13.3%
15.4%
23.8%
29.6%
149610
Despite those gains, Mexico continues to trail similarly
developed economies worldwide in adoption of digital media,
including ecommerce. As with internet adoption, mobile
broadband adoption and online banking adoption, consumers
in Mexico have been slow to embrace online purchasing.
eMarketer predicts that, among the three largest economies in
Latin America, Mexico will have the smallest number of digital
buyers in 2013 with 8.4 million. By comparison, Argentina, with
less than half the population of Mexico, will have 9.2 million
digital buyers; Brazil will have 26.7 million.
Though digital media adoption in Mexico has often been
held back by factors beyond the control of consumers,
such as lack of competition in the telecom market, high
internet costs and insufficient investment on infrastructure
by telecommunications service providers, B2C ecommerce
has 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) and
Elogia study found that transactional activities were hardly top
of mind for a majority of internet users in Mexico. According to
the AMIPCI study, less than three in 10 of internet users polled
that month said they made online purchases.
% of respondents
Online Activities of Internet Users in Mexico,
May 2012
Send/receive email
80%
Access social networks
77%
Search information
71%
Send/receive instant messages
55%
Online banking
44%
Online purchases
29%
Search for job
18%
Sign in/create/maintain a site
16%
Sign in/create/maintain blogs
16%
Online matchmaking
7%
Other
11%
Note: n=2,329
Source: AMIPCI (Asociación Mexicana de Internet) and Elogia, "Hábitos de
los Usuarios de Internet en México," May 17, 2012
141530 www.eMarketer.com
141530
A separate AMIPCI/Elogia study, focused on online banking
in Mexico, found that 55% of online banking clients in
August 2012 used the internet to transfer money between
accounts and 44% paid credit card bills, but only 19% of them
performed transactions directly related to B2C ecommerce.
Despite the hurdles, retailers in Mexico are moving ahead with
efforts to encourage ecommerce, working out more efficient
shipping solutions with reasonable costs, addressing privacy
issues and offering an ever-expanding array of creative payment
methods to satisfy the diverse needs of an online population that
eMarketer predicts will reach 51.7 million in 2013.
As a sign of retailers’ ambitions in Mexico, the 2012 edition
of an AméricaEconomía Intelligence and Visa-sponsored
ecommerce and e-readiness study found Mexico led Latin
America in number of “large” online retailers (23). Brazil, Chile
and Argentina had 21, 8 and 5, respectively.

3. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 3
eMarketer’s estimate for B2C ecommerce sales in Mexico in
2012 is in line with AMIPCI’s latest report on ecommerce.The
Asociación Mexicana de Internet in December 2012 put Mexico’s
ecommerce for 2012 at MXN79.6 billion, or $6.04 billion.Another
estimate of the market’s size came from AméricaEconomía
Intelligence and Visa.The jointly released study estimated that
2011 ecommerce totaled $6.1 billion, well above eMarketer’s
and AMIPCI’s approximately $4 billion estimates for the year—
and presumably signaling a similarly higher number for 2012. [A
figure for 2012 had not been released in time for the publication
of this report.]
billions
Comparative Estimates: B2C Ecommerce Sales in
Mexico, 2010-2016
eMarketer*, Jan 2013
AMIPCI**, Nov 2012
AméricaEconomía, May 2012
Boston Consulting Group,
March 2012
2010
$2.9
$2.8
$4.3
$2.0
2011
$4.2
$4.1
$6.1
-
2012
$6.2
$6.0
-
-
2013
$8.0
-
-
-
2014
$9.9
-
-
-
2015
$11.4
-
-
-
2016
-
-
$12.9
$10.0
Note: *includes travel, digital downloads and event tickets purchased via
any digital channel (including online, mobile and tablet); excludes gambling;
converted at the exchange rate of US$1=MXN13.16; **converted at the
exchange rate of US$1=MXN13.25
Source: eMarketer, Jan 2013; various, as noted, 2012
149388 www.eMarketer.com
149388
Consumers Are the Key
Perhaps the most telling statistic when considering
the state of ecommerce in Mexico is the number of
digital buyers in the country. eMarketer estimates that
in 2013 there will be 8.4 million, defined as those who
have made a purchase via online, mobile or tablet
within the past year. That figure is the lowest among
the top three digital economies in Latin America.
Digital Buyers in Mexico, 2011-2016
2011 2012 2013 2014 2015 2016
Digital 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 via
any digital channel within the past year, including online, mobile and tablet
purchases
Source: eMarketer, Jan 2013
149622 www.eMarketer.com
149622
Barely 20% of Mexico’s internet users in 2013 will be digital
buyers. By comparison Argentina and Brazil will have
penetration rates of 46% and 36%, respectively, this year.
Though the number of digital purchasers in Mexico is relatively
small, the amount that those buyers spend is fairly high.
eMarketer estimates the average digital buyer in Mexico will
spend $952 this year, more than double Argentina’s $428 per
digital buyer and noticeably ahead of the $741 average per
digital buyer in Brazil and the Latin American average of $620.
Average B2C Ecommerce Sales per Digital Buyer in
Latin America, by Country, 2011-2016
2016
Mexico $1,065
Brazil $806
Argentina $545
Other $553
Latin America
2011
$721
$730
$365
$378
$549
2012
$854
$717
$380
$428
$578
2013
$952
$741
$428
$474
$620
2014
$1,030
$792
$471
$514
$669
2015
$1,049
$800
$508
$532
$686 $704
Note: includes travel, digital downloads and event tickets purchased via any
digital channel (including online, mobile and tablet); excludes gambling
Source: eMarketer, Jan 2013
149588 www.eMarketer.com
149588
Income and Ecommerce
The gap in average consumption per online buyer in Mexico and
Brazil may reflect divergent trends in the two largest economies
in Latin America: on the one hand, Mexico’s increasingly uneven
income distribution; on the other, Brazil’s growing middle class.
In Mexico, the percentage of the population living below the
poverty line has grown in recent years, according to World
Bank data, reaching 52% in 2010. In Brazil, that percentage has
A Small but Growing Market

4. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 4
fallen steadily, dipping to 21% in 2009, the last year for which
data is available. Just like the growing gap in poverty levels
between the two leading economies in Latin America, the
difference in number of consumers buying through the web
will also widen between the two nations. eMarketer estimates
Brazil will add 3 million digital buyers in 2013, more than
double Mexico’s 1.2 million gain for the year.
To a large extent, the relatively slow growth in the base of
digital buyers in Mexico is a reflection of the country’s high
rate of poverty, as poor consumers are less likely to shop
online. Yet low-income consumers are also a likely driver of
the country’s high average rate of ecommerce sales per online
buyer, albeit unintentionally. Economic conditions in Mexico
tilt its digital buyer population toward more affluent internet
users who, being better off, spend more on average than
lower income consumers, and as a result drive up the average
spend per buyer. Furthermore, as these existing higher income
buyers become more comfortable with purchasing online,
their spending rises even further. Lower income consumers in
Mexico, therefore, aren’t joining the digital buyer community
fast enough to temper the gains in per-buyer spending being
driven by their better off countrymen.
The effect of income on ecommerce uptake can be seen
in data from an Ipsos Global @dvisor study conducted on
behalf of Reuters News in February 2012. It found that 47% of
respondents living in high-income households in Mexico had
made online purchases. Meanwhile, 37% of respondents from
medium-income households and just 17% of those with low
income had done so.
% of respondents in each group
Demographic Profile of Internet Users in Mexico Who
Buy Products/Services Online, Feb 2012
Gender
Male 28%
Female 18%
Age
<35 26%
35-49 17%
50-64 24%
Household income
Low 19%
Medium 37%
High 47%
Total 23%
Note: in the past three months; excludes grocery products
Source: Ipsos, "Global @dvisor" conducted on behalf of Reuters News, April
3, 2012
140230 www.eMarketer.com
140230
Change could be on the horizon, though. Low-income
Individuals are just starting to see viable payment methods
being offered for consumers without credit cards.
Payment Methods
Of 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 and
personal accounts—circulating in Mexico, and it is likely that the
vast majority of the personal cards are in the hands of individuals
in the moderate to well-off A, B and C socioeconomic levels.
Given that online purchasing is significantly higher in the
top-earning households in Mexico, the AMIPCI/Elogia finding that
60% of online buyers in Mexico had used a credit card to pay
for purchases made over the internet seems almost obvious.
That figure, however, showed a downward movement from the
previous year, when 63% of respondents said they used credit
cards 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 and
4 percentage points, respectively, from a year before.
As more internet users from lower socioeconomic levels
ease into online buying, the use of credit cards to pay for
online purchases in Mexico will continue to decrease, though
marginally, in favor of alternative forms of payment.
While credit card penetration in Mexico is remarkably low, there
were 98.1 million debit cards in circulation by Q2 2012, according
to data from Banco de México. But use of this payment method
for online transactions is hindered by security concerns.
Because credit cards are relatively scarce, B2C ecommerce
companies have developed a wide range of alternative payment
methods 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, Safety
Pay, MercadoPago)
■ SMS
■ Charge to mobile or landline bill
■ Prepaid card/gift card
■ Check
Consumers Are the Key

5. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 5
Online Geography
From a geographic viewpoint, serving digital buyers in Mexico
may be less challenging than one would expect in the 14th
largest country in the world by area. According to World
Internet Project data, 22% of the country’s internet users go
online from the Federal District (i.e., Mexico City). An additional
18% do so from Central Mexico, a region surrounding
Mexico City and where the vast majority of the population is
concentrated in the cities of Puebla and Toluca.
% of total
Internet Users in Mexico, by Region, July 2012
Source: World Internet Project, "Estudio 2012 de hábitos y percepciones de
los mexicanos sobre Internet y diversas tecnologías asociadas," Oct 24,
2012
147214 www.eMarketer.com
North
18%
Federal District
22%
Bajío
16%
Southeast
16%
Central Mexico
18%
Northwest
10%
147214
Unlike most Latin American ecommerce markets, Mexico’s is
multicity, but its complexity is nowhere near that of advanced
economies in North America, Europe or Asia.
While the origin of online orders varies depending of the
product sold, Mexico City is invariably cited as the top-selling
market, followed by Guadalajara, which is in the Bajío region
and is Mexico’s second largest metropolitan area. Beyond
that, cities like Toluca in Central Mexico, Monterrey in the north
and Tijuana in the northwest usually rank high on the list of
cities of origin for online orders.
For most online retailers in Mexico, the top three cities usually
account for at least half of all online orders, and often up to
two-thirds.
A Brazilian Startup Targets Mexico
A pure-play online retailer from its inception in Brazil in
2011, Dafiti launched in Mexico in 2012 with one of the
largest “original product” inventories for online sales in the
nation. (Original products refer to noncounterfeit items.
The term is widely used in Mexico given the far-reaching
extent of piracy in the country.)
Along with its vast inventory and a polished user
interface, Dafiti offers one of the best assortments of
payment methods in the country, the most notable of
which is a cash-on-delivery option for orders shipping
within Mexico City, where Dafiti uses its own fleet to
assure purchases are delivered in a timely fashion. (For
the rest of the country, the company relies on local
parcel service giant Estafeta Mexicana.)
Despite offering payment options that suit buyers in lower
economic tiers who often lack a credit card or even a bank
account, a majority of the company’s consumers come
from top-earning socioeconomic levels A, B and C.
Moreover, the company has noticed an interesting pattern.
“At first, people use alternative payment methods, like
supermarket cash payments or cash on delivery,” said
co-founder David Geisen. “After one, two, three successful
transactions, they tend to start using a credit card.”
Consumers Are the Key

6. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 6
The Plaza vs. Home Delivery
Mexico’s “plaza” culture, in which the town square
is the center of a community’s social and economic
life, makes for a population that is open to sharing
opinions publicly online, but is not so open to buying
remotely—at least not yet.
For people in Mexico, a visit to the “plaza” offers not only a
chance for social interaction, it also gives consumers the
opportunity to compare products and retailers side by side
and assess which offer the best value or quality for the money.
Given that online consumer interfaces on many ecommerce
sites 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 more
than ready to make the jump to online commerce, arguing
that retailers themselves are the inhibiting factor. “There is no
shortage in demand. The shortage is on the supply side,” Pablo
Slough, general director at Google México, told CNN Expansión
in a November 2012 article.
But there is a relatively simple tactic that would seem likely to
spur increased online shopping and buying: competitive pricing.
A November 2012 AMIPCI and Elogia study found that
shoppers in Mexico, like counterparts the world over, were
looking for cheap prices and good deals. Favorable financing
deals and discounts were cited as the preferred promotions
by these online buyers.
% of respondents
Preferred Online Promotions Among Online Buyers in
Mexico, 2011 & 2012
No interest for a period of time
65%
59%
Discounts
51%
49%
Free shipping
47%
47%
Buy one get one free
29%
29%
Free gift with purchase
20%
34%
Loyalty program points
17%
8%
2011 2012
Note: ages 18+; 2011 n=3,811; 2012 n=3,871
Source: AMIPCI (Asociación Mexicana de Internet), "Estudio de Comercio
Electrónico México 2012" conducted by Elogia and sponsored by Visa, Nov
6, 2012
148693 www.eMarketer.com
148693
Surprisingly, Mexico’s delivery infrastructure, once considered
the weakest link for the country’s online retailers, is not generally
seen as an impediment to growth. Parcel companies, both local
and international, are stepping up their coverage and service.
“Shipping was an issue in the beginning, but I don’t think it is
now,” said Francisco Ceballos, country manager at eBay-style
ecommerce site MercadoLibre.“It was just a matter of building
scale and investing in logistics to have good warehouses that
pack and deliver on time.”
Digital buyers have grown confident that their purchases will
be safely delivered at a reasonable cost. The AMIPCI/Elogia
study found that 47% of Mexico’s digital buyers in 2012 had
come to expect free shipping.
On the other hand, among internet users who told AMIPCI/Elogia
they had not made a purchase online, one in five cited fear of not
receiving their purchase as a reason for not buying via the web.
Despite delivery infrastructure gains, improvements are still being
called for.“Mexico is nowhere near [the US] in terms of logistic
capabilities for parcel delivery yet,” said David Geisen, co-founder
of retailer Dafiti México.“Estafeta provides us with a very good
service level, with perks that are normal in the US but not so
common yet among Mexican ecommerce players, like online
tracking of your package.”

7. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 7
What Shoppers Are Buying
Travel and intangible goods are usually the first
categories to be picked up by digital buyers during
the 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 product
categories purchased online among internet users in Mexico.
% of respondents in each group
Internet Users in Mexico Who Purchased Products
Online vs. Offline, by Product Category, May 2012
Groceries & healthcare
99% 1%
Retail
97% 3%
Automotive
97% 3%
Technology
90% 10%
Media & entertainment
89% 11%
Finance & real estate
88% 12%
Travel
64% 36%
Total
90% 10%
Offline Online
Source: IAB Europe, TNS Infratest and Google, "Consumer Barometer,"
July 1, 2012
148604 www.eMarketer.com
148604
In the online travel category, one of the front-runners has been
Volaris, a low-cost airline based in Mexico City. The airline
started operations in 2006 with a strong digital strategy. “We
knew we had to have an important digital component from
day one,” said José Calderoni, the airline’s marketing and sales
director. Having embraced digital media from its inception,
40% of Volaris’ ticket sales came through their website during
their first year of operations. That portion quickly expanded to
55% during their second year. “Since then, online sales [as a
portion of total ticket sales] have grown more slowly to reach
60% [in 2012],” Calderoni said.
Cinépolis, the largest chain of movie theaters in Mexico and
fourth largest worldwide, is another digital pioneer. Despite a
history going back more than six decades in a country where
many 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 growth
rate of 52% in online sales. A whopping 70% increase was
expected in 2012. As a result, nearly 13% of the company’s
ticket sales now come through digital storefronts that include
online, mobile and social platforms.
But even the digital leaders are forthright about the challenges they
face.Miguel Mier,global COO at Cinépolis,ran down the list:“First
would be internet penetration,[which has been] slower than in
other markets.Second would be low credit card penetration,lower
even than other LatinAmerican countries.Third and last would be
[Mexico’s] predominantly cash-based culture.”

8. Mexico Ecommerce: Delivering Value to a Growing Digital Population Copyright ©2013 eMarketer, Inc. All rights reserved. 8
eMarketer Interviews
Marketing in Mexico: MercadoLibre Offers Easy
Payment Methods for Shopping Online
Francisco Ceballos
Country Manager, Mexico
MercadoLibre
Interview conducted on December 12, 2012
Marketing in Mexico: How MasterCard Encourages
Credit Usage
Luis Cirerol
Vice President, Emerging Payments
MasterCard México
Interview conducted on December 17, 2012
Marketing in Mexico: How Dafiti México Overcomes
Ecommerce Obstacles
David Geisen
Co-Founder
Dafiti México
Interview conducted on December 17, 2012
Mauricio Braverman
Product Director
Visa México
Interview conducted on December 21, 2012
José Calderoni
Marketing and Sales Director
Volaris
Interview conducted on December 17, 2012
Miguel Mier
Global Chief Operating Officer
Cinépolis
Interview conducted on December 14, 2012
Bruno Padilla
Marketing Director
MasterCard México
Interview conducted on December 17, 2012
Related eMarketer Reports
Mobile Mexico: Overcoming Obstacles to Growth
Social Networking in Mexico: Bringing the Plaza Online
Digital Ad Spending in Mexico: Advertising Giants
Finally Join the Pioneers
Mexico Online: Usage Grows as Access Obstacles Give Way
Related Links
AméricaEconomía Intelligence
Asociación Mexicana de Internet
Banco de México
Cinépolis
CNN Expansión
comScore Inc.
Dafiti México
Elogia
Estafeta Mexicana
Google Consumer Barometer
Ipsos Global @dvisor
MasterCard México
MercadoLibre
PayPal México
Rocket Internet
Safety Pay México
Visa International Latin America
Volaris
World Bank
World Internet Project México
Editorial and
Production Contributors
Nicole Perrin Associate Editorial Director
Cliff Annicelli Senior Copy Editor
Emily Adler Copy Editor
Dana Hill Director of Production
Joanne DiCamillo Senior Production Artist
Stephanie Gehrsitz Senior Production Artist
Allie Smith Director of Charts