Acquisitions and new entries change Mexico retail landscape

retailWhen looking at the retail industry in Mexico, it appears that the country’s efforts to move into e-commerce have to be the most important trend currently.  Mexico is still playing catch-up to its North American neighbors in the transition to on-line sales, facing hurdles such as low credit card penetration and a strong perception among consumers of high fraud risk in electronic purchases.  But while our e-commerce marketplace sorts out its issues, brick-and-mortar stores continue to play a leading role in Mexican retail, and reshuffling among leading chains as well as the entry of foreign chains into the market is driving continued evolution of the retail landscape.

Over the past 20 years, the entry of Walmart into the Mexican market in the 1990s and the rise of regional chains to national prominence has upset the balance of power in the industry.  Back in 2007, Gigante, one of the country’s dominant supermarket operators, marked a turning point when it sold its 205 grocery stores to emerging northern rival Soriana.  The move effectively signified Gigante’s departure from grocery and general merchandise retailing, although Gigante remained in the retail market operating smaller specialty store chains, and announced Soriana’s entry to the nationally dominant group.  In 2015, Soriana further solidified its position in the market with another aggressive move when it acquired 160 grocery stores and three distribution centers from leading retailer Comercial Mexicana.  While Comercial Mexicana, now called La Comer, remains in the game to focus on a smaller number of more specialized retail formats, the acquisition by Soriana further cements the Monterrey-based chain’s nationwide presence.

Other more recent acquisitions and alliances continue to change the industry’s dynamics.  In August 2016, Mexico’s leading upscale department store, Liverpool, acquired the Suburbia chain of midscale clothing stores from the Walmart company.  The transaction added 119 stores to Liverpool’s portfolio, shoring up its presence in the middle income market.  Shortly before Suburbia changed hands, Chile-based department store operator Falabella announced a partnership agreement with Soriana to establish its Sodimac home improvement stores in Mexico.  The new partners reported plans to open 20 stores over the first five years beginning in 2017.  Under the deal, Sodimac will enter the Mexican hardware, DIY and home improvement market as a competitor to current market leader The Home Depot and emerging contender Lowe’s, both U.S.-based.

Falabella is not the only foreign retail chain to eye the Mexican market in recent years.  Swiss multinational clothing retailer H&M opened its first store in Mexico in 2012, and this year reported plans to close 2016 with 29 stores and expand to 40 locations in the country by the end of 2017.  U.S. children’s clothing and accessories retailer Children’s Place opened its second store in Mexico in 2016 and reported plans to expand to 35 sales locations in the medium term.  Children’s Place currently operates branded space in three Palacio de Hierro department stores in addition to its two own stores in Mexico.  Also in specialty retailing, venerable British toy store Hamleys established its first store in Mexico in late 2015, reporting plans to expand up to 10 stores over the coming three years.  Between the growing willingness among consumers to make electronic transactions and the near-flood of new international stores appearing in local malls, the consumer experience in the Mexican retail market is now practically unrecognizable compared to 20 years ago, and more changes look to be on the way in the coming years.

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