The Mexican retail sector registered a sluggish year in 2018, posting same-store sales growth of just 0.1% and all-stores growth of 3.5% for the year, according to the National Retailers Association (ANTAD). Retail performance showed deceleration at year-end, posting the slowest fourth quarter expansion since 2014. On the plus side, sales during Mexico’s four-day “Buen Fin “ (Black Friday) promotion in 2018 grew 8% with respect to the previous year, the national chambers of commerce, services and tourism (Concanaco Servytur) reported. On-line sales during the promotion jumped 50% for the same period, demonstrating ongoing advances in consumers’ shift to shopping on line.
ANTAD is adopting a cautious outlook for 2019, projecting a 2.2% increase in all-stores sales but a contraction of 1% in same-store sales for the current year. The growth of electronic commerce remains a leading trend for the industry, with Mexico striving to exceed US$20 billion in on-line sales for the year with the hope of surpassing Brazil as Latin America’s top e-commerce market. Industry analysts project that policies proposed by the new Mexican administration could provide a boost to retail. These include monthly stipend programs for qualifying members of segments such as youth, elderly and the disabled, as well as a 16% increase in the minimum wage. Bodega Aurrerá is expected to benefit in particular from these measures across its formats. Also, the new government reduced the VAT tax in the northern zone along the U.S. border to 8% from 16%, which is expected to provide a sales bump to store chains well established in the area such as Soriana, Walmart, Casa Ley, HEB and Super Norte.
When 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. Continue reading Acquisitions and new entries change Mexico retail landscape