E-commerce has become part of everyday life in Mexico. Currently, 7 out of 10 Mexican online consumers make purchases or payments online at least once a month, and 1 out of 10 make purchases every day, according to PayPal. In Mexico, e-commerce penetration is expected to reach 48.7% in 2022. In other words, there will be 63 million Mexicans who will buy online, according to data from Statista.
From a business viewpoint, the Mexican Online Sales Association (AMVO) forecasts that online sales in Mexico will account for 49.8% of all sales by SMBs in 2022. However, the commercial success of ecommerce merchants will depend on marketing experts who are able to identify and solve the current needs of Mexican online consumers. PayPal, for example, says that 90.6% of consumers in Mexico do research before making a purchase on the Internet, highlighting the importance of knowing the buying journey. In other words, knowing every channel, medium, or process that, over time, affects the judgment of Mexican consumers in their online brand selection, and knowing their payment experience and their after-sales experience in e-commerce.
With this in mind, at Americas Market Intelligence we have identified the main steps in the buying process among Mexican consumers, or customer journey, in relation to what businesses are currently offering.
Step 1: The Mexican Online Consumer Becomes Motivated
The Internet is a motivation channel for buying, even if this purchase may occur much later on or happen in physical establishments. Over 97% of consumers in Mexico involve the Internet at some point in the shopping process, according to AMVO. A practice known as webrooming is common, which consists in researching online and then buying the product at a brick-and-mortar store. Other practices include comparing prices online while at a brick-and-mortar store, or buying online after having seen the product in a physical establishment (showrooming).
97% of consumers in Mexico involve the Internet at some point in the shopping process.
When we look at the sources of inspiration for Mexicans in the motivation stage, the marketplaces Mercado Libre (inspiration for 45% of consumers) and Amazon (45%) stand out, according to data from Statista that match our own study of trends in LatAm. Brands in Mexico have reacted positively: 73% of businesses in Mexico offer their products on Mercado Libre, and 54% do so through Amazon, according to AMVO.
On the other hand, Statista also says 40% of Mexican online buyers are inspired by social networks, which is not surprising given that most Mexican internet users use WhatsApp (94.3%), Facebook (93.4%), Facebook Messenger (80.5%), Instagram (79.1%), and TikTok (70.4%). However, SMBs are falling behind: although 69% have an official Facebook account, just 48% have an official Instagram account, and barely 38% use WhatsApp.
To improve motivation, it is imperative that brands offer a multichannel presence consisting of social networks, their own website, and marketplaces. It may even include price comparison websites like Busca Ya, or Tiendeo, or couponing and discount websites. Efforts should also focus on digital advertising, based on objectives such as brand recognition and reach.
Step 2: The Mexican Online Shopper Compares and Evaluates The Products Before Buying
After motivation comes interest. At this second stage, the Mexican consumer has already detected a need or desire and is looking for different suppliers or brands that might satisfy it. In this regard, 8 out of 10 Mexican buyers check at least 6 different sites before deciding to buy, as demonstrated in the latest results of the Buen Fin, one of Mexico’s biggest e-commerce events.
More interestingly still, just 2 out of every 100 Mexican online buyers decide to purchase after checking just one site. This demonstrates the low level of brand loyalty among the Mexican population, and the need to create engaging advertisements and content. A good point of departure is focusing on online purchase drivers, including free delivery, fast delivery, coupons, and instant payment, as shown by the following graph with data from Data Reportal 2022.
In Mexico, just 2 out of every 100 Mexican online buyers decide to purchase after checking just one site. The low level of brand loyalty in Mexico forces businesses to implement a multichannel sales strategy.
At the consideration stage, we can see a gap in terms of digital advertising if we analyze the top 5 digital consultation channels in Mexico. For example, 64% of Mexican consumers consult search engines like Google before making a purchase, but only 17% of SMBs in Mexico have invested in Google Ads.
In this context, we might call the current digital strategy of Mexican businesses “incipient” in the best of cases. The AMVO survey shows that “having begun to sell their products online” is the predominant digital strategy for 53% of brands. Whereas, “beginning to sell to end consumers online” is a strategy implemented by just 38% of businesses.
Although 64% of Mexican consumers consult search engines like Google before making a purchase, just 17% of SMBs in Mexico have dared to invest in Google Ads.
Step 3: The Mexican Online Consumer Makes an Online Purchase
At this stage in the journey, the Mexican consumer has now decided on the product of a specific brand and will now look for a way to make the purchase. In this instance we will focus on a purchase closed solely through the digital channel, that is, e-commerce proper.
Digital purchases in Mexico are made almost exclusively using a cell phone. It goes hand in hand with mobile internet penetration in Mexico, which will reach 82% in 2022, according to data from Instituto Federal de Telecomunicaciones (IFT).
In fact, the AMI payments team forecasts that in 2022 mobile phones will account for a 70% share in volume of sales of Mexico’s e-commerce.
In terms of payment methods, 84.6% of Mexican online consumers are paying for their everyday purchases (daily, weekly, or monthly) with a debit card, according to PayPal. On the other hand, internal reports from AMI show credit cards as the main payment method in relation to market volume.
Right now, the preference in payment methods in Mexico is in line with what businesses are currently offering. Bank deposits and electronic transfers are the main payment methods that SMBs are offering for e-commerce. The third most offered payment method is the one integrated with the marketplaces in which brands sell their products. Cash on delivery is the other popular method, offered by 38% of businesses.
However, brands need to consider the fintech and neobank boom that has happened in Mexico in recent months. AMI analysts talk about a potential tipping of the scales in favor of new payment models such as Buy Now Pay Later. However, for Lindsay Lehr, head of AMI payment practices, it represents one of the “ugly” scenarios for payments in Latin America for 2022, owing to delays in the regulations for open banking and fintechs as a result of the pandemic.
Step 4: The Mexican Consumer Receives the Product Purchased Online
This stage is crucial for after-sales customer satisfaction, largely determined by logistical execution. Currently, 90.4% of SMBs in Mexico offer a mixed sales model that includes physical and digital channels (AMVO, 2021). However, for Diego Rodríguez, senior logistical practices officer at AMI, there is little technological integration between last-mile logistics providers and the web pages, Facebook pages, Instagram pages and inventory-control systems of small business that sell online. The result: orders that go unfulfilled or are delayed, or products that are ordered but out of stock, all crucial elements that directly affect customer satisfaction. “If businesses want to adopt a mixed sales model,” says Diego, “they need to control their inventories and shipping in real time.”
Optimization in inventory management among Mexican SMBs
Problems in product logistics could be due to a lack of specialist logistics providers for SMBs or a lack of reliability in companies providing in these services. Data from AMVO show that just 9% of businesses in Mexico outsource the management of their inventory at warehouse level. And in terms of transportation, just 32% of businesses trust in outsourcing their shipping. To address this challenge, Diego Rodríguez mentions the case of large retail chains like El Palacio del Hierro, Walmart, and Liverpool, which allocated big budgets in 2020 and 2021 to developing sophisticated inventory-management systems. This enabled them to monitor their inventory in real time at fulfillment centers and brick-and-mortar stores. In the case of small stores in Mexico, some have now begun to make more use of the platforms offered by Shopify, Multicomercio, Prestashop, and Alegra to sell directly through their website. However, Diego says marketplaces like Amazon and Mercado Libre are indisputably the leaders in inventory management for small businesses in Mexico, and the ones that have grown most as a result of the pandemic.
Fast, low-cost shipping for Mexican SMBs
There has been exponential growth in startups providing last-mile services on the same day or even in under three hours, with an immediate impact on costs. “The costs associated with the last mile are rapidly increasing, to the point of eroding profit margins for physical sellers,” says AMI’s expert.
In fact, the high cost of shipping is a concern for 56% of Mexican businesses that sell online, according to AMVO, and more so if we consider that 61% of these offer free shipping as a promotional strategy. By contrast, just 36% of Mexican SMBs offer discounts during events like the Hot Sale. In other words, free shipping is a cornerstone among businesses that want a competitive edge.
Below are some of the recommendations that Rodríguez—who has led more than one hundred research studies on the logistics industry throughout Latin America—offers to reduce shipping costs:
- Use price comparison sites like EnvioClick to find the best rates available.
- Offer discounts for deliveries taking more than 2 days. Although Amazon standardized delivery in 2 days as the optimal period, customers are willing to wait if they get a discount.
- Push the strategy of buy online/in-store pickup on the same day. This reduces shipping and packing costs.
At least 25% of Mexican online buyers have returned a product purchased online.
Mitigating the impact of product returns
At least 25% of Mexican online buyers have at some point returned a product purchased on online, and just 2 out of 10 consider the return process difficult, according to AMVO. In fact, says Diego, returns are easier now than before the pandemic, thanks to the greater number of options available, including physical points of return. However, return policies should be clearer and better communicated as they can become an excellent point of differentiation for online sellers and last-mile businesses. “At AMI we have identified greater restrictions in returns, and even maximum numbers of returns per month to reduce costs, but a flexible returns policy can create loyalty among customers and increase sales, especially in categories like fashion, cosmetics, and sports,” explains Diego.
“Last-mile companies definitely have an opportunity to improve return processes and turn them into a greater revenue generator. From my perspective, carriers have not defined an optimal sales strategy properly in terms of the returns service in Mexico because online stores have a greater fear of losing money as a result of returns than the benefits they might obtain from an effective returns policy.”
In conclusion, with regard to the logistics of online stores, or stores with a mixed sales model, Diego Rodríguez has these tips for increasing customer satisfaction, improving the management of shipping, and optimizing costs:
- Keep customers informed during the package’s journey at all times, from the day it is dispatched to the day it is delivered.
- Text messages are more effective than e-mails.
- If delays in delivery are expected, it is essential to get ahead of the information that will be given to the customer, and assume responsibility without blaming third parties.
- When the buyer’s signature or receipt is required, it is important to coordinate the best delivery time window one day beforehand by text message. It is even better if the logistics company waits for the buyer up to 15 minutes instead of making a second or third delivery attempt.
- Make returns easier for customers. Alliances can be negotiated with physical establishments such as convenience stores, pharmacies, and shopping malls. The routes taken by last-mile companies can be leveraged to collect customer returns and reduce costs.
If you would like to improve the internal logistics of your business, get in touch with Diego Rodríguez.
Step 5: The Mexican Customer Develops Brand Affinity
The last step in the online buying journey is creating loyalty. For experts, this step relates to the repetitive exercise of buying and customer interaction, until they develop “love” or loyalty toward the brand. Strategies at this stage are aimed at increasing customer lifetime, while improving the average ticket and purchase frequency. Now, at a time when digitalization has made brand switching something run-of-the-mill for e-commerce, businesses in Mexico need to pay more attention than ever to their after-sales service and communication on social networks. In other words, the customer’s buying journey never ends.
Ultimately, it is worthwhile doing exhaustive research on the weak points in the buying journey, and how it would be possible to attract more customers to the digital channel (see graphic below).
Contact us if you are interested in an exhaustive study exploring the buying journey of your ideal customers, which also highlights opportunities for improvement with a better return on your investment. At AMI our practices specialize in logistics, payments, and e-commerce. We have worked on the strategic planning of various Mexican businesses, focusing on objectives such as lead generation, new-supplier sourcing, satisfying the ideal customer, and evaluating rivals.