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LatAm Mexico Perspectives on Retail

During the past years, we have seen many interesting changes in channels in Mexico, some of them as a result of the severe crises experienced by our country (such as contraction of the economy in 2009). But some other influences or trends that originate in other parts of the world also have an impact on their development.

In terms of the future for retailers in Mexico, there are 4 relevant phenomena:

1. Supermarkets, still with opportunities for growth:

Mexico’s territory is huge, with a complex geography, so there are still many areas where there is room for improvement in supermarket presence. An interesting option, particularly in smaller cities, is the smaller or “express” store format, which has emerged in recent years. It’s not only supermarkets but also a great variety of other modern channels (convenience stores, drugstores, etc) that are taking advantage of this opportunity. The market is not yet saturated with supermarkets, so those retailers who are able to open more points of sale will certainly see the most growth. This scenario could also be appealing to new international competitors who may come to our market.

2. An increasingly fragmented market:

The market is becoming more and more fragmented, and this is reflected in the number of channels that each household visits, which has increased since the financial crisis of 2009. Some examples of mass consumer channels that have become the top options for shoppers are drugstores, which have diversified theiroffer of products in order to compete more directly with supermarkets. This is an interesting initiative because some products, such as toiletries, are sold more and more to end users, and having such products on offer in channels more readily available to shoppers makes complete sense.

Because they are close to every household, convenience stores have also shown significant development, increasing their share in the market as a result of the opening of more points of sale. The express store format is following the same trend. Have we seen it all? No. We will certainly continue to see this phenomenon develop in the future, with new formats or ways of interacting with shoppers, butdefinitely with the aim of offering Mexican people a wider range of places in whichto shop. On this same path, we could see in years to come a greater development in mass online purchases through the internet, or perhaps other “Category Killers” channels will become stronger in Mexico. This type of channel focuses on a set of categories in particular (frozen food, for example), resulting in those categories losing ground in supermarkets.

3. Greater focus on the purchase experience:

One option that retailers should explore to create loyalty in chain shoppers is to pay more attention to the purchase experience. 70% of households report that they have not seen any improvement in the channels where they shop in the past 5 years.

Supermarkets tick many boxes, but there are also aspects of traditional channels that Mexican people enjoy and which the modern channel could adopt. 53% of people like to buy from a place where they are familiar to the seller and the seller knows what they prefer. We enjoy tailored services, and this can certainly be achieved in supermarkets. For example, we like to receive help to make better choices regarding our products, but only 17% think that this need is met in supermarkets. When it comes to food, we try to get some tips on how to cook what we have purchased, and this need is also met in markets and small stores, but not in supermarkets.

Nowadays people complain of other aspects of channels, such as the long queues and the time spent shopping there. Improving the purchase experience will contribute to retaining shoppers and in the coming years this topic will certainly gain importance in our country.

4. Development of own brands:

Supermarkets in Europe have followed another path to boost their growth or increase shopper loyalty: they have developed own brands with the aim of generating brand loyalty. Own brands range from Basic to Premium. Their development in Mexico is poor: 5% of purchases in supermarkets are own brands, while in England their share is 47%. Of course, own brand development is closely related to the supermarket channel development, while in Mexico 35% of spending occurs in this modern channel, 88% of English households spend in this channel. The other reason for selling own brands is their profitability; with no need to spend on advertising, their prices can be lower than that of other brands. This is not currently a concern to brands, but as more and more supermarkets open, more and more households will try own brands. These brands grow during financially tough times, and there is no going “back to normal”, because if households like them, they incorporate them into their portfolios.

There is no doubt that channels in general have many opportunities for growth, and supermarkets have taken advantage of that in recent years by adapting to household needs and coming closer through smaller formats. However there is still a long way to go, so there remains ample opportunity for growth.

Kantar Worldpanel is the world leader in consumer knowledge and insights based on

continuous consumer panels. Its “High Definition Inspiration” combines market monitoring,

advanced analytics and tailored market research solutions to deliver both the big picture

and the fine detail that inspire successful actions by clients.

Thierry Heude

General Manager, Kantar Worldpanel Mexico-CAM

Kantar Worldpanel is the world leader in consumer knowledge and insights based on

continuous consumer panels. Its “High Definition Inspiration” combines market monitoring,

advanced analytics and tailored market research solutions to deliver both the big picture

and the fine detail that inspire successful actions by clients.