Industrial Warehouses and Online Sales. What does e-commerce need to generate sustained growth in Mexico?

The e-commerce industry in Mexico has witnessed significant growth over the past three years, with an unprecedented surge triggered by the coronavirus pandemic. The pandemic's restrictions on mobility compelled businesses to adopt new online channels for buying, selling, and distribution. As a result, online transactions surged by an impressive 80% nationwide, as reported by the Mexican Association for Online Sales (AMVO). This transaction surge led to the need for expanding supply chain infrastructure, resulting in increased industrial warehouse occupancy by e-commerce companies.

From the second quarter of 2020 to the same period in 2023, the industrial area occupied by e-commerce companies tripled, soaring from 370,000 to over 1.2 million square meters. SiiLA's data also indicates a staggering 168% increase in e-commerce companies, with around 80 firms and conglomerates operating physically across the country.

Mercado Libre and Amazon stand out among the notable e-commerce players in Mexico. Both companies experienced nationwide expansion, with Mercado Libre occupying over 160,000 square meters and Amazon over 130,000 square meters in the last year alone. This represents a remarkable growth of over 30% in each company's gross leasable area.

Apart from these industry giants, Mexico has seen a rise in the competitiveness of its e-commerce market since 2020, with AliExpress, BAZ Entregas, Frubana, Shopee, and Troquer among the examples of companies opening distribution centers, warehouses, and physical stores.

What Does E-commerce Need to Continue Thriving?

Sustained growth in Mexico's e-commerce hinges on key aspects, including enhancing digital and logistics infrastructure, bolstering online security, offering diverse payment options, educating consumers, staying technologically adaptive, providing incentives, and establishing appropriate regulations to ensure a competitive and secure environment. In this regard, AMVO considers two indispensable processes:

1.- "Know Your Customer" (KYC) enables companies to verify their customers' identities, thus preventing fraud and money laundering.

2.- "Know Your Business" (KYB) allows companies to verify the identities of the businesses they engage with or forge strategic relationships through this process.

AMVO believes that customer distrust while making online payments remains a significant factor impacting sales volume. In fact, according to the Mexican Internet Association data, one out of every four internet users considers online shopping risky.

However, with the implementation of KYC and KYB processes, companies can demonstrate their commitment to customer security and information protection, thereby fostering a trustworthy environment. These processes not only improve the customer experience but also nurture long-term loyalty. Also, by simplifying the registration and purchase process, companies can identify and retain valuable customers, reducing customer acquisition costs significantly.