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News Article

Can Retailers Brave the Digital Area?

Thu, 05/09/2019 - 16:56

The digitalization of traditional value chains in the retail segment is not only changing the way consumers interact with service providers but also how service providers structure their business, panelists at Mexico Business Forum 2019 said on Wednesday at the Hotel Marquis Reforma in Mexico City.

“In Mexico, 3 percent of retail sales are digital. In Latin America this amount averages 5 percent and in more advanced countries, it increases to 10 percent. Physical points will not disappear, they will grow together with digital platforms to complement services and offer an omnichannel strategy,” said Fabian Torres, Digital Commerce Manager of Nike, during the morning panel discussion.

According to Argenis Bauza, Digital Transformation Partner at KPMG in México, there is a general belief that e-commerce is less expensive. “Logistics prices rise and the velocity that these businesses experience in terms of demand is higher,” he suggested. Torres added that even though e-commerce platforms can decrease costs like rent or payroll, there are other significant associated costs, and benefits. “The countercharges due to failed operations and delivery charges are present. By having both physical and digital platforms, you can exchange traffic between them. You can use physical points as storage and delivery facilities or like a reconnection point with your logistics companies.”

Not all companies are ready to make this digital leap, said Omar Galicia, Commercial Director of Mercado Libre. “Traffic generation investments are lower for a company that already transitioned to an e-commerce platform. The first step for any company without this kind of experience should be to enter into a marketplace as your only job is to make sure your product is available. Then, you can focus your efforts on marketing strategies on site.”

Another important element is to create a trustworthy environment for your customers to embrace these novel platforms. As Bauza said: “In Latin America, customers do not trust the delivery service.” In this sense, Torres said: “If you are promising a certain delivery time frame, you have to achieve it or do it in the average time frame of your competitors. The company’s internal logistics have to be efficient as well, as you cannot generate disgust from your client.”

Some companies are also innovating on the payment side. “Mercado Libre was born digital. There is a trend in the digital payment segment and its financial inclusion. In the next two years, there will be a revolution with tools such as wallets that will allow customers to make investments, ask for loans and make payments through QR codes. We are already working with Mercado Pago platform in this sense”.

 

Aligned with the payment method, security is important. “To date, there are many tools that reduce payment risk,” Torres said. “In this planification, you have to take a step ahead and explore all the available payment channels in the market. There is cash payment on delivery, or cash payment with a commercial partner. Wallets like Mercado Pago are an option too. Even if you introduce gift cards, you help mitigate the dependency on debit and credit cards, and per se fraud risks”.