The Mexican Paradox: Online Sales Increases, Cash Becomes StrongBy Daniel González | Mon, 05/25/2020 - 13:44
Miniso, one of Mexico’s recent retail success stories, had projected to double its points of sale in the country by 2023. With the support of Grupo Carso, the Mexican company had set an aggressive timetable to control the market in less than three years. However, COVID-19 has radically changed those plans and the company is now betting on online sales to continue growing. Bodega Aurrerá, one of the most important supermarket retail chains in the country, on Friday decided to open its online store, joining other retail giants such as Walmart or La Comer, which have promoted this channel as a result of the expansion of the virus in Mexico. E-commerce has come out as a winner of the COVID-19 crisis, nevertheless in Mexico there has been a paradox. According to Banxico, May 21st became the day that saw consumers with the most cash on the streets in history, this happened after increasing the amount of cash by MX$21.4 billion. “Economic activity is greater, so there are more transactions. In Mexico, a very important part of the commercial operations are made in cash, hence the increase in the use of coins and bills,” the financial institution recently reported in the document Cash Provision.
Banxico’s data contrasts with those relating to e-commerce in the country. According to the consulting firm The Ciu, at the end of 2019 in Mexico there were 61.9 million people who regularly purchased goods through online channels. By the end of 1Q20, the number had increased to 62.4 million. An important part of these new buyers came to the digital world as a result of the COVID-19 pandemic. Supermarket retail chains are part of this success story. In 2019, they accounted for 7.6 percent of all digital purchases; by the end of 1Q20, they accounted for 13.9 percent. Another sector that has grown during this pandemic is delivery food service through apps such as Uber Eats, DidiFood or Rappi, which has grown from 4.8 percent to 11.4 percent of all online purchases in Mexico.
While some countries like Sweden or South Korea have taken advantage of the pandemic to minimize the use of cash in those countries (Sweden has even created the e-krona, a digital currency), in Mexico data is contradictory. The country, according to many analysts, has a huge opportunity for digitalization and financial inclusion, which would also increase the number of people who pay taxes regularly. However, cash is mainly used in a large majority of business transactions. Two factors have influenced this behavior: inflation in the country, which has led to price increases in many basic goods and necessities, which are paid mainly in cash, and the economic recession, which has undermined the confidence of the population working informally in Mexico.
At the same time, the Fintech Act, the first law of its kind in the world, prohibits cash payments and the use of financial apps has been growing steadily for the past two years, Gerardo Obregón, CEO of Prestadero, told El Sol de México.