Working Both Sides of the Retail Track Provides Unique ViewBy Jan Hogewoning | Tue, 03/24/2020 - 15:36
Q: Why are you a unique partner in the Mexican retail sector?
A: At TodoRetail, we challenge our clients’ understanding of retail and equip them with the skills and insight they need to make their business better. Because we work with both vendors (producers/product owners) and retailers, we have a unique perspective into the sector. Vendors have a relationship with retailers because they sell through their stores. How to sell and distribute in Mexico is a complex topic. The country has a unique retail history and culture. For example, despite being so close to the US, the Mexican consumption culture has a strong European footprint. All large Mexican department stores and chains were founded by Spanish or French people. This is marked by specific traits. Mexican people love to make an occasion of going shopping. They dress up, they combine shopping with dining and expect a service-oriented environment. The European influence is even reflected in the color of mall gardens, which often have terracotta themes. In supermarkets, you will always find European products, particularly Spanish.
Q: ‘Walmartization’ is a well-known phenomenon in the Mexican retail sector. What impact did this have on the retail culture?
A: Walmart arrived to Mexico in the late 1980s and had a transformative impact. The company really took off when it formed a joint venture with Bodega Aurrera. It learned to tropicalize aspects of its model. For example, its supermarkets did not offer fruit at the start, while Mexican supermarkets always do. Walmart’s model was to offer many products with less attention to presentation and at affordable prices. Its supermarkets were not meant to be a destination for exclusive shopping. This was completely different to retailers like Superama (now part of Walmart Mexico), which had a strong emphasis on quality service offered throughout a few exclusive stores.
Walmart has become the biggest group in the country through acquisitions of other chains, smart target-group segmentation and rapid expansion of stores. Meanwhile, the Aurrera brand went from a high-end supermarket to a supermarket chain known for its lower prices. Other competitor chains have followed suit by stripping down on service and presenting a less exclusive image.
Q: What are the main questions your clients have?
A: The first topic clients focus on is their profits. In our view, many vendors have a glamorous idea about getting their product on the shelves of major retailers. However, they do not seem to have a strong understanding of how to make money. They will sell a total of US$100 million but make a profit of only US$100,000 due to economic inefficiencies. We analyze their numbers and provide step-by-step guidance in areas such as how to price their products, in what form they need to sell them and which market segment they should target. A company may benefit by selling their products in a six-pack instead of a 10-pack, with the frequency of buys going up, just to give a small example.
Data is everything for us. We create a different set of analytics for each of our clients. Many retailers have portals that provide information on their floorplans. Only about a quarter of vendors actually use these in their own decision-making. If you do not know how your retailer sells its products, how can you define a strategy for your own product? People generally love their own product. At TodoRetail, we are 100 percent candid. We always provide the most honest advice, whether to a vendor or a retailer.
Q: How important is e-commerce for businesses?
A: E-commerce is a must. In Mexico, we still face challenges to e-commerce, which has not seen a great deal of progress in the last two years. Firstly, many people do not have debit or credit cards. Mercado Libre, Amazon and others have come up with alternative options, such as being able to purchase the product online and then paying in cash at a bank or convenience stores. However, this takes away part of the benefit of e-commerce, which is supposed to be fast and easy. Another obstacle is the fear people have of their bank account details being stolen. Lastly, there is a lack of infrastructure, both in terms of transport logistics and internet availability in some parts of the country.
Ultimately, the benefits of the service will win over distrust and lead to more rapid growth. One of the advantages of e-commerce is that the customer has a wider offering in products and price. Some retailers even offer their product at a lower price online than at the physical location. The benefit of selling online for retailers is that they can strongly reduce operating costs.
Q: What will change and what will remain the same in the Mexican retail sector?
A: Physical stores will remain important in Mexico. Mexico is No. 1 globally for mall openings. People see these as a form of entertainment. One of Mexico’s great assets is that there is almost always a reason to celebrate with so many holidays, each with particular foods and traditions. One of the challenges for retailers is attracting young people. Mexico is a very young country, with 75 million people under the age of 27. Millennials and Gen-Z love experiences. They know their food and they want to try new things. In addition, they are choosing to get married later and therefore spend their money differently.
TodoRetail is a consulting platform that provides services that range from training events to consulting in the areas of brand marketing, store design and e-commerce