Logistics: Bigger Challenge in a PandemicBy Jorge Ramos Zwanziger | Wed, 12/02/2020 - 14:12
Despite the losses the retail sector suffered because of the COVID-19 pandemic, the digital sector has thrived in Mexico. Consumers have changed their behavior immensely, altering the way companies conceive their production and logistics lines. This creates areas of opportunity for the industry to adapt and grow further.
“During lockdown, we saw super traditional retailers innovating quickly, some at a technological level. They quickly implemented delivery services, Buy Online, Pickup in Store (BOPIS) solutions, curbside pickup, shipping from the store and integrations with different marketplaces,” Eduardo Madeiros, Chief Digital Officer of LATAM at Office Depot, wrote for MBN. The problem is that some companies were not ready for the logistics challenges all these changes would bring.
Last week, Best Buy Mexico announced it was going to close its 49 stores in the country. “Despite [our team’s] extraordinary work, the effects of the pandemic have been too deep and it is not viable for us to keep our business in Mexico,” said the President of Best Buy Mexico, Fernando Silva, in an official release. El Financiero, on the other hand, argues that this was because of Best Buy’s inability to compete with Amazon in the market, as the e-commerce giant has prices that are usually 14 percent lower and a delivery service that can bring products the next day. Marcela Muñoz, Director-General of Vector’s analysis, told El Financiero that the main competition for Best Buy in physical stores were department stores with their aggressive sales and promotions. “Online, without a doubt, Amazon impacted their exit, since Best Buy’s results from 3Q20 were not bad.”
Best Buy encountered a challenge in the current Mexican market. Alex González, Market Analyst at DPL Group, told El Financiero that Best Buy lacked deeper involvement in e-commerce. “Amazon has invested around US$100 million in its distribution centers and the pandemic was the last straw,” he said. Amazon’s capacity in the sector creates a challenge for companies that want to compete. Medeiros told MBN that the side effect of this exponential growth is the loss of consumers in the medium to long term. “Customers are gained much faster but we lose a customer in the digital world based on the sales and aftersales experience.” If a consumer is not satisfied with the service from one platform, it is two clicks away from another platform that logistically can suffice its needs.
Investing in optimizing a company’s distribution of products is important. FedEx Express announced an investment of US$25.8 million in Mexico that is destined for the unstoppable demand for logistics services that e-commerce requires, along with next-day delivery promises, reported T21. “We are talking about next day not only for Mexico City, Puebla, Toluca, Cuernavaca or places that are close to the metropolitan area but to places like Monterrey, Guadalajara, Tijuana and Cancun, where there is no other choice but to fly the products. We are even thinking and testing how same-day delivery would work,” Jorge Torres, Vice President of Operations for FedEx Express Mexico, told T21. FedEx Express is concerned about the peak season in the months of November through January, however, as it expects an increase in volume demand of 70 percent.