LIFESTYLE

E-commerce not quite clicking in Mexico’s populous consumer market ― yet

In Mexico City the notorious Tepito market is still the place of choice to get the best deals on anything from bootleg DVDs, to electronics and sneakers brought in from the U.S., to men's suits, beach towels and toys.

Despite its enormous potential, online commerce has yet to take off among the country’s 122 million residents – the largest population in Latin America after Brazil.

As many as one third of Mexicans own a smartphone, and yet Tepito market, not the Internet, continues to be the top alternative for pricey department stores such as Liverpool and Palacio de Hierro.

“Tepito is known all around the world,” said Jesus Feliciano, a proud shop owner who says he isn’t worried about losing business to online retailers. 

He thinks it’s the department stores that will have to evolve.

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“They’ll be obligated to lower their prices a bit to compete,” Feliciano said, pausing to smile and shake hands with an elderly passerby. “I’ve been here 52 years, I know pretty much everybody.”

While Feliciano and other vendors will probably continue to cater to hyper-local markets, nothing is likely to stop the slow but steady growth of the online commerce here, as retailers big and small learn to tap into a larger customer base.

Even if still far from Brazilian levels, in 2014 Mexican e-commerce totaled $2.8 billion and is expected to more than double by 2019, according to analysis by Forrester Research (Brazilian e-commerce is expected to grow from $17.8 to $40.8 billion during the same period).

"In Mexico, traditional retailers were slower to adopt e-commerce early on, but now we’re seeing more of that,” Zia Wigder, a senior executive at Forrester Research, told Fox News Latino. “Plus we’re seeing a lot of interest from U.S. players such as Wal-Mart, Home Depot, and Amazon.”

“Brazil and Chile are quite well developed” [e-commerce markets within Latin America], she added. “Mexico is an earlier stage market.”

Although Wal-Mart, Zara and Home Depot already have online sales portals in Mexico, analysts expect the arrival of Amazon to catalyze the Mexican market and raise the bar in terms of e-commerce.

The online retailer has been hiring staff in Mexico and is preparing to launch, but no specifics have been yet provided. An Amazon spokesperson contacted by Fox News Latino declined to comment for this article.

Mexico may lag behind others in the region but, in addition to its sheer volume of potential customers, the country has one other major advantage that may help it become a heavyweight in the sector very quickly: Mexico is at the forefront of smartphone usage in Latin America, with almost one third of all Mexicans owning one.

By contrast, less than a quarter of Brazilians and Argentinians use smartphones, while in Chile and Peru the numbers drop to less than one fifth. In the U.S. smartphone penetration tops 65 percent.

By the end of 2015 there will be 65 million Internet users in Mexico, and by 2018 the number of “internautas” is expected to jump to 80 million -- 21.1 million of whom are expected to become online shoppers.

In the meantime, a few roadblocks will probably need to be cleared. Walking through the clothing racks at the luxury department store Palacio de Hierro, Tessi Meneses a 26-year-old finance professional, explained people in Mexico don’t trust the postal system.

“The mail can be late or never arrive,” she said.

Meneses said that although she purchases movie tickets and books hotels and flights online, she mostly shops for clothing in stores. If she does order online, she frequently ships goods to her cousin in Manhattan.

“With NAFTA the prices should be about the same [as in the U.S.] but it’s always more expensive here,” she said.

Meneses’ concerns are echoed by many potential online shoppers. According to the Mexican Internet Association, less than one fifth of the country’s 51 million Internet users make purchases online.

But perhaps the main obstacle to e-commerce growth in Mexico comes down to the very basics: nearly two thirds of citizens do not have bank accounts.  

Feliciano, the Tepito vendor, can assess to that – he said retailers like him can do business with non-bank using customers by establishing arrangements for cash payments at convenience stores.

“Most people pay in cash. They still don’t have bank accounts, but they can buy online if they make deposits at the OXXO store or another store to transfer the money,” he said.

Nathaniel Parish Flannery is a freelance reporter based out of Mexico City who has worked on projects in Mexico, Colombia, Honduras, Bolivia, India, China and Chile. Follow him on Twitter: @NathanielParish and Instagram: @nathanielparish.

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