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As part of Euromonitor International’s interview series, I had the pleasure of speaking with Omar Galicia, MBA, director at MercadoLibre Mexico. Omar is the commercial director responsible for marketing and the marketplace since May 2014, and has more than 18 years of experience in the retail industry in Mexico. Prior to joining the MercadoLibre team, he was as commercial director at Linio.com for Mexico, Colombia, and Peru. He has also served as director of buying at business such as Elektra and Liverpool, designing and implementing business plans and leading diverse commercial activities. Omar is an industrial and systems engineer, and further holds an MBA from IPADE Business School.
The e-commerce industry will be increasingly oriented towards personalization. Without any doubt, this will be one of the key elements that we will see evolve in the medium term. I also think that financial innovations (fintech) will accelerate customer adoption of e-commerce, with logistics companies investing in their capabilities to improve the customer experience of receiving products. At the same time, retailers are directing their focus towards e-commerce, with their participation in events like Hot Sale, el Buen Fin, and Cyber Monday, growing in importance each year. Another trend is the improvement of e-commerce platforms for smartphone use, so consumers can complete the buying process from their mobile devices more easily and simply.
The main challenges for e-commerce in Mexico have been linked to three factors, two of the most complex ones have to do with the topic of bancarization: the low adoption of financial services in traditional and digital banking, and confronting the cultural factor of Mexicans who distrust the entire buying process. To face these challenges, MercadoLibre opened cash payment through pharmacies and convenience stores; launched gift cards that work as digital wallets on the platform, and developed pre-paid cards with which the user does not have to give their information to make the transaction. All of this is paired with our program of protected buying, with which we protect the user until they correctly receive the purchase.
The third challenge has to do with logistics. Today it is working well but going back a few years the large delivery companies were not thinking of e-commerce as they do now. Now, these companies, of some of which we are the biggest clients, are growing as we do and understand the growth perspectives of e-commerce for the next five years. Better infrastructure and better processes are being developed to support this growth.
Beyond these factors, Mexico has a retail infrastructure with wide availability of products, in contrast with other countries in Latin America that have import restrictions. Here, the consumer can find what they are looking for without significant inconvenience in physical retail locations. It is because of this that we have to continue developing strategies and solutions that drive e-commerce in the country.
In recent years, we have observed two types of consumers: Generation X and Millennials. The first are pioneers in the development of the internet, have purchasing power and have been breaking paradigms in e-commerce. On the other hand, Millennials are digital natives and are starting to have access to better economic capacity, which has allowed for an explosion in e-commerce.
This is the evolution we have been observing among consumers in Mexico mainly in the last three years, in large part due to penetration rates of mobile devices. In Mexico, 60% of the population that is connected to the internet does so through mobile devices, and this has allowed them a greater interaction with e-commerce.
The first thing is to understand is that selling through the internet can seem easy and cheap, but in reality, this is not the case. Companies looking to sell through e-commerce have most likely already defined some aspects such as the product or service to sell, the price, and inventory. But, they won’t have the traffic and the generation of demand, which for an internet platform, is an extremely high investment. When they enter a marketplace like MercadoLibre, we offer them the ecosystem of payments, shipping, and most important: we already have the traffic. All of this is extremely important for the brand and service owner, especially for an entrepreneur, so that they can spend more time on the commercial and marketing strategy, instead of getting involved in the creation of a platform.
In second place, it is important to check that you really have something that differentiates you since in a marketplace, there are many competitors. Maybe it is price, the product, the speed – you have to reflect on it.
The third piece of advice, is the scalability of the business model. It is important to consider how, through business’ processes, finances, personnel, and technology you can go from selling 100 units to 1,000 units without collapsing or getting into financial problems.
All technologies and innovations that allow improvements in the user experience through personalization are welcome. Our focus is on offering solutions that are easy to use, safe, and efficient.
My vision is that physical stores won’t disappear, but that there will be a natural transition towards e-commerce. Probably, physical stores will take a role of showrooming. Because of this, the large construction companies are now thinking about shopping centers more as entertainment centers, with parks, restaurants, movie theaters, etc, and accompanying them with physical stores, but under the concept of showrooms. At the end of the day, purchases will certainly be digital in the next ten years. We also see a trend of a growing numbers of entrepreneurs, micro, small, medium, and large businesses that will enter into e-commerce.
The difference is that we are a marketplace, which is different from retail e-commerce. Our platform has the largest number of products in Mexico and we have the best designed ecosystem to protect the shopping experience. Additionally, our offer is broader and the experience we offer gives us a competitive advantage in Mexico thanks to programs such as protected buying, free shipping, and financing. In fact, we are building this service with a loyalty program called Mercado Puntos, which offers benefits like free shipping, exclusive promotions, and discounts, among others, that allow us to incentivize repeat purchases from users, providing them with exclusive benefits.
MercadoLibre’s plans to maintain its leadership can be summarized by continuing to develop an ecosystem of solutions that are easy to use, safe, and efficient for all of our users, which allow the continued democratization of e-commerce. The evolution of MercadoLibre has been conceptualized and developed alongside the end consumer´s experience. We will continue to anticipate the end consumers’ needs with propositions based on analysis of the user experience of our suite of services (logistics, payment systems, loyalty programs, and financing) with constant innovation. Mexico will continue to be a priority in the company’s expansion plans. Evidence of this is the investment of USD100 million that we will make this year for the construction and operation of two distribution centers in the country, with a total of 130,000 square meters of warehouse space.