Amazon Launches Premium Service in Mexico
March 07 2017 - 03:55PM
Dow Jones News
By Robbie Whelan
MEXICO CITY-- Amazon.com Inc. on Tuesday launched Amazon Prime
in Mexico, raising its profile in a country where at least a
half-dozen companies are competing for market share.
Mexico is the 13th country where Amazon is offering the premium
membership service. For an annual fee of 449 pesos, or about $23,
Mexican Prime members will have access to free, one-day delivery in
four of Mexico's largest cities -- Mexico City, Guadalajara, Puebla
and Querétaro -- and free, two-day shipping in the rest of the
country.
The move also makes millions of products from Amazon's U.S.
distribution centers available to Mexican shoppers with free
shipping that will take about a week to reach them, with no minimum
order price. Amazon Prime also includes free, streaming video
service in Mexico similar to the one Amazon offers to Prime members
in the U.S. and elsewhere.
Luis Correa, Amazon's Mexico country head, said logistics have
been a key focus since it set up here 20 months ago. Amazon
operates two large fulfillment centers north of Mexico City and is
planning to open a third in the country this year.
Amazon entered Mexico when online retailers are competing for
market share. This week, Argentine e-retailer MercadoLibre Inc.,
Amazon's biggest competitor in Mexico and often described as Latin
America's eBay.com, said it would invest more than $100 million in
Mexico to expand free shipping, payment processing, purchase
protection and a points-based rewards program.
Ignacio Caride, MercardoLibre's Mexico country head, said his
company has responded to Amazon's expansion by offering free
shipping options on roughly 80% of items listed starting this year.
MercadoLibre ships about half a million items a month, and charges
about $2.50 to the seller to cover about half of the cost to ship
small items.
"We're willing to lose money in Mexico in order to win the
battle with Amazon," Mr. Caride said.
While still the largest player in Mexico, MercadoLibre has been
losing market share over the last six years. In 2011, the company
accounted for 21.2% of all online sales in the country, according
to Euromonitor, but that share had fallen to 9.5% by 2016.
Linio, the online retailer launched by German startup investor
Rocket Internet SE, was the second-largest Mexican e-commerce site
in 2016, with 5.8% market share, followed by Amazon and Wal-Mart
Stores Inc., each with 5.5%, according to Euromonitor.
Some Mexican e-commerce sites are trying to find a toehold by
offering alternative payment options. Amazon allows Mexican
customers to make purchases using only debit or credit cards -- a
small but growing segment -- or gift cards available at convenience
stores. MercadoLibre in 2012 launched MercadoPago, a service that
allows customers to pay for purchases in cash at Oxxo convenience
stores.
Linio, which offers free shipping on all items to subscribers to
a Prime-like service called Linio Plus, has focused on payment
options.
"Our strategy is to spend as little as possible on logistics.
The key is, where we see growth, is in payment methods for the
Mexican consumer," said Nicolás Ariza, director of operations for
Linio in Mexico.
Free shipping is "a big convincing factor for shoppers," said
David Bernardo, a professor who studies e-commerce at the
Tecnológico de Monterrey university. "Once it becomes the market
standard, everyone is going to start doing it."
Greg Greeley, Amazon's vice president for Prime, said free
shipping will likely result in losses for Amazon in Mexico for some
time, and that the company is trying to minimize costs by
fulfilling orders for the site's most popular items, which include
videogames and DVDs, from Mexican distribution centers.
Amazon's overtures are directed at consumers like Elke Vaughan,
a 34-year-old bank associate from Mexico City who says she
sometimes spends $500 a month to buy cosmetics and clothes from
Amazon.com, but has her purchases shipped to her grandmother in San
Antonio and retrieves them on family visits.
"There's a lot of stuff that they just don't ship to Mexico,"
Ms. Vaughan said. "Or if I have some luck and I find something they
do ship, it's usually too expensive to ship it here."
Write to Robbie Whelan at robbie.whelan@wsj.com
(END) Dow Jones Newswires
March 07, 2017 15:40 ET (20:40 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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