One of the first Mexican retailers to sell online is quickly falling behind newer arrivals and it might be too late to catch up, Credit Suisse Group AG said.
El Puerto de Liverpool S.A.B. de C.V., which conducted its first e-commerce transaction in 1997, is spending just a fraction of the amount of Amazon.com Inc, Mercado Libre Inc and Wal-Mart de Mexico SAB on bolstering Internet operations in Mexico. Instead, its shares have tumbled to a five-year low amid a focus on opening new brick-and-mortar stores.
El Puerto de Liverpool, which traces its roots to a Mexico City clothing store set up in 1847, offers fewer products online than its peers do and many of its items can only be purchased in stores.
Shipping is free, but can take longer than five days when there is high demand, compared with as little as one day for some Amazon orders.
Perhaps most importantly, it does not accept cash payments for online purchases, which cuts off a big chunk of the population in Mexico, where fewer than half of adults have credit cards.
“El Puerto de Liverpool’s business model is largely threatened,” Credit Suisse analysts led by Antonio Gonzalez wrote in a note this week. “Investors should no longer think about e-commerce in Mexico as a phenomenon that will affect stock prices in the distant future. The future for e-commerce is now.”
While online shopping only represents about 3 percent of retail sales in Mexico, analysts at HSBC predict that it is set to grow substantially after Amazon introduced its Prime membership club to Mexico earlier this year.
A potential change to the North American Free Trade Agreement that would let Mexicans buy more online from the US and Canada without having to pay tariffs could also lead to more cross-border e-commerce.
El Puerto de Liverpool shares have tumbled 17 percent this year. Walmex has gained 18 percent and Mexico’s benchmark stock gauge is up 3.7 percent.
El Puerto de Liverpool is planning to open 11 stores this year, expanding floor space by 6 percent, its latest earnings report said.
However, it has only invested US$30 million on e-commerce in Mexico during the past few years — the same amount that Mercado Libre has invested on free shipping in Mexico this year alone, Credit Suisse said.
Wal-Mart de Mexico has spent about US$190 million on online efforts during the past two years, Credit Suisse said.
Amazon, which entered Mexico in 2015, is planning to open a warehouse near Mexico City that would triple its distribution space, Reuters reported in September.
These efforts already appear to be paying off: Mercado Libre last year captured 9.5 percent of online sales, while e-commerce platform Linio, Amazon and Wal-Mart de Mexico each controlled just under 6 percent, data from Euromonitor International Ltd showed.
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