Sun, Oct 14, 2018 - Page 15 News List

Cokes, smokes and clicks:
How one corner store
is cashing in

Payments and pickup are two of the biggest barriers to online shopping in the developing world, but Oxxo shoppers can make cash purchases from more than 1,000 online merchants and retrieve their merchandise in a store if they live in dangerous or remote areas

By Julia Love and Daina Beth Solomon  /  Reuters, MEXICO CITY

A dog stands near an Oxxo convenience store sign in Monterrey, Mexico, on Aug. 26.

Photo: Reuters

Stroll along the aisles of any Oxxo in Mexico and you will find the staples of convenience store sustenance: beer, cigarettes and enough candy to keep dentists at full employment.

Look closer and you will see this old-school chain is a linchpin of the country’s e-commerce sector. The retailer, with more than 17,000 locations throughout Mexico, has cracked two of the biggest barriers to online shopping in the developing world: payments and pickup.

Shoppers lacking bank accounts — more than 60 percent of Mexico’s population — can plunk down cash at their local Oxxo to make purchases from more than a thousand online merchants. Those who live in dangerous or remote areas where home delivery is complicated can then head back to Oxxo to retrieve their merchandise.

The pickup program, offered with Amazon.com Inc, operates in nearly 3,000 Oxxo locations, with plans to expand. Oxxo is in talks with other merchants to handle their packages too, Oxxo director of financial and electronic services Asensio Carrion said.

Oxxo takes a cut from merchants and consumers on most transactions. It is not rocket science, but analysts say Oxxo has seized on a lucrative opportunity to cement itself into the e-commerce supply chain in places where online shopping is not the seamless affair it is in wealthy countries.

That makes it one of the few companies in the world with the leverage to go toe-to-toe with Jeff Bezos, Amazon’s billionaire founder. At a time when many brick-and-mortar retailers view e-commerce as a threat, Oxxo has found a sweet spot.

“Mexico runs on cash. This is the huge advantage of a company like Oxxo,” said Enrique Culebro, head of Mexico’s Internet association.

That is good news for parent company Fomento Economico Mexicano, known as Femsa.

Oxxo generates about 35 percent of Femsa’s revenue and is the “driver of the company,” said Jose Cebeira, an analyst at Mexico City brokerage Actinver.

Femsa shares are up about 50 percent since the end of 2014.

Not content with remaining a middleman, Oxxo is working on e-commerce efforts of its own. The company plans to test a home-delivery app next year, and is considering an e-wallet that would allow shoppers to store balances for online purchases, Carrion said.

However, Oxxo must ensure that its e-commerce experiments do not clog registers and undermine its core business of selling Cokes and smokes, fintech consultant Gabriela Zapata said.

“For the person behind you who just wants a quick pack of cigarettes, waiting four minutes is not ideal,” she said.

The small, irregular floorplans of Oxxo stores have already posed challenges for Amazon’s package program, which is limited to small items worth up to 1,500 pesos (US$79.55).

A clerk at an Oxxo in Mexico City said that her store only accepts goods she can tuck under the register to avoid attracting thieves.

Competition is also mounting: Amazon in August began selling non-perishable food and beverages in Mexico.

With about 125 million people and Latin America’s second-largest economy, Mexico is a magnet for online merchants, but to reach millions of Mexicans without bank accounts, they have been forced to get creative.

Oxxo began addressing this challenge in 2012 after Mexican regulators allowed retailers to perform certain banking operations. The chain became a place where customers could pay household bills in cash.

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