Mexico City, Mexico — Amazon Mexico is planning to build it’s third mega store in a municipality outside Mexico City in an attempt to reach 120 million new customers.
The online giant is honing in on Mexico’s electronic commerce as both in-store and online sales continue to increase. Amazon is still new to Mexico, having opened its Kindle e-book site to customers in 2013.
The expansion of physical goods started only two years ago, but is growing much faster than company rivals such as Walmart. Amazon is already the country’s third-largest online retailer, posting $253 million USD in sales in Mexico in 2016, which according to Euromonitor International, is more than double the year before.
The new warehouse, which would be Amazon’s third in the country, will be nearly 93,000 square meters, tripling the distribution space and opening the possibility of reaching approximately 120 million new Mexican customers.
Neil Saunders, director general of retail research company GlobalData says, “Amazon is not afraid to plow into a new market in a very big way, take a big hit, but say, 10 years down the line, this is going to be big and profitable.”
Amazon’s Mexico push comes amid talks to revamp the North American Free Trade Agreement, which could benefit the Seattle-based retailer if the United States persuades Mexico to raise a $50 limit on the value of online purchases that can be imported duty-free.
Amazon spokesman, Julio Gil, did not comment on the construction of the new warehouse, but said the company’s Mexican unit is aiming to expand its product offerings, offer faster deliveries and make the purchasing process as smooth and secure as possible to inspire consumer confidence.
“We’re trying to eliminate any friction,” Gil said.
Since many Mexican shoppers are wary of online fraud and others do not have credit cards, online shopping comprises nearly 3 percent of all retail sales in the country compared with over 10 percent in the United States.
Yet, some analysts believe Amazon is willing to take the risk as it races to bulk up in foreign markets to compete with fast-moving global competitors such as China’s Alibaba Group Holding Ltd.