Dateline: Mexico City
Today Amazon.com officially opens its doors in Mexico. According to Bloomberg:
Amazon.com.mx is debuting with more product categories — electronics, housewares, sporting goods and more — than any other international rollout, the Seattle-based company said in a statement Tuesday.
“The expansion of Amazon.com.mx represents Amazon’s biggest international launch ever,” Juan Carlos García, manager of Amazon Mexico, said in the statement. “With convenient and secure payment options and fast delivery, our goal is to deliver a world-class shopping experience for customers in Mexico.”
Amazon will offer free shipping on purchases of 599 pesos, or about $38. Customers also have the option of having their goods delivered to hundreds of pickup locations across Mexico.
This should be good news for Gringo expats, if not for the entire Mexican shopping population. Not only do the pick-up points solve the problem of being home to receive deliveries, but it should be extremely price competitive. Unlike in the United States, Mexico’s retailing sector is mostly inefficient, and certainly less competitive than in the USA, which by many measures is over-stored. How do I know this? In my prior life as a securities analyst, I covered the US retailing sector in depth. Every single US retailer that had a Mexican operation earned significantly higher returns (abeit on a much smaller sales base) in Mexico than in the USA, including well-known, low-price operators such as Wal*Mart and Costco. This only happens when price competition is less fierce.
The interesting question, to which I have no definitive answer, is whether this will change Amazon’s US operation’s willingness to ship SOB. I have to imagine that such shipments will likely stop, given the possibility of tax leakage. Certainly amazon.com.mx will comply with all Mexican tax rules, including charging IVA, something the US business apparently isn’t doing on shipments SOB.
This should become a good shopping option for US expats. Typically when Amazon enters a new territory, it is willing to suffer substantial losses for an extended period in order to provide excellent service and selection. While Wal*Mart de México, one of Wal*Mart’s strongest segments, isn’t likely to be shaking in its guyabera, it’s clear that the competitive game has now been upped. And I’m quite sure that the Mexican consumer is going to win this battle.
Saludos desde Mexico City, where I’m working on additional posts about Gay Pride and my other adventures.
Post script: Reader Jennifer Rose pointed out that one price comparison she made with the US site suggested that amazon.com.mx’s prices aren’t that compelling. And I too found what I thought to be a rather overpriced towel set (bath, hand, washcloth, $40 USD). And a quick perusal of other items suggested the prices weren’t all that compelling either. Yet further perusal (sorry, this post is a bit of a work in progress) does show some very good prices on other items. Any commentary on the subject would be greatly appreciated. Note that I receive NO compensation from Amazon for this post or for anything else.
El Gringo Suelto 
Hola.
Does anyone knows if the price in Amazon Mexico at the checkout includes the IVA? Because I found many computer parts are cheaper in Amazon Mexico than the US, which I found illogical… for example:
The first one is from Amazon Mexico: $3,931 pesos with label of “envio e impuesto de importacion incluido”
the second one is from Amazon US: $246.79 USD without tax, using exchange rate of 15.6, it’s like $4,100 pesos.
How can this be possible? What I suspect is the price in Amazon mexico doesn’t include the IVA, but I’m not sure…. any one know?
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Hola Yichao! I’m not 100% sure of the answer, but I’ve got a couple of ideas. First, the price of everything in Mexico in stores has the IVA included, e.g., it’s not like US sales tax which gets tacked on at the cash register. So that argues for Amazon’s prices already including the IVA. Second, you could try to buy some items, do the check out, and then just before the final “yes, I’m buying this” button, hit cancel. Or go through with the order and immediately cancel it. But if you look at Felipe’s comments, he seems to suggest that the IVA is already built into the price. Saludos and thanks for stopping by!
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I’m starting up a new comment, since there is not an opportunity to reply to your analysis:
1. Amazon’s pricing may be promotional.
2. Liverpool does periodically offer interest-free installment payments or no payment for 60 days, which Mexican consumers do not get with the credit cards they would use to make purchases on Amazon.
3. Liverpool often offers moneda electronica, 10-20% on purchases, which are credits a purchaser can use on other Liverpool purchases.
4. Mexican consumers, for the most part, did not grow up with a culture of deferred gratification, waiting for that parcel to arrive from Sears or Spiegel back in the old mail order days. Buying online is another step beyond that. When we want stuff, we want to touch it, look at it, and we want it now.
5. Shopping is still very much a social activity in this country.
I think it’s great that Amazon has expanded into Mexico. It will do well. But I wouldn’t make any significant lifestyle changes just yet.
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Hola Jennifer! Good points all. I guess we’ll see what happens, though it’ll be difficult to tell for a while as Amazon doesn’t report by country and I believe that the dept stores in question are private. Saludos and thanks for your contributions to the discussion.
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If anyone wants a copy of the spreadsheet where I did the analysis cited in the response to Jennifer’s last comment, please leave a comment to that effect, and I’ll email it to you.
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I just took a look at the price of the Kindle Paperwhite on both sides of the border. Both include free shipping. The Kindle costs about 530 pesos more from the Mexico Amazon.
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UPDATE: Light bulb ignites overhead. The U.S. price does not include the import tax that Amazon adds during the checkout process. And the tax — if memory serves, and it does — is very close to the difference in the prices. So, all told, it’s pretty much a wash on this particular item.
In that case, I’d prefer to toss money toward my Mexican paisanos who recently got a new job in-country with Amazon. I’ll let Obama worry about employing Americans, which he won’t, of course.
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Hola Felipe! When you talk about the import tax being added during the checkout process, do you mean the US site is doing this on shipments to you? Or that the IVA is not included in the prices we see on the product page of amazon.com.mx? If amazon.com.mx’s prices are equal to the US prices plus the IVA, then I think the Mexican Amazon site could be a great deal, at least compared to the Mexican department stores which charge extortionate prices in my opinion. Saludos and thanks for stopping by!
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The pickup points are a great idea as we do not even have an actual address in Puerto Escondido (sin numero); and even with having an address in Xico, getting mail is a crap shoot. Having used Amazon extensively over some years now I have found different prices on the same item within Amazon’s own ‘catalog’ in the States. I expect pricing will sort itself out – I hope. In the mean time it is good to see progress in this area.
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Hola John! So you really are “sin número?” I’ve seen that many a time, but always wondered how it might work in practice. Does that mean that even the government can’t find you if it wants to? As to pricing, after I posted the comments about the high prices, I did a little more shopping and found some more compelling deals. I think you’re right. Pricing will settle out over time. Saludos and thanks for stopping by!
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“Does that mean that even the government can’t find you if it wants to?”
My address or lack thereof includes the nearest cross street. When they come looking they ask around ;-0
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We have a similar problem up here in Canada with Amazon. There are differences in price that cannot be explained. It will be interesting to see how Amazon does business in Mexico and if they can master the shipping issues.
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Hola Croft! I was wondering myself about how Amazon was going to handle the (let’s put it politely) vagaries of shipping in Mexico. And given the fact that Amazon is a big, well-followed company, and that I am very up-to-date on business news, I was quite surprised I hadn’t read anything about a Mexico entry until today when it happened. But I guess something must have gotten out, as I notice in a comment left elsewhere by John Calypso that there was something already in the press before today about Amazon entering Mexico. Saludos and thanks for stopping by!
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Maybe my Amazon purchase, that is now resting in DHL’s Manzanillo facility, will be amongst the last of an old breed. However, if Amazon can work out the delivery issue, I will shop there if only for the convenience. It is odd that the digital era has put me back into the Sears catalog in 1950s Powers.
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Hola Steve! I’ve long thought it quite ironic that it wasn’t Sears that became the dominant online retailer. Of course the irony is merely poetic, because I was well aware that even by the late 90’s, Sears had gone so many decades underinvesting in everything that it was likely doomed to fail, not reconquer old territory. That said, they do have a very nice online system to hold something for pickup in the store, which is a handy way to buy something you don’t really need to see, like a lawn mower or air conditioner. It’ll be fascinating to see how Amazon does in Mexico. I’m particularly curious to see how they overcome the fact that most Mexicans don’t have credit cards. After a quick perusal of the site, as of today it seems they only take MasterCard or Visa, credit or debit. Saludos and thanks for stopping by!
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Correction: Sorry, I didn’t read your message carefully, about Amazon setting up pick-up locations across Mexico. That makes sense. The few times we’ve ordered stuff on the Internet in Mexico, including from Costco, it didn’t work out very well.
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I’ve read many a tale of delivery-horror in Mexico. But see Ms. Shoe’s comment too. Maybe the pricing won’t be quite as sharp as it is in the USA. To me this is very surprising. Saludos.
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I just priced out an item on the Mexican site that I’d purchased recently from the U.S. site, adding in the duty to the US price, just for comparison. And the same item from the Mexican store was 25% higher. So, for many items, this is no bargain.
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Hola JR! Thanks for taking the extra step. After I wrote my piece, I browsed the site a bit and noted a 3-piece bath towel set with a body towel, a hand towel, and a washcloth for about $40 USD, which seemed quite steep. I’m a little surprised by this, and it does somewhat undercut my argument that Amazon.com.mx will be sharply priced. Perhaps it will be sharply priced compared to the likes of Palacio de Hierro or Liverpool? I’m always astonished at the high prices Mexican dept stores get away with, as I’ve compared those prices to US prices, and the difference is *way* more than the IVA. Thanks for stopping by. Saludos!!!
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http://eleconomista.com.mx/tecnociencia/2015/07/01/quien-mas-barato-amazon-linio-o-liverpool
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Hola Jennifer! Interesting article. It would seem that it bears out my initial assertion that Amazon.com.mx’s prices will be extremely competitive. Oddly, El Economista did not tally up the total for each store and compare or do much other analysis. In fact, they didn’t even conclude that Amazon was cheaper overall, never mind MUCH cheaper.
However, I copied the data to a spreadsheet and did some detailed analysis. If you simply tot up the total basket of ten items, Liverpool is only 2.6% more expensive on the basket, but that’s due to a 12% discount to Amazon on the most expensive item (camera), which comprises nearly three quarters of the the basket weight. If you eliminate that item, then Liverpool is on average 31% more expensive than Amazon. The same pretty much goes for Linio. The basket is is 6.8% more expensive than Amazon, but if you eliminate the camera, Linio is 24% more expensive than Amazon. Of the ten items, Amazon was cheapest on 6, Linio on 3, and Liverpool on only one, the digital camera. (A very surprising result in my view.) However, looking at the total basket cost tends to understate the competitive impact for several reasons. First, customers will tend to cherry-pick the best prices, and may well shop around for more expensive items like the digital camera. Second, it’s quite possible that Liverpool’s price on that camera reflects a special offer. Third, once someone is making one purchase at a store, they tend to also buy the add-ons and impulse items at the same place. So if Amazon is much cheaper on 60% of items, then their competitive impact is likely large. And of course, I have to believe that Amazon’s return policies and customer service will beat any domestic competitor here. Obviously, all of these conclusions are *very* tentative, but Amazon has taken a big bite out of many tougher retailers NOB, so the Mexican retailers had best take the new entrant seriously. Thanks for the follow up comment and saludos!
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In my experience with internet shopping in Mexico the biggest hassle has been delivery, which is so expensive and inefficient that it makes you yearn for the US Post Office. Good luck to Amazon.
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Hola Al! I think it was a stroke of genius for Amazon to arrange for the pickup locations. I know from reading Steve’s blog and Felipe’s comments here and there that getting a delivery even when you’re home isn’t a sure thing. Saludos and thanks for commenting!
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