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Country Profile:The Guide to Ecommerce
in Mexico

Everything you need to know about the market, buying habits, and fraud to launch an ecommerce business in Mexico.

If there’s one thing that
transcends nationality,economic
status, and language
in the 2020s,
it’s ecommerce.

Consumers in every region of the globe are beginning to recognize the many conveniences of shopping online — to the extent that, by the end of the decade, we may think of ecommerce as just “commerce.”

For merchants in North America, the rapid worldwide growth of ecommerce brings with it the opportunity to expand into untapped markets of consumers eager to do business online. And among them, few markets hold more promise than Mexico.

 

 

 

Mexico is going digital along with the rest of Latin America; people there are using the internet at levels that may soon threaten to rival markets in North America and Europe.

But entering any new market comes with challenges, specifically, the challenges of adjusting to the customs, regulations, and languages of a foreign country.

This guide is for English-speaking ecommerce merchants thinking about expanding into Mexico. We’ll help you prepare to make the most of the opportunity by:

  • Taking an overview of the Mexican market.

  • Examining the behavior of Mexican ecommerce consumers.

  • Uncovering ecommerce fraud trends in Mexico and explaining how they differ from those in the United States.

  • Suggesting some strategies for preventing fraud while selling into the Mexican market.

¡Bienvenido a México! Let’s get started.

Mexican Market Overview

Latin America, as a whole, is an emerging market for ecommerce. Latin America is third only to Asia/Pacific and Middle East/Africa in internet users, with more than 360 million. That puts Latin America ahead of North America and Europe in terms of pure opportunities for ecommerce sales.

Within Latin America, Brazil leads in ecommerce sales, with 36.3% of the market. But Mexico is closing in, with 24% of the ecommerce market. Between 2019 and 2020, Mexico saw an annual retail ecommerce sales growth rate of 16.3%, exceeding Brazil’s growth rate of 12.2%.

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Ecommerce Participation in Mexico

We joined with Sapio Research to conduct a survey of 1,000-plus online shoppers in five regions: Mexico, the United States, Canada, Australia, and the United Kingdom.

According to our data, 22% of consumers in Mexico make an online purchase once or twice per week. A similar percentage of consumers buy online once every two weeks, while 33% make online purchases once a month.

These numbers are almost identical to countries such as Australia and Canada. (Although, nearly twice as many American online shoppers – 41% – buy online once or twice per week.)

How often...

One the main reasons

 

Ecommerce Participation in Mexico by Region

Of Mexico’s eight major regions, the Bajio, Centro, and Norte regions lead the way in ecommerce. Between 26% and 27% of residents of those regions who shop online say they do so at least once or twice a week.

mapa mexico

 

The Noroeste and Sureste regions are home to less frequent online shoppers. Of those surveyed by Sapio Research, only 13% of Noroeste residents and 12% of Sureste residents said they shop online once or twice a week.

How often...per region

 

The growth of ecommerce in Mexico is driven, in part, by a well-connected populace. According to a 2019 BlackSip report, 63% of the Mexican population has internet access, the third-highest penetration rate in Latin America. To put that in context, the penetration rate in the U.S. is only about 10 points higher.

The number of internet users in Mexico is expected to grow to nearly 72% by 2021. Already, Generation Z and millennials represent 63% of the Mexican population. Members of these two age groups are much more likely than older generations to use the internet and make purchases online. For example, the internet penetration rate for millennials in Mexico is 70%; the rate is only 24% for baby boomers.

5 Quick Stats: Ecommerce in Mexico

Australia and Cross-Border EcommerceAccording to Statista:

 

icon-5QuickStats-1_1    Revenue in the Mexican ecommerce market hit $10.13 billion in 2020

icon-5QuickStats-2_1Growing at a rate of nearly 6% per year, the Mexican ecommerce market will reach $12.7 billion by 2024.

icon-5QuickStats-4_1The largest market segment in Mexican ecommerce is fashion, with a market  volume of $2.7 billion in 2020.

icon-5QuickStats-3_1-1  In 2020, user penetration for commerce in Mexico is 53.2%. It’s expected to exceed 60% by 2024.

icon-5QuickStats-5_1  The average revenue per user (ARPU) for ecommerce in Mexico is currently $147.66.

 

To put that last statistic in context, Statista reports the ARPU for ecommerce in the United States is currently $1,568.87. So, while ecommerce is growing rapidly in Mexico, the financial value of each individual customer is still much lower than in mature markets.

Types of Online Markets in Mexico

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Robust markets for online sales of both products and services exist in Mexico. In a survey of over 2,000 Mexican internet users (reported on in the BlackSip report referenced above), 61% said they had purchased products online in the past year, and a little over half said they had purchased services.

Top Categories

According to Statista, the most popular categories for ecommerce in Mexico in 2019 were all services:

  • Transportation (65%)

  • Fast food (47%)

  • Housing and accommodation (43%)

  • Travel (41%)

  • Event tickets (40%)

  • Digital downloads (35%)

  • Digital services (35%)

Among physical products, fashion is king (34%). Other popular physical categories include groceries (23%) and toys and hobbies (21%).

If you break the Mexican online shopping population into two age groups – those over 55 and those under – the distribution of product categories is similar (although the total number of purchases for each category is much higher for the younger age group). According to Sapio Research, electronics and technology products are the top categories in both age groups.

Mexicans under 55 say they’re more likely to purchase beauty supplies and sporting goods online than those over 55. The older age group members say they’re more likely to spend on travel online than other categories.

When Sapio Research broke the data down by gender, it found that men lead the purchase of electronics and sporting goods online. All other categories are driven by women. The leading category among women was beauty supplies.

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The top ecommerce sites in Mexico are (based on estimated monthly traffic):

  • Mercado Libre Mexico, a general online marketplace for the Latin America region.

  • Amazon Mexico, the ecommerce giant’s Mexican presence.

  • Coppel, the ecommerce operation of a Mexican department store chain.

  • Walmart Mexico, the American retailer’s Mexican site.

  • Liverpool, a retail company that operates a chain of department stores in Mexico.

Mexico Opportunities and Challenges When Selling into Mexico

Biz Latin Hub (a company established in 2014 to support local and foreign companies doing business in Latin America) cites Mexico’s “welcoming business environment and progressive government” as reasons to do business in the country.

“Mexican law allows 100% ownership and no capital controls for foreign businesses. Foreign entrepreneurs can establish a limited liability company, and enjoy the country’s strong property laws and protections,” writes Biz Latin Hub.

 

Art-CallOut-2-2Mexican law allosws 100% of ownership and no capital controls for foreign businesses.

 

Biz Latin Hub also praises Mexico’s “highly capable” professionals, who give the country an edge over its neighbors in Latin America.

Speaking during an event christened e-Retail Day in Mexico City, AMVO president Eric Pérez-Grovas noted, “Ecommerce in Mexico has enormous potential, but is underdeveloped as compared to other countries in the region with similar income.”

One of the main challenges accessing the Mexican ecommerce market is the relatively low level of internet penetration into the population compared to North America, Europe, and Asia. But as we pointed out above, that appears to be changing.

In addition, mobile connectivity is also on the rise. Whereas in 2009, only 44% of the population were mobile phone users, in 2017, over 72% of Mexicans used mobile phones.

An additional challenge is the banking and payment structure in Mexico, which is very different from that of the rest of the continent. Here are a couple of differences that are particularly of note when it comes to ecommerce:

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  • Only 47% of the Mexican population has a bank account, Reuters reports. “Steep fees” and “past scandals” make Mexicans wary of financial institutions, the report says. Only 31% of Mexicans have credit. (The Reuters article notes, however, that the Mexican government is pushing mobile payment as an affordable, accessible alternative to banking.)

  • Because so many Mexican consumers do not have a bank account, cash is still popular for shopping – even online: 9% of online purchases are completed through paying cash at convenience stores. Consumers complete the ecommerce checkout page, print off a voucher containing a barcode, and then present this barcode at the store, paying their ecommerce bill with cash.

  • As mentioned earlier, a significant number of Mexican consumers buy services online. In the rest of North America, services bought online are often subject to a credit card preauthorization process, where the merchant can place a hold for a certain amount on a customer’s credit card, ensuring that once the bill comes due, the funds will be available. In Mexico, this practice does not exist. This adds complexity and risk when it comes to fraud protection for these industries.

The landscape is evolving, however. In 2018, the Mexican Congress approved a bill regulating financial technology (“fintech”) institutions such as electronic payment companies, crowdfunding firms, and cryptocurrency providers. The law – which went into full effect in March 2020 – is expected to spark the expansion of Mexico’s already-formidable fintech industry, making financial services more accessible and affordable to unbanked Mexicans.

One of the more notable features of the fintech law is its embrace of open banking. Open banking is a system in which banks release open application programming interfaces (APIs) that allow third parties to access their customers’ financial information – with their customers’ permission. The idea is to give consumers greater flexibility in their choice of financial services and to encourage competition and growth in the fintech industry.

“The system promises to spark a new wave of innovation and transparency in the financial sector,” writes Craig Dempsey, CEO and co-founder of Biz Latin Hub. “Over 22 jurisdictions around the world have implemented or are working towards implementing Open Banking, and Mexico is among them.”

Not sure how to navigate Mexico's unique payment and banking structure? Taltk to Us

Mexican Consumer Behaviors
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Mexican consumers may have different habits and expectations than you’re used to from buyers in the United States. To succeed in ecommerce in Mexico, you must understand these differences.

Here is what to expect from the typical Mexican ecommerce customer:

Motivations

Like buyers elsewhere in the world, Mexican shoppers go online in search of savings. According to an AMVO survey (included in the BlackSip report), 50% of Mexicans who shop online do so for “promotions/discounts.” Other motivators include:

  • To access products that aren’t available in stores (45%).

  • To save time (41%).

  • The shipping (40%).

  • To purchase products that are not available in Mexico (34%).

Buying Frequency

According to the same survey, about half of Mexican internet users made a retail purchase online in the past year. About 20% characterize themselves as “recurring” buyers, while 30% say they are “sporadic buyers.”

 

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Of those who do shop online:

  • 5% buy something online every week.

  • 15% make an online purchase at least once a month.

  • 8% buy online every two months.

  • 8% buy online every three months.

  • 9% make an online purchase every six months.

  • 6% buy online once a year.

  • 5% have bought online only once ever.

Among Mexicans who have never participated in ecommerce, 25% say it’s because they prefer the in-store experience, 23% say they don’t trust online shopping, and 19% dislike the complex payment process.

 

   25% prefer the in-store experience


   23% don’t trust online shopping


   19% dislike the complex payment process

 

Mobile Commerce

As we noted above, smartphone penetration in Mexico is strong and growing. By the end of this year (2020), there are expected to be over 90 million smartphone users in Mexico.

But mobile commerce has not quite taken hold in Mexico as it has in other parts of the world. According to a report by IAB Mexico (El Interactive Advertising Bureau), the close-transaction rate for mobile devices in Mexico is only 29%, compared to 40% in Latin America, and 49% worldwide. Mexicans are much more likely to finish up their purchases in physical stores (44%) or on desktop or laptop computers (32%).

Close-transaction rate for mobile devices:

  29% Mexico


   40% Latin America


   49% Worldwide

 

When asked about their reasons for shopping via their smartphones, Mexicans cite the time-savings, convenience, and immediacy of mobile commerce. 28% of Mexicans say they don’t trust the safety of mobile shopping.

Top Payment Methods

At 84%, debit card is the preferred payment method for ecommerce in Mexico. But, as we pointed out above, many Mexicans do not have bank accounts or credit cards. Cash upon delivery (67%) and cash payments in commercial chains (64%) are the next two most popular payment methods. These two methods barely exist at all in the United States.

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(For the cash in commercial chains method, consumers pick up their purchases at physical stores and make their payments in cash there.)

Cash upon delivery is also considered by Mexican consumers to be the safest form of payment. 77% rate cash upon delivery as “very safe/safe,” while only 59% consider credit cards to be safe.

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Buying Local vs. Buying from Foreign Sites

The ClearSale/Sapio Research survey asked participants if they typically ordered from local websites or foreign sites. In every age group, the highest percentage of Mexican respondents said they ordered from foreign and domestic sites an equal amount. About 60% of those 25 to 64 said they ordered from international and domestic sites equally.

Interestingly, a significant portion of Mexicans over 65 (46%) said they sometimes shop across borders, and 15% of that age group said they purchase from foreign countries exclusively.

In the United States, the same age group is much less likely to make online purchases from foreign countries. Only 12% said they order from foreign and domestic websites an equal amount. The difference may be that in Mexico, consumers are much more accustomed to ordering from companies based in the U.S.

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Ecommerce Fraud in Mexico

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As the Mexican ecommerce market blossoms, it’s drawing the attention of internet fraudsters around the world.

Mexican consumer watchdog Condusef reported in 2018 that it had received 1 million complaints of ecommerce-related fraud in the first quarter of that year, a 74% increase from the previous year. The ecommerce complaints reflected a value of $64 million, Condusef estimated.

About half of these complaints were for amounts less than 200 pesos (currently about $8.88) and most involved digital downloads, purchases of movies and music, and transportation.

Fraud Facts About Mexico

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Fear of fraud is the leading reason Mexicans cite for choosing not to shop online.
In a 2019 survey of 1,001 Mexican internet users, the Asociación Mexicana de Venta Online (Mexican Association of Online Sales) found:

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How Mexican Merchants Respond to Fraud

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Faced with card-not-present fraud rates that are high and climbing, many Mexican ecommerce merchants respond by tightening the approval criteria used by their automated fraud prevention systems. About 14% of orders in Mexico are rejected due to suspicion of fraud.

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But low approval rates in Mexico may mask the level of fraud that occurs. Strict approval criteria may indeed prevent fraud, but it also blocks legitimate transactions.

Some companies may say they see no fraud at all, yet their approval rates are only 40%. ClearSale conducted an informal poll of 14 ecommerce merchants at a recent event in Mexico; among them, the average approval rate was between 58% and 65%. The average chargeback rate was between 3% and 6%.

Chargeback rates in Mexico have reached three times the global average. The false decline rate exceeds twice the global average.

Comparison of Ecommerce Fraud in the United States vs. Mexico

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Ecommerce fraud in Mexico is, in many ways, similar to fraud in the United States and anywhere else in the world. Fraudsters target items they think will be easy to sell for a profit. These include high-demand products such as smartphones, flat-screen televisions, video game consoles, laptops, and watches.

However, as we noted above, fraudsters tend to go after low-cost items more frequently in Mexico, such as digital purchases and charges on private transportation platforms like Uber. Ecommerce fraud in Mexico differs from fraud in the U.S. mainly in volume and velocity. When U.S. merchants start to market their products in Mexico, they are often surprised at the number of rejected transactions.

The speed at which fraudsters overcome fraud protection measures can be stunning to American merchants. As ecommerce in Mexico grows and evolves, so does the sophistication of fraudsters.

In Mexico, the information required to make an electronic purchase is minimal, and it does not need to be verifiable. Mexicans are allowed to have unlimited unregistered cellphone numbers, which can make it difficult to connect phone numbers and identities to purchase orders.

Mexican and American consumers also differ in their awareness of online fraud. In the Sapio Research survey of over 1,000 Mexican online shoppers, only 459 said they were familiar with online shopping fraud. Among a similar group of American consumers, 622 said they were familiar with online shopping fraud.

 

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On the other hand, Mexicans seem to be more conservative in their online shopping habits than Americans. Mexicans perform 20% more checks for fraud than Americans, following online shopping tips such as:

  • Running an image search through Google or other search engines. Mexicans are 38% more likely to do this.

  • Using a unique credit card number that expires after the purchase. This tactic is about 50% more common in Mexico.

However, according to Sapio’s findings, Mexicans are 35% more likely to say, “Getting a good deal on quality items is more important than a secure website.”

How to Prevent Fraud When Selling into Mexico

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As we stated above, more than 1 in 3 Mexican ecommerce customers say they have been victims of electronic fraud. 78% of internet users in Mexico say they are very concerned about identity theft due to increasingly frequent data breaches and leaked personal information.

Given the high rate of online payment fraud in Mexico and the high level of concern Mexican consumers have about fraud, merchants entering the Mexican ecommerce market should be prepared to secure themselves and their costumers against fraud.

Wherever in the world card-not-present fraud originates, it can harm your business. It’s not just the cost of lost merchandise and shipping. Chargeback fees can reach $100 per transaction, and banks increase their fees depending on how many chargebacks you accrue each month.

Plus, fraud can damage your reputation with buyers – especially Mexican consumers who are already skittish about sharing payment information online.

The Cost of False Declines in Mexico

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A fraud solution is critical for doing ecommerce in Mexico. But it’s just as crucial not to be overzealous about preventing fraud. Legitimate buyers can get swept up in the process and may get turned off your brand forever.

It’s worth noting that approximately 80% of online purchases in Mexico are legitimate.

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The latest data indicates that false declines will grow to cost businesses $443 billion worldwide by 2021 – vastly outweighing losses from fraud itself.

La Asociación Mexicana de Venta Online reports that 34% of Mexican online shoppers say their payment card has been declined at least once without any explanation. 44% say they decided not to complete their purchase after their payment was rejected.

Compared to consumers in other regions, Mexican online shoppers are more resentful of false declines. 

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39% of Mexicans said they would likely post a negative comment on social media after having a transaction declined by a merchant – compared to 24% of Americans.

False declines appear to bother Mexican men even more than women. 44% of Mexican men said they would never shop with a merchant again after a false decline, compared to 35% of women.

 

chart-mexico-9-1

 

False declines aren’t the only thing that can scare away customers. According to the AMVO report, the top reasons for online cart abandonment among Mexican ecommerce users are:

  • The website required a lot of information to validate my identity (36%).

  • I decided not to buy at the moment (36%).

  • The website took too long to load (30%).

  • I tried to buy, but the site refused my order (29%).

  • It was mandatory to create a user profile, but I wanted to buy online only once (28%).

To protect against fraud in Mexico, a fraud solution must reliably stop increasingly sophisticated fraudsters, while providing a low-friction, frustration-free shopping experience to genuine customers.

What Fraud Analysts Look for in Mexico

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Fraud analysts who specialize in the Mexican market understand the behavior of legitimate Mexican buyers, as well as the tricks and techniques of fraudsters, and are trained to differentiate between the two.

Fraud analysts in Mexico watch for:

  • The lack of a second last name. (It’s customary in Mexico to have two surnames.)

  • The use of a very common last name, such as Hernández, González, or García.

  • Recently created email addresses that share composition traits with known-fraudulent addresses.

  • Frequent purchase of high-risk products.

  • Fast purchase speed, with changing items and amounts.

  • Delivery addresses located in high-risk areas or areas that don’t exist.

  • Lack of purchase history.

  • Data changing from one order to another.

  • IP addresses that are located in different states from the billing and delivery addresses.

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The Best Fraud Solution for Ecommerce in Mexico

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Conventionally, there are two ways to combat card-not-present fraud. Automated fraud prevention tools analyze transactions and reject orders based on pre-determined characteristics. Or, human fraud analysts use their expertise and instinct to assess the risk of fraud.

The advantage of automated tools is that they are fast, and when they’re configured correctly, they can be very effective at stopping fraud. However, automated tools have difficulty adjusting to unexpected circumstances and tend to reject many legitimate transactions.

Human analysts are slower than machines. But their flexibility, knowledge of human nature, and ability to keep up with the latest fraud trends help them tell the difference between fraud and transactions that are merely uncommon.

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You don’t have to choose between these methods. At ClearSale, our fraud prevention solution draws its power from the best of both worlds. We combine advanced statistical and artificial intelligence technology with the world’s largest team of specialized fraud analysts to deliver a balanced, real-world approach that is unlike anything else in the Mexican ecommerce market.

Case Study:

Motorola

ClearSale Helps Motorola Wipe Out Chargebacks and False Declines in Mexico

Iconic mobile phone brand Motorola wanted to make a big splash on Mexico’s two busiest online sales days, Black Friday and El Buen Fin (“the good weekend,” a nationwide shopping event launched in 2011 by the Council of Business Coordination). But Motorola knew that its products would be enticing targets for fraudsters, thanks to strong brand recognition, along with the small size and high resale value of Motorola’s devices.

To make the situation even more challenging, Motorola expected order volume to grow tenfold during these peak sales periods, making it nearly impossible to keep up with accurately screening and flagging suspicious transactions.

Motorola needed a fraud protection solution that would:

  • Integrate seamlessly with its ecommerce platform.
  • Provide prompt reviews of transactions.
  • Let Motorola quickly and confidently approve orders during high-volume sales periods and year-round.
See full case study

With ClearSale, ecommerce merchants receive:

  • Simple ecommerce integration. Our fraud protection solutions quickly integrate with all major ecommerce platforms via an easy-to-install plugin.

  • Near-immediate order approvals. Even our human analysts are fast.

  • Comprehensive protection against fraud. ClearSale’s Chargeback Insurance program offers 100% guaranteed coverage of all fraud-related chargebacks.

  • The highest approval rates in Mexico (and anywhere else). Our system will never auto-decline an order.

  • An innovative approach. Our multitiered team approach to fraud prevention lets us continually calibrate our proprietary statistical model as new fraud patterns emerge.

With our headquarters in Latin America, ClearSale knows Mexico. If you’re thinking about expanding the reach of your ecommerce business into Mexico, get in touch with us today to talk about keeping your business, your reputation, and your customers safe from fraud.

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