Latin American e-commerce giant Mercado Libre will invest $420 million in Mexico in 2020, as part of its continuing battle with Amazon.com, Inc. to gain a larger slice of the country’s lucrative online retailing market.
The online retailer, which is based in Buenos Aires, Argentina, has invested more than $1 billion in expansion efforts in Mexico since 2017 to compete with other online retailers.
“The [$420 million] investment is going to be in three elements: expand the supply we have of more products and brands; expand the logistics network with new warehouses; and increase consumer awareness of the brand,” David Geisen, Mercado Libre’s Mexico chief executive, said.
Geisen was speaking during a press conference at MELIXP, a technology and innovation event hosted recently by Mercado Libre in Mexico City.
Mercado Libre operates in more than a dozen countries. Its three largest markets are Brazil, Argentina and Mexico, which accounted for 63%, 19% and 13% of its gross billings, respectively, last quarter.
However, Mexico is the company’s fastest growing market, with e-commerce traffic up 35% in 2019, compared to the previous year, Geisen said.
“Mexico keeps growing far above Latin America as a whole, and it’s a key market for Mercado Libre this year,” Geisen added.
Geisen said the company intends to build more distribution centers throughout Mexico, which would benefit small- and medium-sized enterprises with storage and shipping
In Mexico, Mercado Libre relies on transportation service providers DHL, UPS and FedEx.
“[In 2019] we opened our second warehouse in Mexico,” Geisen said. “There will be more store openings in the coming years, because they add a lot of value to the companies that market their products through our platform. Ninety percent of the companies that sell on Mercado Libre are small and medium enterprises that do not have the infrastructure or technology to operate their own warehouses.”
Online shopping in Mexico comprised just 3% of total sales last year, according to market research firm Euromonitor International. But it is projected to more than double by 2022, reaching $14 billion.
Walmart Inc is Mexico’s largest retailer, with more than 50% of the country’s supermarket sales through more than 2,400 Walmart, Superama, Sam’s Club and Bodega Aurrera stores. However, Walmart’s online business in Mexico represented around 2% of revenue in 2019.
Amazon launched in Mexico in 2015 at Amazon.com.mx, and is now one of Mexico’s largest online retailers.