Mexican retailers struggle to expand online as Shein hits the market

MEXICO CITY — With nearly 50 million people still living in poverty, Mexico has a large number of lower- and middle-class consumers. This statistic has not escaped Shein, the cheap Chinese online portal that is now attracting Mexicans with clothing selling for just 99 pesos, or $6.

The Chinese platform, which has also taken many other global markets by storm, has built a significant business in Mexico by targeting its many street vendors who make a living selling goods in tianguis, or flea markets.

“Shein does multi-level [marketing]”said Jorge Quiroga, a leading retail industry analyst who runs consultancy Retail Lab. “You can become a partner and then have better prices to resell. Shein now has more than a million of street vendors who also sell on WhatsApp and deliver their wares to popular locations such as metro stations.

Shein's arrival has given Mexico's established retailers a run for their money, relegating Liverpool's El Puerto, once the fifth-largest online clothing retailer, to sixth.

Indeed, the arrival of the Chinese giant – which has launched discount campaigns targeting Mexico's lucrative plus-size market and rolled out ads involving Mexican designers for the country's major Day of the Dead celebration – has upended the market, according to Quiroga.

“They really hurt Liverpool”, which had dominated online sales for several years amid significant investment to improve customer service and speed up deliveries. With more than 120 stores, Liverpool is strengthening online promotions and facilitating credit via its store card, while launching new omnichannel strategies to counter Shein. “But they’re not as dynamic or fast,” Quiroga noted.

Meanwhile, Coppel, which specifically targets low-income Mexican consumers, is also responding aggressively to Shein, primarily by introducing new financing options for consumers who don't have bank accounts. Wal-Mart de Mexico and Centroamerica, for their part, are strengthening their discounts thanks to their Cashi shopping application.

The only company that can really take on Shein is Cuidado Con El Perro (or Beware of the Dog), the country's fastest-growing fashion chain that also targets budget-conscious consumers, particularly Millennial and Gen Z buyers.

Cuidadoconelperro.com offers a wide selection of unisex products. One of its latest capsule collections was inspired by characters from the Pokémon video game and offered sweatpants and t-shirts for $10 to $20. The brand's products became so popular that street vendors also began reselling them in Mexico's tianguis, taking on Shein.

With over 200 stores, Ciudado Con El Perro has successfully targeted the US market (where it ships online) and Guatemala. Last December, it acquired C&A's troubled Mexican subsidiary for an undisclosed sum.

“Cuidado Con El Perro is basically saying to the Mexican clothing market, 'I'm going to be done with you.' He's a wild dog. When you go to shopping centers, their stores are always full, much more than others,” said sector expert Miguel Angel Andreu.

When asked if anything could hinder Shein's rapid growth, he noted that the company had recently suffered from fraud scandals allegedly linked to its payment system.

“Some people don't trust Shein or Temu [the other fast-growing Chinese e-commerce player] because there are reports that they are cloning people's cards,” said Andreu, who runs clothing and retail consultancy Cedetex.

Some Mexicans have also reportedly expressed puzzlement and distrust of Shein's so-called Lucky Flip Game, which offers free credits or vouchers.

“People are confused about this game,” Andreu said. “Psychologically, this makes them reluctant to trust. »

Aside from Shein, Mexican consumers are increasingly wary of online shopping amid growing credit card fraud and/or identity theft, a problem Quiroga blames for holding back growth of the market, which he predicts will stagnate at around 11% this year after gaining much more over the course of this year. the pandemic.

Putting further pressure on e-retailers, most Mexicans still prefer to buy clothes in physical stores.

“A lot of people say, 'I'm buying online and things aren't reaching me,'” because some brands are still unable to deliver their products nationwide. And even if they want to buy, they may not have the funds to do so. “Forty million people are still unbanked in this country,” Quiroga noted.

On the other hand, logistically, things have improved.

“Retailers are investing a lot of money to improve the shopping journey with greater delivery responsiveness,” said a banking industry analyst, speaking on condition of anonymity. “In the past, people had difficulty finding a wide selection of items, sizes and styles. Now they can do it in just three or four clicks.

In addition, “brands can now deliver within 24 hours no matter what,” adds the analyst. “The quality of their website is also much better, whether you access it via PC or smartphone, and there is a certain level of professionalism that wasn't there before the pandemic.”