BMI View: Mexico's retail market is expected to p rove the regional outperformer in the short-to- medium term , with positive economic and labour trends supporting healthy growth in household income rates , which in turn will boost spending in a number of retail segments. The country is attracting a high level of international investor interest and we expect to see a large number of new retail units opening over the coming months, including the introduction of major international fashion and electronics brands to the market - reflecting growing consumer demand for non-essential and higher value items as disposable income rates rise. While some risk to investors does stem from ongoing security concerns and a reliance upon the health of the US economy, overall Mexico's retail market is expected to grow and diversify rapidly and as such presents a valuable opportunity for a range of retailers.
|Headline Household Spending|
|e/f = BMI estimate/forecast. Source: BMI, INEGI Mexico|
Key Views & Developments
Strong growth in labour-intensive sectors such as manufacturing and construction will lead to higher employment rates in Mexico, which will provide a valuable boost to average household income rates when measured in local currency terms in 2016, though we note currency movements will lead to a short-term contraction in average household income when measured in US dollar terms, reflecting the ongoing weakness of the Mexican peso.
Higher household income rates combined with improving access to credit and low inflation will in turn support robust growth in total household spending in 2016, again when measured in local currency terms, with total household spending reaching some MXN5,646bn (USD319bn). Banco de Mexico (Banxico) is expected to hold the benchmark overnight interest rate at 3.75% when it meets in late June, supporting our current forecasts.
A number of high profile retailers have announced plans to expand in the Mexican market. Luxury brand Dior opened its first store in the country in early 2016 following Bottega Veneta, Bulgari, TAG Heuer and Rolex, which have also entered the market. Swedish brand Make Up Store has also opened a new store in Mexico City, alongside other Swedish brand H&M, which has expanded rapidly in Mexico.
Further reflecting the expected growth in the Mexican retail segment, Walmart Mexico announced in May 2016 it plans to open over 1,000 new stores in Mexico and the wider Central America region over the next ten years.
The Mexico Retail Report has been researched at source and features BMI Research's independent assessment and forecasts for the retail sector. The report examines key drivers of retail sales growth and future prospects, including consumer spending and private sector investment.
BMI's Mexico Retail Report also examines the level of development and potential for growth of the retail sector, the commercial initiatives of major players, changing consumer demographics that influence demand and the regulatory environment. Key sub-sectors include mass grocery retail, autos, over-the-counter pharmaceuticals, computers and consumer electronics.
- Benchmark BMI's independent retail industry forecasts for Mexico to test other views - a key input for successful budgeting and strategic business planning in the Mexican retail market.
- Target business opportunities and risks in Mexico through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
BMI Industry View
Summary of BMI’s key forecasts and industry analysis, plus a discussion of major industry developments and a snapshot of key short-term demand-driving macroeconomic movements.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the retail sector and within the broader political, economic and business environment.
BMI Industry Forecasts
There are four separate 5-year forecast modules in the retail reports. These are:
- Headline Retail Forecast: Total household spending (local currency and USDbn, % growth, % GDP, per capita, per household), spending by retail sector (food & non-alcoholic drink, alcoholic drink, clothing & footwear, housing & utilities, furnishings & home, health, transport, recreation, education, restaurants & hotels, personal care & insurance (local currency and USDbn, % growth, % GDP, % of total spending)
- Retail Sector Forecast: Breakdown of Food, Non Alcoholic Drink, Alcohol, Tobacco, Clothing, Footwear, Household Goods, Furnishings, Appliances, Glass and Tablewear, Household Textiles, Consumer Electronics, Garden Toys and Pets, Home and Garden tools, Personal Care, Personal Effects Spending (USDbn, % Growth)
- Household Income and Numbers Forecast: Number of Households (‘000, % growth); gross income per household and per capita; net income per household and per capita; tax and social contributions per capita; breakdown of household incomes – USD5000+, USD10,000+ USD50000+ (‘000, % of total); labour force, employment and unemployment (‘000, % change)
- Demographic Forecast: Total population; Babies 0-12 months; Young Children 0-4yrs; Children 5-9yrs; Young Teens and Older Children 10-14yrs; Older Teens 15-19yrs; Adults 21yrs +; Young Adults 21-29yrs; Middle Aged 40-64yrs (‘000, % growth, male, female); Urban Population (‘000, % population); Rural Population (‘000, % population).
BMI’s Retail Risk Reward Index
BMI’s Risk Reward Indices provide investors looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Provides a detailed country-specific analysis of the key trends and developments in the retail sector as a whole, as well as an assessment of the main drivers affecting the major retail segments including mass grocery retail, fashion, pharmacies, consumer electronics, home improvement and personal care. The market overview also considers the most effective store formats in a given country and the impact of these factors on the main international and domestic players’ development strategies.
This provides a brief overview of the key players in each subsection of the retail sector including MGR, Fashion, Home Improvement, Consumer Electronics, Pharmacies, and Department Store chains.
The Retail Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.