Interview : Guilherme Loureiro
In what ways has digitalisation changed the way distribution networks operate in the retail sector?
GUILHERME LOUREIRO: As consumption trends differ from region to region, particularly between the larger cities of Mexico City, Monterrey and Guadalajara, distribution networks are now managed and planned differently than they were in the past. Particularly in these major cities, the population tends to be more digitally engaged, and for this demographic the retailer has had to adapt in order to deliver products in the fastest possible time.
Due to the increased urgency in shoppers’ habits, the first step is therefore to ensure that shops and warehouses are well stocked. It is more important than ever for retailers to make accurate models and forecasts that analyse and predict exactly what type of products will be required, how often and in which locations. This requires more use of big data, data analytics and advanced technology to match supply as accurately as possible with demand. Depending on the type of product, the retailer should also find the most efficient way to deliver goods to the consumer, through a traditional logistics provider or even through firms with a more focused distribution network, like Uber.
Whereas many consumers choose to have products delivered directly, for the quickest service they can browse and buy online, and collect from the nearest store. Obviously, larger retailers with a more extensive distribution network have an advantage in this regard, but it does affect how they manage and plan their network. This trend is more demanding for retailers as it makes the distribution chain unpredictable. With “click and collect”, demand can be 10 to 20 products an hour, but this can also reach up to 100 items per hour, highlighting the centrality of modelling and predictions.
How is e-commerce affecting the traditional model of fast-moving consumer goods (FMCGs) shopping?
LOUREIRO: Software development is becoming a central component for nearly every company. Across any sector, the company that focuses on the customer always wins, and that is no exception with regard to retail or FMCGs. Those who look to emulate the best customer service and the most efficient solutions for the client will take the lead.
Today’s consumer may still visit a shop, but they often place the order and pay from the comfort of their own home, or on the move from their mobile phone. Even though they may sometimes get products delivered to their door, the primary demands are efficiency and flexibility as today’s customer doesn’t have a set purchasing behaviour. The retail sector has changed unimaginably over the last 10-15 years, and the best that retailers can do to adapt to this change is offer consumers choice, flexibility, competitive prices, and ease of access and delivery. Retail is arguably the most dynamic sector in Mexico, with a multitude of opportunities for firms of all sizes, as long as they understand consumer needs.
To what extent does the recent rise in spending depend on easier credit access?
LOUREIRO: Although Mexico has grown a lot as a result of consumer credit, it can be expensive and hard to access for the 50% of the population that are employed in the informal sector. This is beginning to change as, in the near future, fintech and other forms of electronic financial transactions will completely revolutionise the way that much of the unbanked population obtains credit and consumes. Due to the multitude of structural factors affecting this progress, it is hard to judge when this take-off will occur, but it will probably grow slightly ahead of the rising formalisation and digital penetration rates experienced at a national level. In addition, more sophisticated digital modelling will make financial institutions’ lending estimations more accurate, further bolstering credit availability. Despite the fact that current macroeconomic uncertainty makes it hard to predict short-term spending trends, the long-term projection is positive, buoyed by the availability of credit.
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