Retailing in Mexico: The Best (and Worst) of Breed

 

 

 

 

 

 

 

 

 

If you have older siblings, you remember the envy caused by watching your older brother or sister get the newest jeans for back to school and the new car when he or she starts driving. You also knew fully well these new things would become yours as part of the inevitable hand-me-down process.  If you are anything like me, you wanted to yell at your parents, “Hello!  Why can’t I have a new shirt? Don’t I have the same value and have individual needs? Why do I always have to be a second thought to my older sibling?”

Well, guess what- Mexico feels the same way. As our neighbor to the South, Mexico has a front row seat to the happenings of the USA.  It witnessed the great economic growth and prosperity of the 1990’s, it wept with us when our country was attacked by terrorists in 2001, and it is definitely watching every business decision currently being made that will directly affect its own economic, social and political prosperity for decades to come. Although much discussion can be had to the international relations between the U.S. and Mexico, I would like to focus specifically on the trade and commerce of the fashion industry.  In this arena, make no mistake about it, Mexico has traditionally been seen as an afterthought, as the younger brother that will take whatever hand-me-down consumer goods its older brother, the U.S, no longer wants or has use for.

However, as Mexico’s middle class grows, so does it purchasing power and demand for new, additional and better options.  The onslaught of social media has allowed anyone with Internet access the ability to watch fashion shows in real time and know within nanoseconds, what celebrities and fashionistas around the globe are wearing. This increase in awareness/demand and purchasing power, in addition to the oversaturation of domestic markets has lead fashion brands and retailers to look at Mexico as an emerging market with the offer for growth and a new revenue stream.  However, even with these positive market factors, Mexico still seems unable to get the retailing game right.    During a recent visit to the city to attend the Top Glamour 2010 Awards, hosted by Glamour Mexico, Olay and Pantene, I did some market research to see which retailers are on target to move into leadership positions and which ones are as lost as a fashion intern on her first day.

First, I went to the most sophisticated, advanced marketplace I could find, the newly opened Saks Fifth Avenue in the ritzy neighborhood of Polanco.  After only three minutes in the store, it was beyond obvious that the buyers have absolutely no idea of the first rule of retailing; know your customer and his expectations.  First, the size assortment for most collections on the floor ranged from 0-4.  If Mexico is the second most obese country after the U.S, how many sizes 0, 2 and 4’s are really out there? Second, Saks Mexico doesn’t understand how to merchandise a store.  When setting up a floor, merchants need to group designers together who have a common customer, which is reflected in a similar price point and either similar or complementary styling characteristics. A customer should walk into contemporary and be able to flow through the collections knowing that her needs and expectations will be met.  This is not happening in Saks. In my visit, I found Vanessa Bruno, Vivienne Westwood and Tibi hanging next to one another.  There is a gap about the size of the Grand Canyon in the price points and styling characteristic of these three brands.   The Saks Mexico shopping experience is more like walking through the chaotic brain of Tim Burton than a well planned, studied marketplace catering to the upscale (wealthy) customer. It is no wonder that Sak’s isn’t moving merchandise, but if I know Carlos Slim, he has most of the goods on consignment or at the very least, has negotiated very high RTV’s (Return to Vendor).

However, the Mexican landscape isn’t totally doomed. El Palacio del Hierro, Mexico’s retail pride and joy, and Saks primary competition has really blossomed under the intelligent and experienced leadership of its Marketing Director, Carlos Salcido. He has taken what was a regional department store in a third world country, and turned it into one of the biggest conversations after a recent article in WWD.  The evidence of his extensive knowledge of retailing and ability to stay on the pulse of the industry is evident in many ways.  The first is the understanding of competition and the need to be agile in adapting strategy in order to capture the consumer.  When Saks entered the Mexican market, it was with the promise to bring exclusive designer brands that otherwise couldn’t be found.  Palacio did its homework and secured designer brands in order to compete. But it didn’t just go get any designer brand.  Rather, the retailer did research to determine the brands its customers really wanted (turns out Michael Kors and Stella McCartney have followings down South). In addition to adding new designers to its merchandise mix, Palacio bought deeper into its best selling brands, namely Burberry and Carolina Herrera.  Finally, each collection is well assorted to accommodate a variety of sizes. I had no problem finding a US size 8 in every garment I tried on.

Second, the floorsets make sense!  Contemporary brands such as BCBG, Ralph Lauren, Adolfo Dominguez, and Tommy Hilfiger hang together in what is a very cohesive and logical group.  The price points are similar and the branding characteristics are complementary enough to keep the customer interested and in the area long enough to encourage a sale.

Finally, the service is flawless.  Store employees are friendly but not solicitous, knowledgeable about its product offer and are willing to go above and beyond the call of duty to make sure you are happy.  You get the feeling the employees aren’t just punching a clock and waiting for their commission check, but rather they feel ownership in the company and therefore want to be the best representative possible.   Palacio  is a very positive shopping experience, I got what I wanted and smiled the entire way through.

The Takeway: Although a successful retail business depends on the cooperative performance of many factors- first and foremost is the golden rule of retailing- know your customer and his expectations.  The second rule is to follow the process to ensuring you meet the expectations. This includes buying the right product at the right time and at the right price, excellent merchandising skills, and superior customer service. If I were a betting girl, I would put my money on Palacio’s stock at least for the foreseeable future until Saks understands that a celebrated name and pretty clothes alone do not a successful retail business make.

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