Wal-Mart in Mexico

"I really don't see what is to prevent us from owning all of Mexico and running it to suit ourselves." - William Randolph Hearst

According to the New York Times on December 7, 2003:  

"Wal-Mart, the biggest corporation in the United States, is the biggest private employer in Mexico, with 100,164 workers on its payroll as of last week. Last year, when it gained its No. 1 status in employment, it created about 8,000 positions, nearly half of the permanent new jobs in this struggling country.  

Wal-Mart's power is changing Mexico in the same way it changed the economic landscape of the United States, and with the same formula: cut prices relentlessly, pump up productivity, pay low wages, ban unions, give suppliers the tightest possible profit margins and sell everything under the sun for less than the guy next door."


Though it came to this country only 12 years ago, it is doing more business (closing in on $11 billion a year) than the entire tourism industry. Wal-Mart sells $6 billion worth of food a year, more than anyone else in Mexico. In fact, it sells more of almost everything than almost anyone. Economists say its price cuts actually drive down the inflation rate.

Last year, 585 million people, nearly six times the population of Mexico, passed through its checkout lanes. With 633 outlets, Wal-Mart's Mexican operations are by far the biggest outside the United States.

Its sales represent about 2 percent of Mexico's gross domestic product, almost the same as in the United States. Analysts say it now controls almost 30 percent of all supermarket food sales in Mexico and about 6 percent of all retail sales, also about the same as in the United States.

Added to the penetration of Wal-Mart in Mexican life is the new Wal-Mart store that will appear less than one mile from the ancient pyramids of Teotihuacan.  "What might this mean? Perhaps they can build a strip club at the Holy Sepulcher, a McDonald's at the ruins of Montealban, or a Hard Rock Cafe next to the Pyramids of Egypt," wrote columnist Javier Aranda, referring, respectively, to the site where Jesus was buried, another famous Mexican ruin and a man-made wonder of the world.

We will now refer to some survey data from the 2004 TGI Mexico study.  This is a survey of 4,181 persons between the ages of 12 to 64 years old in Mexico.   Within this study, 3,888 respondents classified themselves a principal shoppers in their households.  Among these principal shoppers, 21% have shopped at a Wal-Mart store in the past 12 months.  In addition, another 24.5% have shopped at a Bodega Aurrera, a warehouse-style discount chain owned by Wal-Mart.  The chart below shows the incidences by socio-economic level.  The Bodega Aurrera stores have a distinctily different profile from the Wal-Mart stores.

(Source: 2004 TGI Mexico)

Notwithstanding the diifferences in socio-economic profiles of the customers, the types of shopping activities at Bodega Aurrera and Wal-Mart are nearly identical:

(Source: 2004 TGI Mexico)

So why do Mexicans patronize the Bodega Aurrera and Wal-Mart stores?  This is the bottomline.  In the next chart, we show a partial list of the important reasons listed by all the principal shoppesr and then separately by those who have patronized Bodega Aurrera and Wal-Mart.  For everybody, the most important reason is 'price' and Bodega Aurrera and Wal-Mart are highly competitive in this regard.  In the end, as much as some Mexicans may not like the Wal-Mart stores for nationalistic reasons, there are compelling economic and consumerist reasons why they are so popular.

(Source: 2004 TGI Mexico)

(posted by Roland Soong, 10/14/2004)

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