In our last blog, Is expansion into Mexico the answer to a static or declining fuels retail environment?, we wrote about the political, economic, security and logistical barriers to entering the Mexican retail fuels market. Now we turn our attention to the opportunities there.
For most companies, the biggest draw to entering the Mexican market is growth. There are few countries in the world with growing demand that do not already have a well-developed competitive market or significant barriers to entry due to local content requirements or profit repatriation challenges. Some, like China, have all three.
In terms of retail sites, even by developed market standards, Mexico is underserved by retail locations. In Mexico City, limitations on the availability of sites probably makes this an even greater challenge. Yet, these high-throughput sites offer growth opportunities if good flow patterns can be established to increase the throughput of vehicles.
There is also a readily-available, young talent base for mid-tier managerial tasks. While there is a real war for talent in the office and clerical space, site managers and entrepreneurs willing to build franchise bases are readily available and typically engaged in helping to grow their businesses.
Mobile and smart-phone penetration is high and the possibility to use mobile payments as an alternative to the untrusted credit card system could result in the market leapfrogging Western retail sites in payment processing.
The potential for innovation is great for those companies that can harness it. The market is young and the services that can be sold through retail sites have not been fully tested in direct marketing trials.
It is also important to reflect on the integrated margin available from import and supply, combined with a retail “demand pool”. Pump prices are still significantly higher than in comparable markets north of the border, and creating an integrated import, logistics and retail market can provide fuel arbitrage opportunities which aren't easily available elsewhere—not just in the retail fuels market, but in the wholesale and aviation fuel markets too.