Amazon.com Inc. is gearing up to open a massive warehouse in Mexico as it aims to tap into the e-commerce market that has yet to take off in the country.
Citing sources familiar with the project, Reuters reported that the 1-million-square-foot warehouse will be located in Tepotzotlan, near Mexico City, and is slated to be completed in 2018.
With the new facility, Amazon's distribution space in the country will triple, noted Reuters.
While U.S. consumers have long been fans of online shopping, shoppers in Mexico aren't as willing to purchase things from the internet. Online shopping accounts for only around 3% of retail sales in the country, reported Reuters.
In the U.S., more than 10% of retail sales come from the internet. Fraud and a lack of credit cards have been two reasons for the low adoption rate in Mexico.
The Seattle-based retailing giant wants to change that. According to Euromonitor International, it is currently Mexico's third biggest e-commerce company, posting sales in 2016 that more than doubled from 2015. As in its other markets, it wants to be the leader in Mexico as well.
It doesn't hurt that if the North American Free Trade Agreement (NAFTA) is overhauled, the U.S. could get Mexico to raise the limits on online purchases that can be imported into the country duty free. Currently the cap is at $50, noted Reuters.
Julio Gil, a spokesman for Amazon, wouldn’t comment on the impending warehouse but told the news service the company is looking to expand the number of products it offers in Mexico, as well as decrease delivery times and make it easy and secure to make online purchases. The goal is to get more people comfortable shopping online.
The new warehouse will be able to handle shipping larger products to Mexican consumers, such as furniture. It may also act as a distribution point for shipments to the U.S., noted the report.Read more at Investopedia.com