Thursday, December 20, 2007

E sales surge in the US and the north of Mexico.

Following fears of an economic downturn in the US following the sub-prime bust, credit crunch and the negative effects that might have on the Mexican economy, some good news showed up this week with the early December levels of online shopping in the US.

According to data from Comscore (via The Economist) US online purchases, from November 1st. to December 6th, increased a healthy 18% versus 2006, with weekly sales peaking at a record e-commerce level of 4.6 billion dollars. So in spite of falling house prices, tighter credit and lower levels of consumer confidence, North Americans appear to be spending more than ever, at least online.

The north of Mexico also seems to be experiencing a surge in online shopping. According to data extracted from Google Trends, Google searches to online retailers, so far in December, have increased significantly in the Monterrey and border areas. This would indicate that innovators and early adopters in the north of the country are beginning to follow what is now a mainstream activity in the US and have begun to take their Christmas business online. This poses a question: as broadband internet penetration begins to accelerate towards 10% of the population, to what extent are retailers in Mexico prepared for the coming e-commerce Christmas opportunities?

Further analysis, using Google Trends, shows a mixed picture. Palacio de Hierro, Mixup and Office Depot show higher levels of searches compared to Office Max, and show lower levels.

The quality of site content and “shopability” varies from state-of-the-art, at Office Depot, Sanborn’s and Mixup, to rudimentary at Palacio de Hierro and Liverpool. The latter sites being more focused towards the wedding gift market than the Christmas shopper. Palacio de Hierro projects a festive spirit but offers a limited selection of gift ideas and does not offer a secure shopping cart. Customers have to call a sales operator. Hardly state of the art e-marketing.

The leading Mexican brand, in terms of e-commerce potential, would appear to be With its advantage in music and video products, the strongest selling e-commerce categories, might just emerge as the of Mexico. Next up would be Office Depot and Sanborn’s, two strong national brands backed by the awesome technology and financial resources of Carlos Slim. Palacio de Hierro clearly has potential too, but would require a significant forward commitment to technology and digital content in order to compete effectively.

If actual buying online has yet to take off in most of Mexico, using the internet for browsing and information gathering peaks strongly during the Christmas season. Interest in the iPhone, for example, appears to be strong all over Mexico. Search traffic for video games also appears to be strong. Probably from parents looking for information on exactly how much an Xbox or Wii is going to cost them.

With the expected surge in broadband internet penetration and e-commerce in Mexico, the above should serve as a loud wake-up call to Mexican retailers. The horrendous pre-Christmas traffic alone should be enough of an incentive for thousands of frustrated Mexico City shoppers to take their shopping online.

Best wishes for the holiday season.

Thursday, December 6, 2007

Let’s go to the Movies!

After a dip in 2003, the movie business in Mexico has been growing steadily and looks to be on the way to a record year in 2007. Attendance reached 165 million tickets sold in 2006 and is expected to top 180 million this year, according to AC Nielsen. It is estimated that nearly 10% of Mexican middle class adults (over 18) can be classified as “frequent moviegoers”, i.e. go to the movies at least once a month. That’s a lot of popcorn! It is also an opportunity for innovative marketing in the growing area of brand entertainment.

The growth in Mexican box office receipts can be attributed the success of the modern multiplex theatres that arrived in the mid nineties and now number over 200, with over 3,200 screens. The leading exhibiter is Cinéopolis with 49% of ticket sales in 2006, according to AC Nielsen, followed by Cinemex with 17%, MMC, Cinemark and the independent exhibiters.

Cine complexes have become a major component in urban retail development, due to their proven ability to generate traffic. The busiest multiplex in 2006, according to A.C. Nielsen, was the Cinéopolis at Universidad 19, in Mexico City, with 2.2 million visitors. As malls and modern commercial centers continue to expand in the major cities and to outlying provincial markets, the multiplexes are involved in all major development projects. So the total number of screens could pass 4,000 by 2010.

Film production is now approaching 500 titles a year and 2007 has been a good year for hit movies in Mexico, the top ten summer releases so far grossing 189 million dollars up to September (according to Variety - Nielsen data): Spiderman 3 grossed $35.3 million dollars; Ice Age 2, $29.2 million; Harry Potter $24.9 million, closely followed by Pirates of the Caribbean and Shrek the 3rd; Transformers; The Fantastic 4; Ratatouille; The Simpson’s and KM 31 rounding out the top ten. It is interesting to note the number of sequels in the list. It used to be that sequels rarely matched the gross of the original title, today most sequels gross higher with each release.

Movies and multiplex theatres now offer a significant audience to marketers through a number of channels: traditional on screen advertising; product placement in the movie itself; in theatre promotions and free tickets as promotions, rewards and incentives.

Hollywood Movie Money is a company that specializes in movie ticket promotions and branding programs. Utilizing new technologies, HMM has recently announced a number of product innovations and branding platforms which include prepaid plastic cards, print at home tickets via the internet and cellular telephone ticketing.

With DVD sales and rentals now accounting for more than half of total industry revenues, the main threat facing the movie industry all over the world is piracy. According to the MPA (the Motion Picture Association) in 2006 producers lost approximately $483 million dollars of DVD and VHS revenue to piracy in Mexico, or 61% of potential revenue. Things are a lot worse in China and Russia, where loses to piracy have reached 90% and 79% respectively.

One response to the piracy threat to DVD revenues could be to reduce prices and attract brand partners and sponsors, as television does. Meanwhile: Lights! Sound! Roll ‘em! and keep the popcorn coming this way please!

Thursday, November 29, 2007

Welcome, Millennials!

We are hearing a lot about the Millennials, the next generation of young people now entering the workforce. So this a quick note to welcome them to the world of marketing.

Dear Millennial: Let me introduce you to the 4 basic types you will meet here. They are: the Suits; the Creatives; the Geeks and the Nerds. Let’s take a quick look at who they are and what they do, so you will recognize them when you come across them.

First, the Suits. As the name suggests they are the managers and admire anybody with a degree in Strategic Management, from the Iberro is or Anaguac. An MBA is even better. Their heroes are Jack Welsh and Donald Trump. Suits pride themselves on being hands on and on top of everything, so they depend a lot on their Backberreys. The sign of a fast track Suit is when they take their laptop to a meeting and have the conference report finished, as the meeting is breaking up, so the boss gets it on the Backberry before they get back to their office. I have seen it done and very impressive it was.

Next up are the Creatives. These are the creative directors, copy writers, art directors, photographers, graphic designers, web designers, film directors, producers, editors, animators, special effects engineers and a host of other specialists who actually conceive and produce marketing communications. Thus, they are the center of the marketing universe. (Hard to argue with that) Creatives love YouTube and hate Power Point presentations. Creatives also love awards and spend a lot of time updating their creative reels (also on YouTube), art books and digital files, ready for their next job interview.

The Geeks see themselves as the “knowledge workers” of the group, with a deep understanding of popular culture and how brands and consumers interact. Geeks get to moderate workshops and brainstorming sessions and are good at charts. Geeks like the 4i’s – Information, Interpretation, Insights and Inspired Ideas. Both Suits and Creatives get on Geeks’ cases because they never have enough useful, powerful and actionable insights at the right time. Geek heroes are Steve Jobs, The Matrix and Ethnographers.

Last, but by absolutely no means least, are the Nerds. They live numbers, science and detail so Nerds are also frequently Financial Directors, Money Managers, Media Planners or Stock Analysts. Nerds know they are important and dislike always being last on the agenda at meetings. Nerds can hold grudges hence the movie: Revenge of the Nerds. Their heroes are Bill Gates and Carlos Slim (of the same $ number loving world). So be careful and never under estimate them.

Lastly, be enthusiastic about everything and be nice to people, especially the messengers, the receptionist, the systems people and the guy who runs the copy machine, because without them on your side you are dead meat in the marketing world! Saludos R.T.

Thursday, November 22, 2007

The Beauty Business Surges Again.

Walk into any department store and chances are the first area you will enter will be the Cosmetics and Toiletries department. For many women and increasingly men too, it is an irresistible magical place to shop. Welcome to the Beauty Business, the most profitable part of the store.

The Cosmetic and Toiletries market in Mexico, defined as hair care & coloring, skin care, make up, perfumes & fragrances, deodorants and oral hygiene, punches well above its weight in per capita consumption and share of world markets. According to CANIPEC (the cosmetics industry association), the beauty market in 2005 was worth 3.5 billion dollars, ranking around 10th in the world and growing at annual rate of 10%, compared to the worldwide growth average of 8.2%.

It’s hard not to be fascinated by the Cosmetics and Toiletries market, because of its size, product innovation, design & packaging, consumer typographies, brand dynamics and its undoubted mystique. Above all, the Beauty Business represents a constant, unrelenting, marketing challenge.

Whether it’s the latest make up innovation from L’Oreal, a new line extension from P&G’s Pantene shampoo or Unilever’s Sedal; new ideas for men’s grooming from Nivea; a new fragrance from Chanel, Calvin Klein or Joy or a new organic cream at the Body Shop, hardly a week goes by without some new offering appearing in the category.

Increased discretionary spending from working women, higher disposable income from an reviving middle class and access to consumer credit are the key factors driving demand in Mexico and other developing markets.

Distribution covers a wide and varied spectrum of sales points: from direct sales (Avon, Jafra, Mary Kay, Amway and Herbal Life etc.), to retail department stores, super markets, pharmacies, duty free stores, independent specialist retailers, salons and beauty shops, down to the informal sector of street markets and vendors. The Beauty Business is everywhere.

Manufacturers and producers also present a diverse and competitive market place, from the global giants (P&G – Max Factor, L’Oreal, Unilever – Pond’s, Beiersdorf - Nivea), to middle players (Grisi, Bristol Mayers) to small local producers and, increasingly, low priced imports from Asia and China.

Mexico, as a member of the World Trade Organization (WTO), is obliged to eliminate all existing tariffs and quotas on Chinese imports, effective this year. In the price sensitive low end market cheap imports are helping to boost sales. Unfortunately, so are counterfeits and generic copies of high end brands.

Profound changes, already evident in the US and Europe, are beginning to make themselves felt in the Mexican market. Changing demographics – the population of Mexicans over the age of 55 (the Grey market) will double in the next fifteen years to 25 million. Changing attitudes towards aging and changing definitions of beauty are changing how people interact with brands. Consumer activism against toxic ingredients is gaining momentum all over the world. The move to 100% organic cosmetics is already well advanced in a number of European countries. But no matter how the changes come it’ll still be a Beautiful Business.