At their vacation home in Mexico in 2016, Toronto businessman Rahim Bhaloo and his wife were about to attend a birthday party when they learned they didn’t have a gift bag for the gift.
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At home, there would be an undeniable solution: move to one of the hundred stores of Dollarama Inc. But, as Bhaloo would soon discover, it was not so undeniable in Mexico. He scoured Playa del Carmen in search of a dollar store and was able to locate one. He said it took him more than 3 hours to locate the bag, so he was charged 55 pesos, the equivalent of about $3, more than double what Dollarama charges.
When Bhaloo returned home after all, he threw the bag on the counter, and an argument ensued. How could it have taken him so long?His wife stopped and said, “Rahim, don’t you think there is an opportunity for dollar retail stores in Mexico?”
Bhaloo, formerly the country’s largest Second Cup Coffee franchise, hesitated at the suggestion. “I don’t know the market,” he says.
He is the first Canadian businessman who hesitates to settle in Mexico. Although Canada and Mexico have been trading partners since 1994 through the North American Free Trade Agreement (NAFTA), Canadian traders and leaders tend to prefer to do business in the United States. In 2000, exports to the United States accounted for about 87% of Canada’s total exports, while exports to the United States accounted for about 88% of Mexico’s total exports.
Foreign investment figures were much better. Canadian foreign direct investment in Mexico amounted to only Can$3. 9 billion in 2000. But that can change. Currently, Canadian investment through corporations like PesoRama totals $25 billion annually, driven by the country’s developing mid-range elegance and competitive labour costs, according to Global Affairs Canada.
Mandel-Campbell went on to quote Carin Holroyd, a political science professor at the University of Saskatchewan, who said, “We had it easy. We have many resources that we can sell seamlessly to an English-speaking market that is nearby. . Fifteen years later, Holroyd observed that Canada was “slowly reducing its former over-reliance on the United States,” though perhaps only because the United States was less interested in Canada. More interest in other markets, namely East and South Asia, Europe and Latin America, the path to comprehensive foreign participation remains complicated and without a transparent roadmap,” he said in an email.
For Bhaloo, the concept of exploiting a market failure in Mexico is intriguing. In 2018, he began studying and learned that Canada, which at the time had a population of 37 million and a source of income consistent with the capita of US$46,548, according to World Bank figures: they are home to heaps of Dollaramas, while Mexico, with a population of 126 million and a constant source of income per capita of US$ 9,687, I had practically none.
Mexico’s poorest families would likely have a higher demand for ultra-low-cost retail sales than Canada, but no one had taken over. dollar chain in Mexico, with 20 points of sale in Mexico City.
The PesoRama team temporarily understood why dollar retail stores were rare in Mexico. In a phone call, CEO Erica Fattore said of everything from product loading to hiring, and the most difficult day-to-day operations in Mexico. Companies want to “build infrastructure in particular for Mexico,” Fattore said, “It’s not like you can deploy existing U. S. infrastructure. “USA to Mexico. O from Canada to Mexico. It just wouldn’t happen. “
If Canadian companies can triumph over those challenges, it would possibly be worth it. Mexico is the largest economy of the moment in Latin America after Brazil, and is among the 15 largest economies in the world. More than half a million Canadians visited Mexico in 2021, and many Canadian retirees, in addition to Bhaloo, bought assets there.
Mexico has more to offer than many: it is one of the most open emerging countries to foreign direct investment, with thirteen industrial agreements, which is at most on a par with Canada’s 15. The latest World Investment Report, published by the United Nations Conference on Trade and Development (UNCTAD), ranks Mexico among the 10 most sensitive destinations for FDI in 2021. Today, Canada and Mexico represent $41. 7 billion in the product industry two-way every year, making Mexico the third largest trading partner of Canada, the United States. United States and China.
Juan Navarro, principal and principal investigator of CMX Partnerships, a company that conducts industry and investment studies, wrote in an email: “While it is true that the Mexican government and society in general have many things (to do) to the crime rate, the country has made many innovations in recent years.
He added: “Canadian companies deserve to invest seriously in Mexico because of its reliable and enduring partnership with Canada and because Mexico is a country committed to foreign trade, investment and the rule of law.
Mexico is a largely untapped market for the “retail value retail” industry, said Fattore, who has worked in dollar store control for two decades.
“One of the things I would like other people to know is that it’s a big market with a lot of opportunities,” Fattore said. “When we arrived in Mexico, the only thing that became very transparent to me was that everyone just needs to do business. “
Canadian companies and investors have misconceptions about the industry with Mexico, he said. When other people think of the country, two things come to mind: resorts and a delicate political climate, he added.
And for a smart reason. Organized crime and corruption are affecting Mexico’s business climate, analysts at Banco Santander S. A. reported. According to Human Rights Watch, Mexico faces human rights violations, in addition to torture, gender-based violence, and enforced disappearances. Meanwhile, President López Obrador has expanded the use of the armed forces to control immigration, run social programs, and pursue big projects. Impunity is not unusual in the Mexican justice system.
However, Mexico is a failed state, full of disorder. By comparison, life in Canada is stable, but that doesn’t mean the barriers are insurmountable.
“There are, again, a lot of misconceptions,” Fattore said. It is vital that everyone makes their own decisions when they see it,” he continued. the neighborhoods, meet the people. »
PesoRama is not the only price store interested in the Latin American market. In 2019, Dollarama acquired a majority stake in Dollarcity, which has retail stores in El Salvador, Guatemala, Colombia and Peru. Its Goodlettsville, Tennessee-based competitor, Dollar General Corp. plans to expand into Mexico, opening 10 outlets through 2023. (Since the opening of PesoRama in Mexico, its main competitor is the resume of Waldo’s Dollar Mart de Mexico, S. R. L. de, however, this is set to replace it with Dollar General access. )
Fattore said she’s not involved in the festival because foreign stores tend to treat Mexico as an extension of their U. S. and Canadian operations, not realizing that while Mexico is a North American country, Mexicans have very different tastes.
“They’re taking what they’re doing so well for their existing market and they’re looking to deposit it in Mexico,” he said. “Seeing Americana, red, white and blue, doesn’t make sense. View St. Patrick’s Day in Mexico. . . Guys. It just doesn’t make sense. “
PesoRama has taken another approach, adapting its offering to the Mexican market. For example, Mexicans prefer other flavors, colors and sweet drinks to Canadians and Americans, Fattore said. Thus, PesoRama gives a sweet flavored with chili and cucumber, like other products that Mexicans know and love.
Retail outlets in dollars generally don’t take steps to innovate, Fattore said, betting that low values are enough to attract customers. dollar retail outlets. ” Now they’ve had new strategies,” he said. “Everyone is waking up. ” Oh my God, I don’t have that dollar value to depend on anymore. ‘»
PesoRama followed Dollarama’s pricing model, which starts with costs of just $1 or less and increases over time. WeightBranch at 25 pesos or less and more up to 50 pesos or less. Now, their products range from $1. 50 to $3. 15, or 25 to 50 pesos.
“The dollar stores business is a supply chain business,” Bhaloo said. “It’s about getting products from elsewhere. “
To keep costs down, dollar retail outlets decide to sell their own personal labels, which tend to be less expensive because retail outlets don’t want to negotiate with larger companies. Sixty percent of PesoRama’s shares are personal labels, Bhaloo said. .
What Mexican consumers want, more than anything, Bhaloo said, is value. He tested PesoRama outlets in 8 other Mexican neighborhoods with other revenue streams and learned that “it doesn’t matter where (we open),” Bhaloo said. Whether it’s a high source of income, a low source of income or an average source of income, we cater to all market segments. “
With that in mind, the company plans to open five retail outlets in the month starting next month, in addition to its 20 existing outlets. For now, Bhaloo plans to do it in Mexico, but has bigger plans for the company’s future. a style of business that works all over the world,” he said. “We have the place to be in a market where we are first movers, and we have the opportunity to have the advantage of being first. “
Fattore believes the store market belongs to PesoRama. “I would like to dominate this market,” he said.
PesoRama benefits from a commercial courtship that has lasted decades. Navarro advises other Canadian corporations to do the same. , but also because Mexico is one of Canada’s long-standing trading partners,” he said.
“Diplomatic relations have existed between these two countries for almost 80 years, which are forged bases for the construction of joint capacities (for the use of their companies).
• Email: mcoulton@postmedia. com | Twitter: Marisacoulton
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