Amazon's Mexico website. Amazon's Mexico website.

Amazon planning new mega-warehouse

93,000-square-meter facility planned near Mexico City, say real estate industry sources

Online retail giant Amazon is planning to open a mega-warehouse near Mexico City to further bolster its presence in the domestic market, according to real estate professionals who are familiar with the project.

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A 1-million-square-foot warehouse — 93,000 square meters — will be built by industrial developer Fibra Prologis in the municipality of Tepotzotlán, they said, at a location about 40 kilometers north of the capital.

The project will triple the size of the company’s current distribution space in the adjacent state of México municipality of Cuatitlán Izcalli, where the company has two dispatch centers.

Located 11 kilometers from the existing facilities, the new mega-warehouse is expected to be completed sometime next year. Its location will enable easy access to Mexico’s biggest consumer market but it could also be used to ship products to the United States.

The president of the logistics consultancy firm MVPVL said that a facility of the size planned would be able to store about 15 million products including bulky items such as furniture. One million deliveries a day could be made and it would likely employ 2,000 to 3,000 people, Marc Wulfraat said.

News of the plan comes two years after Amazon launched a new retail website in Mexico that significantly expanded the range of products it offered here.

It also coincides with renegotiation talks of the North American Free Trade Agreement that could benefit the company if the United States succeeds in persuading Mexico to increase the limit on the value of goods bought online that can enter the country duty-free. It currently stands at US $50 but there is a proposal to push it as high as $800.

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Despite being relatively new in the Mexican market, Amazon has grown rapidly and is now the third largest online retailer in the country, recording sales of US $253 million last year. Before the launch of the expanded website in 2015 its presence was limited to the sale of Kindle e-readers and e-books.

E-commerce has grown steadily over recent years but replicating the kind of success it has had in the U.S. may prove to be more difficult.

Many consumers are skeptical about the safety and certainty of buying online while many others don’t have credit cards.  Online shopping in Mexico accounts for just under 3% of total retail sales compared with more than 10% in the U.S.

However, those figures along with a population in excess of 120 million represent ample room for growth and some analysts say that Amazon is prepared to take a risk in order to compete with other online retailers such as Chinese-owned Alibaba, with whom the Mexican government just signed an agreement.

“Amazon is not afraid to plow into a new market in a very big way, take a big hit, but say, 10 years down the line this is going to be big and profitable,” GlobalData Retail CEO Neil Saunders said.

While Amazon spokesman Julio Gil declined to make any comment about the mega-warehouse plans, he said that expanding product lines, offering faster delivery times and making purchasing as secure as possible were among the company’s goals in Mexico.

Source: Reuters (en)

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