You can’t go far in Mexico without seeing an Oxxo store, and you’ll be seeing even more of them as time goes by. Mexico’s largest convenience store chain and one of its most successful retailers, with 11,850 outlets in operation throughout the country and in Colombia, opens more than 1,000 new stores every year.
The reasons for its success, according to a report in El Financiero, are in logistics, rented locations and no franchises. It is seven times larger than its nearest competitor 7Eleven, and is in third place behind Walmart and Chedraui in terms of sales per square metre, a figure that comes in at more than 10,000 pesos.
And figures from the first quarter of this year show that those productivity numbers are growing faster than they are at the two big-box retailers, which actually recorded declines.
Launched in 1978, Oxxo is owned by Femsa, proprietor of Coca-Cola Femsa and one of a handful of Mexican companies that have thrived internationally. (MND, June 27)
So what is Oxxo’s formula for success? El Financiero asked some specialists for some clues:
Oxxo is not a franchise. Most stores are operated under a commission contract and others directly, for the purpose of maintaining absolute control over products and service.
It has a real estate division. This division is charged with identifying ideal locations and defining the expansion strategy based on population densities. It currently has a very high density in the northern states with one store per 4,700 people; in the center of the country there is one for 14,000 inhabitants.
It doesn’t buy, it rents. The majority of its locations are rented. Instead of investing in real estate, Oxxo prefers to invest its money into opening a greater number of stores and begin to generate cash flow without making a bigger initial investment.
Logistics. With 16 distribution centers in Mexico it can work with suppliers who might have limited capacity for delivering products. This permits a broader selection of goods.
Additional services. Customers can make credit card payments, pay for various services and buy cellular airtime.
Development of prepared products. It offers prepared foods of brands such as Andatti and Delixia and snacks such as those of Bitz, and the launch of O’Sabor and Saldazo debit cards which are linked to Banamex accounts. Pharmaceutical products are another attraction.
According to figures released by Femsa, each Oxxo store on average serves 759 customers a day.