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THE IMPACT OF THE MEXICAN THE IMPACT OF THE MEXICAN

ECOMMERCE TIDAL WAVE ON SUPPLY ECOMMERCE TIDAL WAVE ON SUPPLY

CHAINSCHAINSJames A. Tompkins, Ph.D.James A. Tompkins, Ph.D.

CEO, Tompkins International CEO, Tompkins International

March 18, 2015March 18, 2015

Mexico City, MexicoMexico City, Mexico

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Disclaimer

All of the information in this presentation is the result of Tompkins International’s research of public information.

There is no information being presented today that comes from any proprietary source.

Tompkins International does not discuss information about their clients unless that information has been published.

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Why Should a Keynote about Latin America or

Mexico Supply Chains Mention eCommerce?

1. Mexico’s retail market is only second to Brazil in Latin America.

2. Despite the global economic slowdown, Mexico’s retail industry is steadily growing thanks to higher job creation and increased levels of access to credit.

3. International retailer presence in Mexico has increased several fold in recent years.

4. Mexicans are notable for several consumption records. They rank number one in Latin America for their propensity to purchase luxury goods and are fourth in the world.

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Why Should a Keynote about Latin America or

Mexico Supply Chains Mention eCommerce?

5. Mexico’s eCommerce market is full of potential and growing. With a market of eCommerce 8.4 million strong and online shopping sales reaching USD 5.75 billion, Mexico is now the second largest eCommerce market in Latin America after Brazil, accounting for 14.3% of total South American online sales.

6. In 2015, 65.1 million Mexicans will go online, making it the 8th largest internet user population in the world.

7. Mexican shoppers are the most engaged in mobile commerce of all Latin American countries with 17% of internet users shopping on mobile devices.

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Why Should a Keynote about Latin America or

Mexico Supply Chains Mention eCommerce?

8. Mexico is also a prime location for cross border eCommerce with 50% of Mexican eCommerce shopping on foreign trade websites, primarily the US.

9. It seems like all eyes are on the Latin American market right now and one country starting to get some attention as an eCommerce destination is Mexico.

10. Brazil’s economy has been stealing headlines in recent years due to its rapid expansion, but Mexico is poised to steal some of its thunder.

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Why Should a Keynote about Latin America or

Mexico Supply Chains Mention eCommerce?

11. 71% of Internet Users in Mexico made a digital purchase in 2014.

12. eCommerce sales in Mexico have grown from 4 billion (USD) in 2011 to over 10 billon (USD) in 2014. Between 2009 and 2013 eCommerce in Mexico grew 400%. Future growth to be in the 20-35% per year range.

13. eCommerce sales in Argentina, Brazil and Mexico are forecasted to grow 135% from 2013 to 2018.

14. B2B and G2B are growing faster in Mexico, than B2C.

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LATAM Snapshot

Brazil Mexico Columbia Argentina Peru Chile

Population 1 2 3 4 5 6

GDP 1 2 4 3 5 6

GDP/Capita 4 3 5 2 6 1

GDP Growth 5 6 2 4 1 3

Logistics

Performance

Index

1 2 6 4 5 3

eCommerce Strong Slow

Penetration

Rapid

Growth

Accelerated

Growth

Limited

Penetration

Growing

Fast

eCommerce Challenges

• Credit Cards• Delivery• Culture

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Top 5 Global eCommerce

Marketplaces

1. Amazon

2. eBay

3. MercadoLibre

4. Rakuten

5. Alibaba

In LATAM

IN LATAM

Based in LATAM

In LATAM

In LATAM

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Significant eCommerce Players in

Mexico� Alibaba

� Amazon

� Best Buy

� Coach

� Costco

� Dafiti

� eBay

� Elektra

� Etsy

� Home Depot

� Inditex

� J.C. Penney

� Linco

� L’Oreal

� Lowe’s

� MercadoLibre

� Neiman Marcus

� Overstock.com

� Perfume.com

� Privalia

� Rakuten

� Sears

� Segunda Mano

� Shoebuy.com

� The Container Store

� Walmart

� Williams Sonoma

� W.W. Grainger

� Zara

� Zulily

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So What?

� The biggest topic hitting Mexico in the next 3 years is eCommerce.

� The hottest topic in Mexico and Latin America over the next 3 years is eCommerce.

� But what about the eCommerce challenges in Mexico?

– Delivery

– Credit Cards

– Culture

� Do you know the greatest challenges Alibaba faced in China in

2004?

– Delivery

– Credit Cards

– Culture

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The Perfect Storm Created the Alibaba

Tidal Wave

� Technology

� Globalization

� Supply Chain

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Alibaba: What’s the Big Deal?

1. Alibaba has 84% of the online business in the largest eCommerce market in the world.

2. In 2020 China eCommerce will be larger than that in the U.S., UK, Japan, Germany, and France combined.

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Alibaba: What’s the Big Deal?

3. In 2015 Alibaba will be the largest retail platform in the world. Yes, larger than Walmart.

4. Alibaba is the fastest growing eCommerce company in the fastest growing market in the world:

• Grown 120%/year since 2003

• Grown more than 70%/year between 2009-2013

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Alibaba: What’s the Big Deal?

5. Alibaba handled $9.3B on “Singles Day” (11/11/2014) in 24 hours.

6. Alibaba is profitable.

7. The September 2014 IPO was the largest IPO ever.

8. Alibaba’s goal is cross-border trade.

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If You Do Not Understand Alibaba…

Watch The Alibaba Effect video:

www.tompkinsinc.com/videos/alibaba-effect/

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How Can You Ride the Alibaba Tidal

Wave?

Source: http://adventureblog.nationalgeographic.com/2013/07/03/the-worlds-8-most-dangerous-waves-plus-surf-

spots-for-the-rest-of-us/

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Three Key Facts About Riding the

Alibaba Tidal Wave

1. Big marketplaces get bigger because people/merchants go there.

2. Big marketplaces sell more advertising and/or have more traffic.

3. Big marketplaces can grow quicker and are more profitable because they are easier to deploy and require less capital.

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Understanding Successful Retail

Business Models

1. Alibaba

2. Walmart

3. Amazon

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The Supply Chain of Businesses are

Morphing

1. B2C B2B

2. Retailer Consumer Products

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How Can You Ride the Mexican Tidal

Wave of eCommerce?

1. Business Strategy:

2. Operations Strategy:

3. Operations Structure:

4. Operations Excellence:

Omnichannel Channel Management

Omnichannel Retail, Logistics and Capabilities

Omnichannel Supply Chain

Omnichannel Performance

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Omnichannel Channel Management

1. What to sell?

2. Who to sell to?

3. Where to sell?

4. How to sell?

5. What services to offer?

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Omnichannel Retail, Logistics and

Capabilities

1. Omnichannel Retail

2. Omnichannel Logistics

3. Operations Capabilities

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Omnichannel Supply Chain

1. Network Design

2. Facilities Design

3. Transportation Design

4. Technology Design

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Omnichannel Performance

1. Speed of Implementation

2. Robust Change Management

3. Adaptive/Responsive

4. Customer-Centric

5. Profitable Growth

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Conclusions

1. The Alibaba tidal wave is a big deal.

2. The Mexican tidal wave is a big deal.

3. Omnichannel is also a big deal• Omnichannel Channel Management

• Omnichannel Retail, Logistics and Capabilities

• Omnichannel Supply Chain• Omnichannel Performance

4. Hang on to your hats!

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Contact Information

Jim Tompkins

jtompkins@tompkinsinc.com

Executive Assistant:

Debbie Flynn: dflynn@tompkinsinc.com or 919.855.5447

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www.tompkinsinc.com