Amazon is focusing on central Mexico by building a large new warehouse

Author: Daina Beth Solomon

MEXICO CITY (Reuters) – Amazon.com Inc is seeking land in central Mexico for the country’s fourth distribution center, sources said, aiming to capture a larger share of the growing e-commerce market in Latin America’s second-largest economy.

The retail giant’s target is the state of Queretaro in Mexico’s industrial heartland, where it is looking for a developer to build a large center, said two real estate professionals familiar with Amazon’s real estate search. They asked to remain anonymous because Amazon has not announced its plans.

The expansion plan underscores Amazon’s intention to put down roots beyond Mexico’s bustling capital, building on the country’s potential to become an e-commerce powerhouse in Latin America.

Online shopping in Mexico accounted for just 3.0 percent of total sales last year, but that number is expected to more than double by 2022, reaching $14 billion, according to research firm Euromonitor International.

“Mexico’s digital economy has enormous potential. We expect it to continue to grow in the future,” Brian Huseman, Amazon’s vice president of public policy, said at a recent event in Mexico promoting efforts to attract more Mexican companies to its platform.

“Amazon is here for the long haul,” he said.

The company was considering several properties in Queretaro and was looking for 50 acres where it could build a warehouse of more than 1 million square feet, about the size of 17 football fields, plus office space, one of the sources said.

Amazon declined to comment.

Queretaro, 183 km north of Mexico City, is within a day’s journey of Monterrey and Guadalajara, Mexico’s two most populous regions. It is also among the middle-class cities in Bajio, a region dense with automotive and aerospace plants.

Most of the state’s industrial parks are located along the so-called the “NAFTA highway,” a key artery for Mexican companies receiving goods from the United States and Canada under the North American Free Trade Agreement. An updated pact was agreed last month to preserve cross-border trade once it becomes law.

The parks are also within a few miles of the Queretaro Intercontinental Airport, which handles cargo.

Amazon’s expansion into Queretaro would be part of the company’s push to attract customers with fast deliveries while reducing shipping costs.

“It’s about speed to market and keeping costs low,” said Marc Wulfraat, president of consulting firm MWPVL International Inc.

Amazon, which began selling physical goods in Mexico in 2015, already operates three warehouses on the outskirts of Mexico with approximately 1.5 million square feet of space. According to MWPVL, this space represents just 1.0 percent of the company’s massive U.S. logistics space.

Still, it has scaled up faster in Mexico than in Brazil, which has 665,400 square feet, according to MWPVL.

For Pedro Villa, whose Mexican company Konekte sells home storage equipment, fast deliveries boost sales by deterring first-time buyers who fear online fraud and worry that packages may not arrive.

“It’s about confidence,” Villa said. “If you pay and it takes a week or 15 days, you’re going to want your money back.”

(Reporting by Daina Beth Solomon; Editing by Clive McKeef)