Christmas rings the inflation doorbell
AN ANALYSIS OF MEXICAN CONSUMER HABITS
We asked 100 Mexicans about their consumer habits during the winter holiday period in Mexico. What appears to be one of the jolliest and happiest seasons of the year to celebrate family and friends with Christmas and New Year’s, it is also when people spend the most.
Mexpando’s survey revealed that 57,7% of respondents have more expenses in December than any other month of the year, 66% of the participants anticipate and plan their expenses for Christmas and New Year’s, while the rest (34%) don’t.
Although December is the month when Mexicans spend more money, November in Mexico offers two special weekends for pre-holiday shopping. First, the Buen Fin, which means “good weekend” is a four-day event full of discounts and promotions to encourage market activity, the 12th edition was celebrated the weekend of the 18th -21st of November. It is indeed a version of the American Black Friday, another event that comes right after the Buen Fin, exactly the following Friday (Friday 25th this year).
During the 12th edition of the Buen Fin, 65,5% of the respondents did not pursue a purchase from the discounts and promotions of this event, while the resting 34,5% affirmed to buy something. The most purchased articles during the event were clothes (39,4%), electronics and beauty products (26,8%), footwear (22,5%), and cell phones & accessories (15,5%).
Compared to the Buen Fin purchases, only 28,9% of the participants bought something during the 2022 Black Friday. In the same way, the categories of clothes and electronics were the most popular with 26,7%, followed by beauty products and cell phones & accessories with 13,3%.
Regarding the amount of money spent, 33% spent between 1,001-5,000 Mexican pesos, 18% between 5,001-10,000 MXN, 16% between 100-1,000 MXN, 9% between 15,001-20,000 MXN,4% between 10,001-15,000, 4% more than 20,000 MXN and 16% did not buy.
Similar to this, during Black Friday 33% of participants spent between 1,001-5,000 MXN, 26% between 5,001-10,000 MXN, 15% between 100-1,000 MXN, 13% did not buy anything and 10% spent between 15,001-20,000 MXN.
For both events, the percentage of people who bought online was 58,6% versus 36,2% that bought directly in the store. The collected information demonstrated that the age category of 25-30 years has more tendency to buy online. The method of payment by credit card was notably high, having results of 50,7%, compared to the 22,4% who bought by debit card or 19,4% by cash, the rest used PayPal and store cards.
Omnichannel consumption
With the 2019 pandemic, experts analyzed the buying and selling situation and were able to anticipate changes in consumer habits. Resulting in a series of variants at the time of purchase decision. The bet is on E-Commerce sales since the digitalization of businesses is growing rapidly, yet physical stores have not been forgotten and gradually recovered after the pandemic restrictions (Deloitte Digital, 2020).
It is also observed in the study of Deloitte (2020) that the omnichannel is the “new normal” along with the step back of globalization, prioritizing local consumption. Being the new normal led to a more conscious way of shopping, the digital channels allow the consumer to compare prices and create a habit of research, thus according to the IAB Mexico research, a consumer that feels informed and in control has more probability of concreting the purchase (IAB MEXICO, 2022).
IAB Mexico established that the research and price comparison habits are not exclusive to purchases on digital channels. The consumer can previously research online to then acquire the product in a physical store. Both ways, the after-pandemic consumer prioritizes experience; they search for availability, variety, and quality of service in local stores, while in digital business they are worried about data security, sufficient information on the product, ease of purchase and that the product arrives in good conditions (IAB MEXICO, 2022).
The culture of non-saving
Inflation in food and beverages will affect this year’s celebrations. According to Herrera (2022), Christmas or New Year’s Eve dinners will turn out to be even more expensive this year, some products like meat increased by more than 20%, resulting in a 30% rise in these holiday’s expenses compared to 2021.
In Latin America, it is expected that this year’s average inflation will close at 11.2%. Many countries in LATAM reached 12,5% or 13,75% already, figures not seen in more than 20 years (Cota, Galarraga, Lwein, Centenera, & Monter, 2022). However, the real issue for these Latin American countries is the financial habits that occur during this season.
The region is well known to have a particular attachment to the December holidays and neglect its financial health for the occasion. Despite being one of the most expensive Christmas since the 90’s, consumption in Mexico remains strong due to the efforts of several stores to maintain low prices during this season (Cota, Galarraga, Lwein, Centenera, & Monter, 2022).
Cota, Galarraga, Lwein, Centenera, & Monter (2022) stated that a survey made by the Deloitte company indicated that 48% of Mexican citizens are feeling financial stress related to their holiday shopping duty. Erick Calvillo, a Deloitte analyst affirmed that the average Mexican spends more than they can afford and, even look for ways to buy in installments, making this holiday a long-term debt.
The phenomenon of buying on credit and in installments with no financial education during Christmas shopping continues to hunt the Mexican consumer habits. A UNAM study made by Francisco Javier Fonseca showed that on average, a Mexican household can spend 40,482 Mexican pesos for celebrations, while the average income is 221,980 pesos a year, which means about one-fifth of their earnings (DGCS-UNAM, 2022).
As a result of the case study made by Fonseca (2022), he realized that the occasion when Mexicans spend the most is: Christmas in December, followed by Independence Day in September. Fonseca added that these celebrations are part of the Mexican culture, and they can’t be eliminated, however, it seems that these traditions can lead to a great economic unbalance and damage the future of a household.
Based on the BBVA research blog (2019), the Mexican National Baking Commission reported that Mexico has 58.2 out of 100 points in financial literacy, below the average rating of G20 countries. According to the report, the younger generation is not prioritizing saving money for the future compared to the older people (BBVA Research, 2019).
The reason why people get a credit card without previous meditation is an example of the culture of non-saving. A frequent financial habit that occurs among Mexicans is to believe that a credit card can be interpreted as an extra income, the average debt of someone who misuses their credit card is 140,000 MXN (El Financiero, 2018).
Nonetheless, in September 2022, the use of credit cards increased 22,9%, the areas where the use of credit cards has grown the most is convenience stores, restaurants, gas stations and department stores. The use of immediate credit for this type of expenses reflects the need to cope with rising prices due to inflation; it is not only about the consumption habits and financial education of the country, but also about the economic uncertainty Mexicans will need to embrace this time of the year (Rodríguez, 2022).
Along with the important cultural context of this season to understand the economic situation, we can also conclude that many Mexicans were not anticipating buying during the Buen Fin or Black Friday promotions for their holiday shopping. The question that remains is, did Mexicans compensate the burden of inflation with their credit cards? It will be important to analyze these patterns of consumer behavior at the end of the year.
Cota, I., Galarraga, N., Lwein, J. E., Centenera, M., & Monter, R. (2022, December 10). El regalo de Navidad más caro para América Latina: inflación más altas tasas de interés. Retrieved from El País: https://elpais.com/economia/2022-12-11/el-regalo-de-navidad-mas-caro-para-america-latina-inflacion-mas-altas-tasas-de-interes.html
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Herrera, J. (2022, December 8). Fiestas decembrinas, más caras por alta inflación. Retrieved from El Economista: https://www.eleconomista.com.mx/finanzaspersonales/Fiestas-decembrinas-mas-caras-por-alta-inflacion-20221208-0078.html
IAB MEXICO. ( 2022, February 9). El Consumidor Mexicano: Un nuevo journey omnicanal. Retrieved from https://cdn.iabmexico.com.mx/iab-assets/estudios/Retail+-+V.+Publica+vf.pdf?_branch_match_id=929003943512983251&utm_source=website_estudios&utm_campaign=descargas%20pdf&utm_medium=Estudios&_branch_referrer=H4sIAAAAAAAAA8soKSkottLXz8nMy9bLTEzKTa3ITM7XS87P1
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