Market Trends of Mexico 3PL Industry
The United States-Mexico-Canada Agreement (USMCA) Increasing the Bilateral Trade is Driving the Market
The US-Canada-Mexico Agreement provides a solid foundation for strengthening North American production, but reshoring to Mexico will not occur without careful policy implementation. Under the first pillar, Building Back Together, the United States and Mexico committed to strengthening critical semiconductor and information and communication technology supply chains centered in China and Taiwan, as well as promoting bilateral trade, in part by establishing the Supply Chain Working Group. Promoting investment in semiconductors in North America appears to be a logical response to Asia's overreliance. It is more difficult to transition from theory to practice.
Under the USMCA, trade recovered from pre-COVID levels, with an average 6% increase across the region from 2019 to 2021. To put this in context, a record 75% of Canadian and Mexican imports came from the US in 2021, making both countries the US's largest export markets. Both are also the US's most important trading partners, accounting for more than twice as much US trade as China. In terms of controversies, the USMCA is off to a fast start, resolving far more trade-related disputes in two years than its predecessor, the North American Free Trade Agreement. This is evident in the labor sector, where the USMCA's new Rapid Response Mechanism (RRM) has yielded promising early results in favor of collective bargaining rights in Mexico.
The Agreement requires the 3PL service providers to collaborate and increase their connectivity within the country, as well as in North America, for ease of trade. In response to this, DB Schenker and AirBridge Cargo teamed up to improve digital connectivity for air cargo in 2020. Ryder, the leading provider of 3PL solutions in Mexico, announced an expansion of four centers that may function as the operating premises located in key points of the national territory of Mexico, as part of its growth plans and in response to the demand for logistics services from different sectors.
E-commerce and Logistics' Technology Growth in Mexico is Driving the Market
During the pandemic, e-commerce activity increased significantly, particularly in Mexico, where this channel was underutilized. Several stages in the supply chains that served online shopping in Mexico were severely underdeveloped. Such a lag needed to be addressed on multiple fronts, but having modern and robust technological resources was undoubtedly critical to capitalizing on opportunities brought about by increased demand. Technology enhances service quality, expands capacity, and allows for a better understanding of market dynamics.
In Mexico, e-commerce will continue to penetrate and expand. The omnichannel will become more relevant, marketplaces will expand, more small and medium-sized businesses will enter the ecosystem, fintech tools will become increasingly important, and cross-border activity will increase as a result. Technology will continue to play an important role in bringing such things to fruition. Over the last five years, the Mexican retail e-commerce market has grown by 300%, propelling it to 16th place globally, ahead of its neighbor Brazil.
Mexican shoppers' desire for international brands and products is fueling a healthy cross-border market in addition to fueling domestic digital retailing. More than two-thirds (67%) of Mexican online consumers now shop cross-border, and foreign merchants account for 6% of total online sales. As in other countries, the pandemic boosted the e-commerce market in Mexico, creating a million new Mexican online shoppers and increasing user penetration to 74%. In terms of 4PL and 3PL logistics, technology is critical to meeting clients' needs; in fact, it is the backbone of such operations. Many customers from various industries have increased their logistics requirements, while others have arrived in Mexico as a result of the nearshoring trend.
Clients are more seasoned and informed; they expect complete transparency and more complex and advanced solutions. Logistics digitalization is now a reality in Mexico. Logistics, transportation, and mobility are vital to the global economy. It is difficult to comprehend how complicated it is for supply chains to function properly. There are numerous moving parts and several processes that necessitate surgical precision. To summarize, technology is the backbone of modern logistics, and asset-light businesses will unlock greater amounts of value due to extremely low investment requirements.
