Mexico: Waldo's takes advantage of knowing its consumers

Discount Variety Retail Chain Waldo Dollar Mart found a niche with the sale of opportunity products, and knowing its customers well has led it to develop a market for electric mobility products.

Waldo's Dollar Mart saw an opportunity with a business model that would become popular in Mexico. The discount store chain opened its first unit in Mexico in Tijuana, in February 1999, under a concept that was familiar among shoppers who crossed the border to buy products in dollar stores, which sold a variety of goods at a single price, established by the exchange rate.

So Mexico was different. There was a climate of economic recovery, with a good pace of growth and low inflation after five years earlier there was 'the December mistake', the crisis that was generated by the lack of international reserves, which led the peso to lose more than 60% of its value in record time.

The retailer, which then operated with U.S. capital, as a franchise of Waldo's Holdings, maintained its premise of selling its products below the value of one dollar, which in the year of its opening was around 10 pesos, until in 2014 it passed into the hands of the Mexican Grupo Vizion and that was when it reversed its business strategy. the most significant moment for its current development, says Ernesto Llano Sánchez, commercial vice president of the company.

The most significant adjustment in the reengineering of the chain is that shareholders began to participate more actively in the operation of the company, with the benefit given to them by the experience in retail with the clothing stores under the Eleczion brand, which then had a national presence. "Since 2014 we have been working in a more integrated way and we no longer only manage these brands, but we also incorporate the clothing chain into Waldo's stores. This has triggered new formats with which we are in the 32 states of the country. We believe a lot in Mexico, we are going to continue growing in the country," says Llano Sánchez.

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40% of its portfolio was of continuity items, that is, those that are always on its sales floor, while the remaining 60% are of opportunity purchases, which requires careful management of the supply to maintain the price differential, which now ranges from 9.99 to 99.99 pesos. which rise in goods of differentiated value, such as suitcases or household appliances.

As part of the efforts to find functional products at affordable prices, in the midst of a global context of persistent inflation, something that has become the company's biggest challenge, the search for goods for suppliers begins in the local market, which is complemented by imports from 16 countries, including China. In addition, it replaces those goods that become more expensive to maintain their supply. "We seek to surprise the customer, the idea is that they arrive at the store and discover. We look for products that make sense to customers, and they make viral products, and if there is an opportunity, we look for them to move on to the permanent product line. We are focused on the price point," says the executive.

From dollar products to electric cars

Waldo's has its main focus on its general merchandise stores, which are the basis of the geographic growth of the business, but with the knowledge of the buyers, the company has diversified the formats to have small stores, such as Waldo's Express, Waldo's Motos for mobility stores, Waldo's Moda and its online store.

This diversification of formats allows the company to target its product offer more precisely, while the mobility division is gaining popularity in the market with the viralization on social networks of its bicycles, motorcycles and electric cars, all of the Chinese brand Kiwo. In November last year, in fact, the executive shared that this new commitment represented 50% of the chain's growth in comparable stores, consolidating itself as a pillar in the chain's performance.

The mobility vertical, in addition to cars, motorcycles and electric bicycles, will have in the short term an assortment of spare parts and maintenance equipment, which are currently only available in its online store in response to the success of Kiwo's merchandise offer. The price of the products of this division is one of the characteristics that have led it to gain popularity. The price of the electric car, for example, starts at 90,000 pesos, while the starting price of motorcycles is less than 6,000 pesos.

"We learned a lot about what our customer is looking for in the various regions of the country and that is how we are limiting the offer," explains Llano Sánchez, while revealing that the best-selling product is its electric bicycle model. "This 2025 is still a year of learning in this division, we want to master the format and determine where the concept is most successful and that will allow us to determine where we have to analyze the growth of Waldo's Motos," he says.

Quickening the pace to gain market share

Waldo's has managed to mutate at the pace marked by the transformation of the habits of Mexican consumers, without ceasing to operate in the hard discount segment, which in times like these, with high levels of inflation and a timidity in consumption when it comes to opening the portfolio, take notoriety and this results in the race to win the market being increasingly close.

Discount stores represent an opportunity to win over Mexican consumers who are looking for a variety of products at affordable prices and this has led to the various brands that compete in the segment gaining popularity. From the units of Tiendas 3B Stores to the small-format units of large self-service stores, such as Walmart, Chedraui and Soriana, they compete for this segment of the market.

Waldo's, which until mid-May had 895 stores (740 Waldo's stores, 120 fashion stores and 35 mobility stores), expects to reach 900 units by the beginning of the second half of the year, according to the plans that Llano Sánchez shares, without revealing the estimated amount of investment for this expansion. "Our project is to open 130 stores and with this strategy, we are going to reach the milestone of the 1,000th store in 2026," he says.

"We are already in 286 municipalities and we will continue to have a presence in more throughout the country. We are increasingly looking to be more versatile, that is, we are not closing ourselves to a format just in store. We seek to be sensitive to the different value propositions that exist in the market," he adds.

In the hard discount segment, the chain that has accelerated growth is Tiendas 3B, which outnumbers the rest of the competition, and which this year plans to open between 500 and 550 units, of which it has already cut the bar of 117 during the first quarter of the year.

Until March of this year, it was at the forefront with a greater number of stores, above Walmart, which operates in the segment with the Bodega Aurrera Express format. "The market is competitive and Waldo's will have to make a difference with its growth strategy or develop in the regions where it could have the greatest opportunity," says stock market analyst Marisol Huerta.

The chains in the segment had a growth of 51.2% in points of sale in the country, going from 2,180 branches in 2019 to 3,297 by August 2023, according to an analysis by Deloitte. For the consultancy, the margin for growth in this niche is wide, considering that they represent only 2.3% of the value of total retail sales in Mexico, while in Colombia the percentage is 17% and in countries such as Norway, Denmark, Belgium or Germany, they represent up to 40% of the consolidated sector.

"It is evident that the Mexican market is just beginning to adopt this type of format, and that consumers are also beginning to consider them as one of their options for making purchases. In other words, there is still ample ground on which to expand," says Manuel Ostos, leading partner in the consumer industry at Deloitte Spanish Latin America, in the analysis, published in October last year.

Waldo's is confident of its opportunity to grow. Its like-for-like sales growth target for this year is around 5%. E-commerce, meanwhile, is growing at triple digits, and already has a share in consolidated sales of between 3.5 and 4%. And the number of visits is 150 million a year in e-commerce, when in physical stores the number is 100 million.

"Discount stores will continue to be the engine of retail in Mexico, given the structure of demand and the strength of the consumer, and in the case of Waldo's, their price power and their ability to achieve extremely low prices should definitely remain as their strong point in the future," says independent analyst Carlos Hermosillo.

Read more: From dollar prices to electric motorcycles: this is how Waldo's evolved in Mexico

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