MEXICO - Telecoms & IT
Peter Ostroske has a seven-year long career in entrepreneurship and e-commerce. In 2014, he founded OFI in Colombia and opened its Mexico office in 2016. He holds a degree in social sciences from the University of Chicago.
People often paint e-commerce as an underdeveloped opportunity in Mexico; however, when we look at the growth of the numbers, it is a different story. The e-commerce industry in Mexico is growing closer to 40-50% YoY and customers are getting increasingly comfortable purchasing via e-commerce platforms. We are passing the moment where customer confidence is the number-one barrier. While a great deal of media that continues to talk about fraud and customer confidence of platforms are no longer valid, the challenge is more about user experience and finding out what customers truly need. The younger generation is growing up and starting to consume, and we see this not only in Mexico but all across Latin America. More than 10% of the GDP in the US is pushed through e-commerce platforms while in Mexico it is less than 2%; the prospects for growth are on the up.
B2B e-commerce is interesting because in the US, Europe, and Asia it is slightly more than 2.5 times the size of B2C commerce. If we were to take Amazon and all the smaller competitors around the B2C e-commerce opportunity and put them together, it might end up becoming approximately USD500 billion in global sales, while B2B commerce is closer to USD1.2-1.5 trillion in global sales. It makes a lot ofsense for businesses to buy online as they can have a broader product range and services available, they can make price comparisons, and analyze carefully the different benefits. Ultimately, in Latin America there is a big question around customer relationships that is universal, though particularly in Latin America. Companies will always need to maintain customer relationships in Latin America and B2B e-commerce will never be a 100% automated self-service experience; we seek to maintain some human contact for example a conversation with someone in a contact center or a chat representative. If it is a medium-sized customer, it may have a dedicated sales representative. When we think about e-commerce, we talk about it as a channel without the human elements; however, that will not see much success in Latin America, at least not within the B2B segment.
Our goal is to surpass USD100 million in revenue in 2020. The company was founded operationally in 2014 and 2020 will be our seventh year of operations. Colombia and Mexico are our focus and we will continue to penetrate both markets and gain more market share. In Latin America, IT Solutions is a USD120-billion market opportunity that is around 5% of the global market. For the rest of Latin America, we will continue to open more markets via the e-commerce platform and are currently selling cloud solutions to customers in Brazil and Argentina. As we reach a base of revenue that makes sense to open-up a local entity, then we will do so in both countries.
Because we started in Colombia, we had to adjust our model to find a great product-market fit; however, we found that it was actually easier to replicate in Mexico contrary to what many had said. People paint the picture of each Latin American country being different, which they are; however, OFI offers customers solutions in a more efficient way. We find new customers through digital marketing strategies, developing opportunities, closing them, and approaching new solutions via cross selling, which is more efficient than with a traditional reseller. For customers, it is a better experience with the same product or service, which is why we have been able to find success with our business model in Mexico with less friction than one might see from companies from Spain or other parts of Latin America that have trouble with the Mexican market.
There are a few different categories; one is definitely cybersecurity and we are developing a plan to enter that segment. Our goal is to become an IT security provider as well, although this requires an entirely different skillset. All other technologies are about being more efficient, competitive, and productive; however, IT security is like an insurance policy. If we were to pick one category that is growing faster than any other, it would be IT security or cloud. Beyond that I would say analytics and AI, which are both categories currently being adopted in Mexico. We also believe blockchain technologies have an important place in the Mexican market and will develop strategies around distributed ledger technologies as well.
Everybody is fighting to get to the top of the pyramid by going after corporate customers. We also have corporate accounts and are happy to work with them. Then, there are medium sized customers of 100-500 employees. Businesses below this threshold of employees, we consider a small business and that segment is unserved in terms of IT solutions—not underserved but unserved. They often buy consumer-level products at Best Buy or Office Depot rather than business solutions. Our strategy is to serve them and do it in the most efficient way possible through our e-commerce platform. If you go to OFI.com.mx there are over 100 different manufacturers on our platform that we represent, from HP, Dell, Lenovo, Microsoft, Salesforce, Amazon Web Services, to Google, and our goal is to understand where these businesses are today. If they are just getting started and need a domain name or email then we will help them get established and take them to the next level.
The cost of logistics is high. Customers want more solutions tomorrow, even if they have to pick it up as they do not want to wait for two or three days. We have connected with a group of different distributors all throughout Mexico; in aggregate we are connected with over 100 different warehouses that hold inventory and that can delivery to business customers in Mexcio. We inform customers if there is inventory closer to them or further away from them and constantly seek to optimize the time to delivery and the costs of that delivery for each one of our customers depending on where they are located. Logistics is complicated and requires a great deal of effort.
We want to hit our numbers. We recently received the certification for Great Place to Work, which was one of our goals and a major milestone for us. Given that we are a service providerone of our most important tasks is to develop our human talent, and this certificationis representative of what we do internally. We have different goals around performance, though it is important that we continue to penetrate the market.
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