Augmented Reality, Pay-Later Model Driving Growth in Mexico’s Online Fashion Retail

The use of augmented reality and the buy-now-pay-later model is driving e-commerce fashion sales growth, according to Gerzayn Gutiérrez of Tiendanube México

Fashion is driving growth in e-commerce in Mexico
August 22, 2022 | 05:23 PM

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The fashion segment brings in the second-highest turnover in Mexico for e-commerce unicorn Tiendanube, and for the Argentine startup, 20.8% of its sales come from this segment, while 21.6% of the online stores that use the platform to sell their merchandise also belong to the fashion segment.

And what is happening at Tiendanube is just one example of the growth of the fashion segment in e-commerce in general.

The segment has grown to the extent that it already has a special online sales season called Hot Fashion, organized by the Mexican Online Sales Association (AMVO), which took place last week.

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According to AMVO, six out of 10 online shoppers say they have purchased at least one fashion item in the last year, and of those, 76% say they buy items in the segment on a recurring basis.

In addition, overall, the fashion category is among the top e-commerce categories. Clothing and accessories ranked third in terms of most online transactions in Mexico with 32%, only surpassed by 41% of shoppers who made transactions related to digital services, and 39% who bought transportation online, according to data published by Statista.

But what is contributing to making fashion such a major part of e-commerce growth?

There are several trends that are encouraging consumers to buy more clothing and accessories online, in addition to the long-in-gestation omni-channel that is providing shoppers with a ‘phygital’ experience, hybrid of physical and online shopping.

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Augmented reality driving sales

The incorporation of augmented reality into online sales has helped the growth of the fashion segment, since thanks to this technology, customers can experience how the garment they want to buy would look without having to try it on physically.

Thus, customer enjoy an exclusive experience, and for which they are willing to spend more and buy with more certainty.

Gerzayn Gutierrez, head of brand and communication of Tiendanube Mexico, said at a press conference that augmented reality brings an dvantage for brands as it reduces the number of exchanges and returns, and also induces greater loyalty, and which possibly favors repurchase.

Gutierrez said that 71% of consumers say they would shop more frequently in stores that use augmented reality, while 40% would be willing to pay more for products displayed using this technology.

Buy-now-pay-later augments purchasing power

In addition, the buy-now-pay-later (BNPL) model is helping to increase consumers’ purchasing power.

“This financing option for buyers seeks to maximize conversion into sales, especially because this credit is not assumed by the seller as such, but by microcredit companies such as Aplazo and Kueski Pay, which are integrated with Tiendanube,” Gutiérrez says.

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BNPL has seen sharp growth in Mexico in recent years, as in other countries, especially among young people who find a liquidity option in this payment method. For stores, its implementation increases the average sale without the risk of chargebacks or fraud to which they are exposed with other digital payment methods.

Over 10% of Tiendanube transactions are made through BNPL, says Gutierrez.

‘Live commerce’, also known as ‘social commerce’ and involving social media in purchases, is also an emerging trend. During the pandemic, users wanted to continue buying fashion accessories, but were faced with the challenge of not being able to experience the physical item. Aa result, they began to post live shopping experiences on platforms such as Facebook, Instagram and Tiktok.

This trend has continued to grow, as it has turns the shopping experience into an entertaining event where different dynamics such as lightning promotions or guest influencers are increasingly incorporated.

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The advantages of live shopping include direct contact between consumers, the fact that they can see a product from different angles (and even see it worn by someone else, and the creation of a direct link between social networks and an online store.

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Dropshipping and sustainability

Dropshipping, which consists of the possibility of selling products from an external supplier without the need to have them in inventory, is also on the rise.

Only three months since its introduction by Tiendanube, 75% of users already use it, with the most-used segments being health and beauty and fashion, with 15.12% and 11.22% of total e-commerce sales respectively.

In addition, more and more companies are becoming interested in sustainable fashion, not only for ideological reasons, but also because they represent more profitable alternatives in terms of practicality and cost, while helping to avoid having a negative impact on the environment.

This responds to a consumer trend, as consumers are more aware of what they consume and now, in order to become loyal to a brand, they consider important to know the origin and the care that brands take in the manufacture of their products.