Christmas shopping fever only an illusion in Mexico

Tue Dec 22, 2009 3:12pm EST
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By Jean Luis Arce

MEXICO CITY (Reuters) - Mexican stores are packed with shoppers this Christmas, but slashed prices and big promotions mean cash registers are ringing up meager sales, underscoring a fragile recovery from a punishing recession.

From Wal-Mart de Mexico, the country's biggest retailer, to informal street vendors, retailers are cutting prices to lure customers -- some hoping to increase market share and others just struggling to stay in business.

"The stores may be clogged but what are people buying? They are going for the goods marked with a super-discount or super-promotion," said Raquel Moscoso, an analyst of consumer consumption at Ixe Financial Group.

"Everybody is literally slicing the pie ever thinner and in many cases they are sacrificing margin for volume," she said.

Customers like Teresa Saldivar illustrate the retail climate. "Just a few days before Christmas, everything I've come across is discounted. It's great. Now is a good time to buy," said Saldivar, 76, shopping at an upscale department store despite living on a small pension.

Since the global credit crisis threw Mexico's economy into a downturn last year, retailers like Wal-Mart de Mexico, Soriana and Comercial Mexicana have held off on price increases to keep traffic moving through their stores.

"We're offering three-day sales to move items that we would have sold quickly without promotions in past years," said Gustavo San Vicente, a salesman at a luxury department store in Mexico City.

Mexico's economy is expected to have shrunk 7 percent this year after slumping U.S. demand for its manufactured exports threw it into a deep recession. In recent months, the economy has begun to recover thanks to increasing industrial output, but consumer spending remains extremely weak.   Continued...

<p>A store offers 40 to 50 percent discount on its products in Mexico City February 22, 2009. REUTERS/Henry Romero</p>