For fast-growing US brands, the prospect of entering the Mexican market presents not just an opportunity, but a strategic move in an increasingly interconnected ecommerce landscape. With its growing digital infrastructure and ecommerce boom, Mexico offers fertile ground for brands looking to capitalize on international expansion. The ecommerce market in Mexico is not just burgeoning; it's a hive of activity with an estimated value $25.7 billion as of 2023, and with projections to swell at a compound annual growth rate (CAGR) of around 7.2% through 2027, the market volume is expected to reach an impressive $34 billion. However, the journey into such a vibrant and expanding market is not without its complexities, especially when it comes to managing transactions and compliance across borders. This is where a Merchant of Record can be a pivotal partner.
A Merchant of Record (MoR) is a legal entity recognized as the seller of goods to the end customer. This entity takes on the responsibility of handling payment processing, sales tax collection, remittance, and ensuring compliance with various financial regulations.
For businesses, being their own MoR means setting up and maintaining a complex infrastructure that manages payments, tax compliance, and customer financial disputes. This can be a resource-intensive endeavor, often requiring a dedicated finance or legal team to navigate the intricacies of international markets.
A MoR acts as the legal entity responsible for processing consumer transactions in the foreign market. This includes responsibility for:
When customers make a purchase on your brand's new Mexican website, they are technically buying from the MoR. This subtle yet significant distinction means that while the consumer experience is branded and seamless, reflecting your company's standards, the MoR is handling the complexities of the transaction behind the scenes.
The MoR then purchases the product from you, the original business. This results in two separate transactions:
The MoR's name appears on the customer's credit card statement, and it is the entity that customers will engage with for any disputes. This shifts the liability for financial transactions from your business to the MoR.
Once the sale is completed, and the MoR has collected and reconciled the payments, the process of returning your revenue is straightforward and transparent.
Engaging a MoR provider presents brands with a strategic path for international growth, significantly mitigating financial risks. This partnership enables brands to preserve and enhance buyer relationships by offering a shopping experience that feels local and familiar. Furthermore, brands maintain comprehensive control over the customer experience, encompassing product sourcing, marketing strategies, and audience engagement. This is achieved while the MoR operates as the official seller, offering brands a balance between operational convenience and maintaining direct customer interaction.
Brands aiming to expand and scale in international markets, especially in a vibrant area like Mexico, can greatly benefit from collaborating with a MoR provider. This approach is particularly advantageous when entering markets with different legal and regulatory frameworks. Handling these complexities internally can drain resources and, if managed improperly, can result in legal issues.
Key indicators that a brand might be ready for an MoR solution include:
Recognizing these signs is crucial for brands considering expansion, as partnering with an MoR offers a strategic pathway to enter and thrive in promising markets like Mexico.
In the context of Cubbo, offering both logistics and MoR services, the synergy creates a seamless experience for US brands entering the Mexican market. Cubbo takes care of the details, from the moment goods are stored in the warehouse until the sale is finalized, ensuring that businesses can scale without being bogged down by operational complexities. Our services include:
The MoR model is a game-changer for companies looking to expand beyond their local markets without the hassle of setting up a local presence. It's an especially critical service for ecommerce platforms that must navigate the ever-changing landscape of international sales and tax laws.
Partnering with a company like Cubbo can thus provide a comprehensive solution that not only manages your inventory and fulfillment needs but also navigates the financial and regulatory landscape, giving your brand the freedom to grow and reach new markets with confidence.
Ready to explore the Mexican market? Contact me today (brian@cubbo.com) today and take the first step towards global expansion with a trusted, experienced partner at your side.