Amazon.com is preparing to open a 1 million square-foot warehouse near Mexico City, sources familiar with the project said, part of an effort to boost its presence in Mexico's nascent e-commerce industry.
The new warehouse is slated to be built in the Tepotzotlan municipality about 25 miles (40 km) north of the Mexican capital, according to four Mexico City real estate professionals familiar with the plans. Expected to be completed next year, the facility would triple Amazon's distribution space in Mexico, home to around 120 million potential customers.
Amazon's Mexico push comes amid talks to revamp the North American Free Trade Agreement, which could benefit the Seattle-based retailer if the United States persuades Mexico to raise a $50 limit on the value of online purchases that can be imported duty-free.
Amazon is a relative newcomer to Mexico; it opened its Kindle e-books site to Mexican customers in 2013 and expanded into sales of physical goods just two years ago. But it is growing much faster than rivals such as Wal-Mart Stores, and is already the nation's third-largest online retailer. Amazon posted $253 million in sales in Mexico last year, more than double the year before, according to market research firm Euromonitor International.
Sharing a nearly 2,000-mile long border with the United States, Mexico would seem a logical place for Amazon to expand. But duplicating the company's U.S.-style success could prove tougher.
Online shopping comprises nearly 3 percent of all retail sales in Mexico compared with over 10 percent in the United States. Some Mexican shoppers are wary of online fraud and many do not have credit cards.
Some analysts believe Amazon is willing to take the risk as it races to bulk up in foreign markets to compete with fast-moving global competitors such as China's Alibaba.
"Amazon is not afraid to plow into a new market in a very big way, take a big hit, but say, 10 years down the line, this is going to be big and profitable," said Neil Saunders, managing director at the GlobalData Retail research firm.
Amazon spokesman Julio Gil declined to comment on plans for a new warehouse in Mexico. He said the company's Mexican unit is aiming to expand its product offerings, offer faster deliveries and make the purchasing process as smooth and secure as possible to inspire consumer confidence.
"We're trying to eliminate any friction," Gil said.