Monday, 26 October 2020

Auto Mercado Rethinks Its Expansion Strategy In Light of the Country’s Slow Economic Growth

The planners at Auto Mercado drew up an expansion map for operations in Costa Rica that included the opening of at least six stores per year, from 2016 to 2024. However, what is planned does not always occur.

The first Auto Mercado began operating in 1960, in Los Yoses. Photograph by John Durán.

“Sales have been low in everything that is retail since 2016. We wanted to slow down investment a little and be prudent, we are waiting for the moment to move forward,” explained Guillermo Alonso, president of the board of directors of Auto Mercado.

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In April 2015 – the year in which they announced the expansion plan – commercial activity in the country grew at a rate of 3.28% (year-on-year variation), while, last April, it did so at 2.05%; according to the Monthly Index of Economic Activity (IMAE).

That is to say, we are not in crisis, but there is a deceleration as consumer confidence deteriorates as a result of expected increases in fuel prices and in the dollar exchange rate.

The economic slowdown and having to reduce the speed of its expansion does not frustrate the managers of Auto Mercado. In the end, they are changes of plans caused by external factors; neither should it be a strange matter for a company with 58 years in the market, having overcome economic crises, delays due to bureaucracy and the arrival of strong international competitors, such as Walmart.

What the change means, for now, Auto Mercado will open at least two stores each year (each with an average investment of US$4 million dollars) and four or five Vindi format convenience stores (each costing US$200.000 dollars).

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The cutback also means fewer jobs created. Each Auto Mercado employes 100 people, Vinid stores 16.

The Auto Mercado is 100% family owned by the Alonso family, that is now in its seeing its fourth generation of Alonso’s at the helm.

Guillermo Alonso stresses that to work in the corporation, it is not enough to carry the surname Alonso, they must have work experience in other companies and professional training at the master’s level, as well as in some cases, have proven performance in managerial positions.

Source (in Spanish): El Financiero

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