20 May COVID-19 and the failure of SMEs in Mexico
Only 25% of Small and Medium Enterprises (SMEs) manage to survive the first two years of creation in Mexico, according to information from Centro de Desarrollo para la Competitividad Empresarial. However, since 2017, around 52% of the Gross Domestic Product (GDP) is generated by that 25% of the SMEs that survived the first years, these represent 94.9% of the total of local companies in the country. (Schorr, 2021)
By 2019, at least two out of every ten companies made it through five years of life. Typically, 80% fail before they are five years old and 90% do not reach a decade, for financial, commercial and administrative reasons. In addition, we must add to the equation, the impact of the economic crisis due to COVID-19.
INEGI explains that one of the main causes of the short life of SMEs is due to administrative failures; an example of this is that at least 18% of companies must initiate legal proceedings against debtors.
In addition to the mismanagement, assures (Schorr, 2021) we must add the technological backwardness. In this order of ideas, we can emphasize that in Mexico 38% of SMEs with a web presence said that, as of July of last year, at least 50% of their sales were through the network, according to data from the Facebook network.
Before the health crisis, only 36% of Mexicans had access to a bank account and 63% depended on cash. However, once the pandemic started, according to data from the BMV, the banking sector had an increase in the use of people around 250%, according to IDC.
On the other hand, Visa Mexico reports that 66% of consumers indicated that since the pandemic they use less cash. Electronic commerce in Mexico has closed 2020 with its highest historical increase, a growth of 81% compared to the previous year, 2019.
In addition to this, Mexico ranks first in adoption of fitnech for electronic payments in Latin America and is third in the world, below China and the United States, according to the Finetch Global Adoption Index 2019.
This information reveals that the changes in consumption habits of Mexicans. For this reason, SMEs today have the challenge of adapting to new customer demands.
Large companies were somehow already prepared to face the pandemic: they had access to financing, experience, and smooth administrative processes.
Now there is no other option but to apply digital capabilities to traditional processes, assets and products to improve efficiency, manage risk, discover new opportunities to generate income, optimize time and provide the customer with an unforgettable experience. In a world where digitization is advancing by leaps and bounds, it is key to join in the simplicity, speed and speed that this generates and thus achieve customer loyalty and take advantage of the competition. (Schorr, 2021)
References
Schorr, N. (13 de Mayo de 2021). Yahoo! Obtenido de Yahoo! finanzas: https://es-us.finanzas.yahoo.com/noticias/fracasan-pymes-m%C3%A9xico-razones-habla-124400644.html