Bi-National Shoppers are Essential


Bi-National Shoppers are Essential

The International Council of Shopping Centers forum held in McAllen brought a near overload of information about the status of retail.

The Developer’s Outlook

It’s no surprise to hear that a bi-national customer base has infused billions of dollars into the Rio Grande Valley. Simply consider that Monterrey has a zip code with the highest per capita income in all Latin America. Add the facts that the majority of Mexican shoppers enter the U.S. on short term visas, are above median income, stay within 25 miles of the border and frequently patronize upper tier stores and restaurants.

The result in McAllen, for example, is that about 25 percent of retail revenue comes from Mexican nationals. El Paso, Brownsville, McAllen and Laredo are the four largest, bi-national shopping destinations on the Texas border. Besides strong sales for retailers, the cities capture substantial revenue from sales tax thanks to the millions of Mexican shoppers.

Dr. Dave Jackson of UTPA’s Center for Border Economic Studies pointed out that in 2010 the number of border crossings fell by 14 to 18 percent, depending on the border city. Yet gross retail sales increased along the border. Jackson suggested that bi-national shoppers are perhaps spending more each trip but making fewer trips because of cartel violence along the highways among other factors. Currently 85 percent of bi-national shoppers drive to the Valley, although increasing numbers are opting to fly to South Texas. (See the Weslaco airport story in this issue.)

Eight years ago, a VISA card study revealed that when Mexican nationals used their credit cards in the U.S., sixteen percent of the time they were charging purchases in the Rio Grande Valley. Historically McAllen has had as much as 34 percent of its gross sales receipts attributable to cross border shoppers, according to Kevin Jones, leasing representative for Simon Properties, which owns La Plaza Mall and Palms Crossing. Because of that, the Mexican consumer plays a significant part in the search for tenants, Jones noted. “We’re always looking for the latest trends, based on consumer demand. Every shopping platform is different. We must understand the audience. At Palms Crossing and La Plaza we have put in place things that make shoppers feel comfortable.” He expects cartel problems to have a minimal impact on the stores.

Bi-national shoppers are the reason La Plaza Mall’s sales (among the highest per square foot in the nation) seemingly conflict with the projected retail volume for the American demographic. In terms of attracting new retailers, commercial realtors like Mike Blum believe that upscale stores like Nordstrom’s, Saks and Niemen-Marcus could succeed in the Valley. “There are a whole bunch of stores that ought to be in the Rio Grande Valley, but they don’t understand what we already know,” that bi-national shoppers are such a huge part of the local market.

The best practice, it was mentioned, is to bring in retailers and let them talk to existing retailers who have done well and can share local data. Knowing the retailers, their needs and the locations they prefer is essential for growing the merchant base. But there is a little discussed impediment to bringing in new upscale retailers. Existing anchors have unpublicized powers that can include ownership of a mall parking lot which gives them control over who can set up pad sites. Other anchors may have right of refusal on competing retailers coming into a shopping center. On the other hand, some Mexican retailers are beginning to move north of the border.

The Economist’s Outlook

“The U.S. is still running a surplus in cross-border shopping. Mexicans spend more money here than Americans spend in Mexico,” said Roberto Coronado, economist at the Federal Reserve Bank of Dallas in El Paso. He addressed the impact of cross border retail activity on the RGV economy, noting that Brownsville and McAllen are doing better than Laredo as “border business cycles are still bouncing around the bottom.”

How does The Fed determine how much of border retail sales are attributable to Mexican shoppers? They estimate the amount that is spent on retail sales in nonborder Texas cities in relation to population and then compare those numbers to border cities’ retail sales. Currently, border cities retail sales run between seven and 30 percent above the norm. The McAllen area alone, Coronado said, took in $2 billion last year in bi-national sales. The top sectors are automotive (including parts), clothing, sporting goods and motor vehicles. An interesting fact is that bi-national purchases of women’s clothing were approximately $50 million while men’s clothing was $1 million. The Fed’s estimate does not take into account the amount of US border residents’ retail spending in Mexico, a number which has plummeted recently.

Coronado said bi-national shopping is closely linked to the exchange rate and he had good news for border retailer. “The outlook continues to be good. The peso is expected to remain strong.”

Freelance writer Eileen Mattei was the editor of Valley Business Report for over 6 years. Her articles have appeared in Texas Highways, Texas Wildlife Association, Texas Parks & Wildlife and Texas Coop Power magazines as well as On Point: The Journal of Army History. The Harlingen resident is the author of five books: Valley Places, Valley Faces; At the Crossroads: Harlingen’s First 100 Years; and Leading the Way: McAllen’s First 100 Years, For the Good of My Patients: The History of Medicine in the Rio Grande Valley, and Quinta Mazatlán: A Visual Journey.