Coppel and Access to Credit

I currently live in a country where I’m willing to bet that 9 out of 10 people are living paycheck to paycheck. This statement would still hold true even if the global economic crisis did not hit. Though the idea of saving is something people desire, their current circumstances do not permit it. These circumstances, however, are shared by the majority. So how do people renovate their house, buy their kids presents on their birthday and on Christmas, get that new TV, cell phone, laptop and fresh new nikes that can cost as much as their weekly income? Simple store credit.

I’m not talking about visa credit cards that you swipe and then access your monthly balance from an internet portal from your computer at home. No, I’m talking about the good ol’ credit that’s given to customers at any particular store. I see it everywhere. From a little shop around the corner, to the local family owned grocery store the size of a garage, and even the market butcher shop. Obviously, they don’t give credit to everyone, but they have a pretty good idea of who the loyal customers are and which of those customers will keep their word, return and pay. I’ve heard many times, “No, I can’t go in with you because I owe the lady X amount of money.” It’s funny to see people ducking and dodging local business owners and every once in a while you might even see a brawl. But these local small business owners need to cut some credit in order to keep some of their best customers. It’s scenarios like this that keep bigger retail stores from cutting anyone some slack with any credit. Even if that credit is coming from a trusted Visa or Mastercard credit card, most retailers prefer cash.

When you take a look at the demographics and income brackets of most people in Mexico, you quickly learn that most people are working class. One major retail store that has thrived on this market is Coppel. What Coppel does is grant store credit to any Mexican citizen that is at least 18 years old, employed, not in the military, and provides proof of their home address (they send somebody to knock on your house door to confirm that you do in fact live there). What can you access with this store credit? Clothes, shoes, furniture, electronics, automobile accessories, instant cash loans, retirement plan services, and even bank services. Sounds risky, right? Their competitors dare not offer these kinds of products and services with in-store credit like Coppel does.

What does this mean for the consumer? You would be stupid if you ruined your credit history with Coppel because you’re not going to find another store that will give you access to so many products and services like Coppel does. Surprisingly, the interest rate is reasonably low and customers are always coming back, staying current with their credit payments, and keeping the business running. Coppel has done this for over 50 years!

So how do people pay for that new stove and refrigerator that they purchased on credit when their total  monthly income wouldn’t even pay for the stove alone? Narcotrafficking 🙂 Just kidding. I honestly don’t know (which makes the theory of Narcotrafficking highly plausible…) but most customers do return and pay. And if they don’t pay on time, they’ll pay whatever interest they owe in order to preserve their store credit. This business model for Coppel has worked so well that they have quickly become one of the top 100 companies in Mexico. Holy Moly!