Angel in flight



The age of 38 is a very tender one to be a president, particularly when it has taken only one year to get there. But then, Angel Alverde has been a business entrepreneur since the age of 21.


"I have always been interested in the retail business, so I decided to start up my own clothing franchise," he says. "I approached various stores in malls and eventually managed to get my products sold in 12 outlets around Mexico City. The venture was a big success."




But keeping his sights higher, Alverde enrolled on an MBA programme in Chicago, Illinois, in 1992, and it was with this exposure to the markets that the door at Office Depot sprang open. "I was in contact with Gigante [a successful supermarket chain in Mexico which was to become Office Depot’s partner in the country] and heard about an opening for a merchandising marketing director to help set up Office Depot Mexico. I saw a huge opportunity with what Depot wanted to do here, so I was really excited when I was hired.


"One year later, when I turned 30, I became president. It has been an amazing opportunity for me to make the company grow and become profitable. I am very happy."


Certainly, Alverde’s jollity and verve come across clearly when he talks (he is Mexican after all!), as does his sharp intellect and speed of thought. And indeed, nothing less would be required in a position armed with the task of setting up an alien concept like an office products superstore in a country like Mexico – and pulling it off.


But Alverde claims he was "in no doubt" that Office Depot would work in Mexico. "There was a need for a company with Mexican products and a service that made a difference here," he affirms. "Office Depot in the US was very supportive. They listened to what I was saying and trusted me. We also had a lot of support from our Mexican partner, Gigante."


He was right to be confident. From its first two stores in Guadalajara (Mexico’s second largest city) in 1995, Office Depot now has 95 outlets in Mexico and nine in Central America – spread across Costa Rica, Guatemala and El Salvador – with plans this year to open another 14 stores in Mexico and one in Costa Rica. In addition, the company has an annual growth rate of between 15 and 20 per cent, more than triple the average Mexican growth rate of 3.8 per cent.


But nevertheless, it has been a journey that Alverde sums up in three words: challenges, opportunities and risks. The main challenge was of course the fact that people didn’t know who, or even what, Office Depot was, he says. "The office superstore was an alien concept in Mexico ten years ago and ‘Office Depot’ does not translate into Spanish, so people were originally unsure, often thinking we were a sports retailer or sports complex that required membership. But we kept opening stores, people started walking in and we invested a lot of money in marketing to tell people who we were.


"It was all about getting our product offering right," he adds. "At first, it didn’t work because we were importing 95 per cent of our products from the US and people didn’t want that. Now we import just 9-10 per cent of products from the US and source products made in Mexico with Mexican brands. In Guatemala, we have different products again with locally recognised brands. You have to follow what the customer tells you."




Indeed, Alverde’s speech remains pitted with bright, trusted MBA-jargon. "It is all about creative marketing," he says. "Because of the high levels of poverty here, we offer ‘buy now pay later’ incentive schemes on most of our office furniture and electronics ranges, for example. We have also tried to promote telemarketing which was difficult at first because of people’s natural suspicions of giving over a credit card number over the phone etc, but now this is another battle we are winning. We have to make sure we live up to people’s expectations."


He is also trying to promote private label, a relatively new concept in Mexico and Central America. "There is definitely potential for private label, but it is not very important yet. Own brand translates as a cheap, poor quality product to Central Americans, so we want to build the image that private label offers quality at a great price."


Perhaps one of the largest challenges that Alverde – and indeed any Mexican business – must face is the country’s economic instability. "Our generation in Mexico lives with what the rest of the world describes as ‘crises’ every day," he says, claiming that it is difficult to plan on an economy when its direction is unpredictable. If the currency is devalued, his company can lose 30 per cent in sales, but you never know when this might happen. "Security is also an issue," he continues. "We make sure we have the police in our stores and that they are accompanying our deliveries. But product theft will always be a problem here."




So how exactly does Alverde manage his business in such a climate? "You need to take opportunities to be conservative with finances, be very cautious and manage the business without taking financial risks. Office Depot Mexico has the lowest margins of all Depot’s worldwide divisions.


"In order to compete against local stationery stores that have a loyal local client base, we make sure we know our local market and distribution channel, source as many products as possible direct from the manufacturer and keep our prices down. Furthermore, we invest in our people to ensure we have a great team behind us. Our staff turnover here is very low."


But despite his sways of optimism, Alverde is a realist at heart, and freely admits that the sky is not the limit for his company’s growth prospects. "There may be 100 million people in Mexico, but there are high levels of poverty, which limits growth. For a population of 300,000, for example, you can only open one store in Mexico but many more in the US. This is why we were obligated to go into Central America three years ago as well. But we will reach saturation point sooner or later."


And this could well be ‘sooner’, by all accounts. Next year Alverde plans to open only six new stores in Mexico, with company growth rates declining to around only 5 per cent, he estimates. Central America, he says, is almost saturated already – Panama is too competitive and too difficult; Honduras is perhaps the only market left to exploit.


So what then? "We will continue to head south into South America," says Alverde confidently. "There are more opportunities down there for us because of the size of the market, and we are analysing them right now. Colombia is of particular interest." But there will nevertheless be more challenges. "The economies in South America work very similarly to those in Central America and people think in a similar way," he says. "And like here, it is all about who you know, not what you know."


"But in finding new places to grow we will keep profitable," he claims, and repeats his MBA-tinted mantra: "You can be successful in any market if you know how to excite your customer."