Calle Republica 2855 Poniente
Company Perspectives
Our Mission: To be the favorite store of the great majority of the popular market that buys on credit, offering, in an easy manner, a wide supply of products and services for all the family at good prices.
Coppel, S.A. de C.V, specializing in household goods and clothing, is one of the largest department store chains in northern Mexico. It is the second-largest chain in Mexico for the sale of furniture and articles for the home. The Coppel chain operates more than 300 stores in every Mexican state under the Tiendas Coppel name and almost 200 shoe stores under the name Tiendas Coppel-Canadá.
Fifty Years in Northern Mexico: 1941-90
The enterprise initiated activities in 1941, when Luis Coppel Rivas decided, along with his son Enrique Coppel Tamayo, to move from Mazatlán, Sinaloa, to Culiacán, the capital of the state, and establish a small gift shop that later specialized in selling radios and watches. According to family lore, business did not go well until Coppel Rivas' wife took control of the purse from her husband. "She measured even the water in which he bathed," a grandson recalled to Adolfo Ortega of the Mexican business magazine Expansión. Later the enterprise obtained more financing, renamed itself Comercial Coppel and shifted its specialty to household goods, especially furniture. Over the course of time, its goods came to include electronic products, household appliances, toys, calculators, travelers' items, auto accessories, optical goods, and jewelry. The enterprise was incorporated in 1965 as Almacenes Coppel. (Almacen is the Spanish word for warehouse). It would later reincorporate as Coppel, S.A. de C.V. in 1992.
Coppel owed its success to its policy of making sales on credit, secured by weekly payments. In 1970 it began selling clothing and household appliances under a revolving credit scheme. The company had no competition in this field during the decade, since, as a practical matter, clothing could not be repossessed for nonpayment. During the 1970s the company added perfume, shoes, and tennis clothing and accessories to its range of products. The large volume of Coppel's business and the complexity in managing inventory resulted in a system that allowed the company to maintain optimal quality control in the operation of such distinct areas a sales, credit, collection, promotion, finance, and human resources.
A grandson of the founder, Enrique Coppel Luken, became chief executive and chairman of the board of the firm in 1983. Although Coppel began listing its common stock on Mexico's stock exchange in 1988, it remained almost totally a family-owned firm, which reincorporated in 1992 as Coppel, S.A. de C.V.
Expansion Throughout Mexico: 1990-2005
Coppel had 22 stores at the beginning of 1990, when it initiated an expansion program. As the decade progressed, the chain expanded its reach beyond its base, entering cities such as Guadalajara, Monterrey, Puebla, and Tijuana. There were 143 Coppel stores in 21 Mexican states in 2002, when the company bought the Calzados Canadá footwear chain. Canadá, once the largest producer and retailer of shoes in Mexico, had fallen on hard times by the 1980s, but 178 stores remained in almost all parts of the country, and its Guadalajara factory was still turning out 4 million pairs of shoes per day. The seller was Grupo Financiero BBVA Bancomer, S.A. de C.V., which had taken over the heavily indebted chain and wanted to divest itself of nonperforming assets. The Canadá stores were remodeled and continued operation under the name Tiendas Coppel-Canadá.
The Canadá stores were little more than one-tenth the size of the Coppel stores, which were divided into 16 specialized departments by line of product. The number of Coppel stores was growing by an average of 20 percent a year during the first years of the 21st century. Coppel was planning, in 2002, to open units in areas where the chain had no prior presence, such as the southeastern states and Mexico City. Each new store opened represented an investment of about $2 million.
Interviewed for the Mexican business magazine Expansión by Raúl Curiel, one investment analyst questioned whether, given a clientele of modest means and the need to extend credit to them, opening new stores was worth the expense. A Standard & Poor report echoed these concerns. Coppel's finance director told Curiel, however, that "The popular market protects its credit rating because thanks to credit it has access to articles that it can't acquire otherwise; that, and the ease with which we extend loans are our competitive advantages."
One believer in Coppel was the International Finance Corporation, the private credit arm of the World Bank, which extended the enterprise a $30 million loan in 2002 as a means of expressing its interest in financing profitable private long-term projects in Mexico with a strong social impact. The IFC granted Coppel a new 10-year loan of $35 million in 2005. On this occasion, an IFC press release declared, "This loan conforms to IFC's strategy of aiding the Mexican private sector to obtain more access to foreign private finance and to facilitate the growth of local enterprises, better their competitiveness, and create new employment."
A staff of 2,000 was dedicated to keeping credit risks low, with only 5 to 6 percent of all accounts in arrears of payment. More than 90 percent of all credit applications were authorized automatically, with decisions on the rest made in less than five minutes. Credit sales carried installment periods of 12 or 18 months for furnishings and five months for clothing. Coppel's credit charges came to about 15 percent of net sales in 2005. Its total debt was 56 percent of total assets at the end of the year--about the same as the previous year, although operating expenses grew 27 percent, mainly because of the cost of opening new stores.
Enrique Coppel and his brothers were not disposed to raise money for the firm's expansion by selling stock to outsiders. Disgusted by the high rates and short terms of bank loans, Enrique Coppel turned to local capital markets in 2003, raising $97.6 million from a peso-dominated bond sold to insurance companies, private banking clients, and company-run pension funds at a cost not much higher than the Mexican interbank rate. Coppel was hoping to issue bonds of even longer term to closely related local pension funds known as afores, which were required to invest mainly in government paper or investment-grade corporate securities. Only one agency had given the company an investment-grade rating, however. Meanwhile, Coppel was having success in shifting its short-term debt to longer terms and lowering its finance costs.
Coppel shrugged off the cost of opening stores, inaugurating 38 new ones in 2003, 44 in 2004, and 52 in 2005. Its formula for financing growth remained the same. Each store opened represented an increase in sales and assets, supported by new loans and reinvestment of profits. In 2004 the company secured a credit line of MXN 1 billion (about $90 million), about half of which it earmarked for the first half of 2005. "We believe that we can continue growing at this rate for another decade," Augustín Coppel, a younger brother of Enrique, told Ortega. He was in charge of the expansion program that could take the chain to 2,000 stores in 2012--a goal that Enrique told Ortega was "not a plan but a desire. ... It isn't an obligation or a task, but it can be a result."
Coppel was in a hurry to grow because it saw a great opportunity in selling goods on credit to people of slender resources. There were over 20 million Mexicans without financial services whatever and 50 million who needed loans to buy merchandise because they were living on less than $600 a month. To tap this market, however, Coppel needed an alliance with a bank--or its own bank. The company, along with two others, had joined with Banca Afirme, S.A. to share credit information and extend loans, but Enrique Coppel was not satisfied with the experience. Coppel had already begun offering its customers cash loans of up to about $1,000, life insurance, a service that would send money from one city to another, and a bill paying service for public utilities such as water, light, and telephones. Coppel also began operating a retirement fund, Afore Coppel S.A. de C.V., in 2005.
The company was not sufficient to consume all the energies of Enrique Coppel, who was in the process of founding a 2,500-acre self-financed model community in Culiacán that was named La Primavera and was seen as the embryo of a larger one to be called Ciudad Coppel. Built around an artificial lake, the gated community would ultimately consist of 100,000 people, all carefully selected from the best elements of northwestern Mexico, living in well designed large houses or apartment towers. There were spaces reserved for commercial and industrial zones, offices, schools, a Catholic church and small chapels, a hospital, a university, a hotel, an extensive park and canal system, sporting clubs, and an artificial beach--even a race track and a casino or amphitheater. Coppel said, however, that non-Catholics should not look to him for contributions to the purchase of land or erection of buildings for their denominations or faiths.
Coppel in 2005-06
At the end of the first quarter of 2006. Coppel was operating 306 Coppel stores and 176 Tiendas Coppel-Canadá in 134 cities and every state. Some 40 percent of the properties on which these stores rested belonged to the company; the rest were rented. The company also had a network of 74 distribution centers and ten warehouses and maintained a fleet of 241 trucks, plus smaller vehicles, in order to fill, and, if necessary, install, 20,000 home delivery orders a week without charge to the customer. All the stores, distribution centers, and warehouses were connected by computer, which also stored information on credit customers.
Coppel's furnishings division consisted of electric home appliances; other articles for the home and for personal use; electronic items, such as television sets and cellphones; household appliances; furniture; tires and other automobile accessories; bicycles; toys; watches; jewelry; and optical goods. All merchandise in this division was guaranteed for two years, even when the manufacturer did not offer said guarantee. In the case of failure of an essential appliance such as a refrigerator, stove, or heater, Coppel, at the option of the customer, could provide a substitute during the period of repair. The clothing division included boys' and men's clothing, girls' and women's clothing, sheets and pillowcases, shoes, and perfume. The furnishings division was accounting for 72 percent of sales and the clothing division for 28 percent. In all, Coppel was selling about 14,000 items and was stockkeeping 44,295 units.
Some 88 percent of Coppel's 2005 sales were made on credit. The other sales were made in cash or by credit or debit card. Coppel's credit charges allowed it to gain a profit from this form of sales beyond covering its own finance costs and other costs related to credit sales, such as administration and absorbing bad debts. The company had about 9.9 million customer accounts, of which 4.3 million were active, and its own proprietary credit card. Coppel saw as its market the 57 percent of the Mexican population with monthly incomes between 4 and 45 times the minimum wage. The company was initiating 19 sales promotion campaigns a year and publishing a promotional monthly with a circulation of 10.1 million. Advertising on radio and television was continuous and was in the form of 20- and 30-second spots. Print advertising was geared to the 19 campaigns a year and special times of the year such as St. Valentine's Day and Christmas. Coppel's suppliers were covering about 30 percent of the company's advertising expenses.
Considered as a department store chain, Coppel's sales volume was not as high as that of Wal-Mart de México or El Puerto de Liverpool but was superior to such well established rivals as El Palacio de Hierro and Sears Roebuck de México. Elektra and Famsa were considered the competitors most similar in the socioeconomic segment at which Coppel aimed. Elektra had some 850 stores, sales 60 percent higher than Coppel, and a tie-in to bank services, but it did not sell clothing or footwear. Famsa, which was smaller, had 250 stores in Mexico and United States and had begun selling clothing in some of its stores for the first time. The records of a federal consumer agency showed fewer customer complaints against Coppel than Elektra or Famsa in 2003-04; moreover, Coppel had resolved a higher proportion of the complaints than Elektra or Famsa.
Coppel's line of merchandise included such household appliances as stoves, washers, dryers, refrigerators, air conditioners, irons and ironing boards, blenders, hot plates, toaster-ovens, and grills. It was also selling luggage, portable coolers, tires and batteries, audio components, cameras, telephones, television sets, radios, videocassette and digital video recorders, and personal care items.
Coppel's common stock remained almost exclusively in the hands of the five Coppel Luken brothers who were grandsons of the founder. They owned 99.9 percent of the shares in 2006.
Principal Subsidiaries
Coppel Corporation (United States).
Principal Divisions
Clothing Division; Furnishings Division.
Principal Competitors
Grupo Elektra, S.A. de C.V.; Grupo Famsa, S.A. de C.V.
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