September 28, 2023 • 20 mins
Guatemala-based Megapaca is the number one importer of used clothing from the United States. The company has seen massive success in secondhand retail in Latin America, and now they have their sights set on expanding to the US.
Bloomberg’s Adam Minter walks us through this complex, data-driven operation. And Megapaca's back-office manager Jose Rivera talks about the company’s ethos and its goal to become the leading seller of used clothing in the world.
Read more: The Massive Guatemalan Operation That Wants to Sell Americans Their Old Clothes Back
Listen to The Big Take podcast every weekday and subscribe to our daily newsletter: https://bloom.bg/3F3EJAK
Have questions or comments for Wes and the team? Reach us at bigtake@bloomberg.net.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Have you ever wondered what happens to those old Levi's
and tired nikes that you drop off at a clothing
drive or leave in a donation bin. Well, there's a
good chance that at least some of the clothes you
give away will end up in Guatemala. It's the number
one importer of used clothing from the US. In part
(00:22):
that's because of one company that buys up tons of
donated clothes and re sells them in Guatemala. In across
Central America, it's called Megapaca.
Speaker 2 (00:33):
So most people in the US or even outside of
Central America have never heard of this company. But if
you go to Guatemala in particular, it is a household name.
The brand recognition is higher than Walmart, It's higher than Zara.
Speaker 1 (00:45):
Bloomberg's Adam Mintor visited Megapaca's vast operation in a Squintla,
Guatemala to see how it's transforming the business of secondhand clothing.
He reports that Megapaca is now expanding with the aim
of becoming a household name in a new, much bigger
market the US where the clothes come from in the
(01:07):
first place. I'm West Kasova today on the Big Take
mega Paka turns discards into dollars. Hey, Adam, how's it going.
(01:29):
It's going okay. I've been looking forward to talking to
you about this story because it's about a company I
have never heard of. And you've been covering the clothing
recycling industry for a long time, You've written books about it,
and yet this company, Megapaca, kind of escaped your notice
for quite some time. Tell us about this company. Yeah,
it did.
Speaker 2 (01:49):
Like a lot of people who follow US clothing and
sort of the globalized export of it. I had been
focused for so long on West Africa, East Africa, Pakistan.
We see all these pictures, but in fact, Central America
is the largest destination for US used clothing and Megapaca
is the number one importer in Guatemala and for that
(02:10):
whole region. And I just happened upon them because I
was at a conference in Costa Rica where they presented,
and I was just knocked out by the scale and
sophistication of what they do, and I thought, this is
something I have to write about.
Speaker 1 (02:23):
And everything they sell is used clothes from the US.
Speaker 2 (02:27):
Everything they sell is used clothes from the US. In fact,
that's a feature, it's not a bug. Their marketing is
everywhere all over Guatemala.
Speaker 1 (02:35):
So yam Omegapaca, Megapaca is mizienda in Guatemala.
Speaker 2 (02:41):
You will see their signs, these really elaborate graphics printed
on their trucks and it'll all say one hundred percent
imported from the United States. It's a selling point. They're
very proud of it, and people are very keen to
get it. Guatemalan consumers, like consumers everywhere really these days,
are very fashioned forward. They're very cued by what they
see on the internet. They're interested in the same fashions
(03:01):
as somebody in Brooklyn might be.
Speaker 1 (03:05):
Tell us how this company started and where they are now.
Speaker 2 (03:10):
So like all great entrepreneur heal stories, they started very modestly.
An entrepreneur, Mario Pania, looking for a business. He originally
thought he was going to import automobile parts from the US,
and he actually went to the US looking for automobile parts,
and he decided that was too hard, and he heard
about clothing. He knew, being Guatemalan that there was a
(03:31):
demand for secondhand clothing. There was an opportunity there, and
so he rented a car. I believe he had about
thirty five thousand dollars in capital, and he just started
driving around the US to thrift stores looking for clothing
that he could export back to Guatemala. And I believe
he drove around for three weeks until he found his
first load in New Jersey. And so they started out
(03:52):
importing clothes into Guatemala and wholesaling them to small pacas.
And if you've ever been to Guatemala or Central America,
you'll have recognized the pockets. They're just small stall street stalls,
often with hand lettered signs, that are selling bundles of used,
imported clothes. And so Mario thought, well, we'll just wholesale
to them. And then one day, as he described it
(04:15):
to me, the power bill came due and they needed
cash fast, and so they basically opened their warehouse and
said all comers come and buy clothes, and at the
end of the day they'd made sixty six dollars. And
as he said to me, I realized, then we're in
the retail business, not the wholesale business. And so they
started opening stores very slowly over the last twenty years
(04:35):
that have become an absolute retail juggernaut across Guatemala and
other Central American countries.
Speaker 1 (04:41):
So Adam, like you say, you went and saw this
operation in Guatemala, can you describe it, because it's astonishing
just how sophisticated it is.
Speaker 2 (04:49):
So when you walk into this warehouse, your first impression
is chaos. I sometimes think of it as like popcorn popping,
because you see garments flying everywhere and you're thinking, there's
no order to this. But it's incredibly sophisticated. When a
shipping container comes in, there's a first sort, that's what
they call it, and it's just very basic. We're going
to sort out the men's clothes from the women's clothes,
(05:10):
from the children's clothes, from the shoes, and whatever trash
is in there. Stuff that just can't sell that'll get
sorted as well. Those are the new employees who do that.
They're just learning the business. But the magic really starts
happening in the second sort, and that's where you see
how these thousands of garments that are coming through the
system per hour really get divided and turned into a
(05:33):
profitable business. So in the second sort, you have more
experienced employees who can sort the men's genes from the
women's long sleeve blouses from the children's trousers and they're
doing hundreds Each of these employees are doing hundreds of
these an hour, and when you watch it, I mean,
it's kind of overwhelming. I felt exhausted. I don't know.
I don't know how they do it and continue being
(05:55):
able to stand and can concentrate. But they're very committed
and they seem to really get some enjoyment about getting
this right, in part because if they do well and
they're being watched at all times for just the performance,
they can make it to the pricing stage. And that's
where Megapaca's very best, most experienced employees are, and it's
where Megapaca really makes its money. That's where you have
(06:20):
to figure out what each of these garments is going
to be worth when it hits the racks. And that's
not just somebody standing there saying, hmm, this looks like
a five dollars blouse to me. What they're provided is
computerized data on a screen in front of them that
tells them what similar garments have sold for in Megapaca
is now, as a few weeks ago, one hundred and
(06:41):
twenty three stores across Central America plus the websites, and
that gives them a range of prices. They can then
take those prices and look at the condition of a
specific garment and say this garment should be priced high
on the continuum potential prices that this type of garment
has sold at, and that pricing data is then fed
back into the system and it's tracked to the store
(07:02):
and they're judged on whether they hit it right. Is
somebody going to pay that price? I mean, if you
see five hundred gap T shirts over the course of
a week, you know you're going to have a pretty
good idea of where they wear, you know, And so
they're looking at that stuff and then going right back
to that algorithm printing out the price tag which has
a QR code on it. That QR code when it
(07:24):
goes to the shop, say in Guatemala City, will allow
Megapakat to say, Okay, this kind of thing from Fargo
North Dakota sells poorly in this store, but maybe that
same kind of garment from Fargo North Dakota sells really
well in a different Guatemalan megapaca. It's that detailed, it's
incredibly sophisticated, and it's nothing like being in a popcorn popper,
(07:45):
which is what I thought I was in what I
walked in there the first time.
Speaker 1 (07:49):
You mentioned that shoes coming in is another lucrative part
of the business, and you describe what happens to a
shoe that arrives in their facility. Paint us a picture
of that.
Speaker 2 (07:59):
What Megapac does is what a lot of small secondhand
dealers I've seen in Mexico do, which is they upgrade them,
they up value them. And the way you do that
is you wash them. Well, it's one thing to be
a small guy with a street stall, you know in Esquintola, Guatemala,
who buys ten shoes a week and washes them clean.
What Megapaca has is an entire washing line. It's on
(08:22):
the second floor of the distribution warehouse, and it's incredible.
You've got a little over a dozen employees who are
receiving shoes that have scuff marks, maybe some of them
are muddy. They've been donated to, you know, thrift stores
in North America, in the United States, and they need
to be cleaned up. In the space of two to
three minutes, they are able at these wash basins to
(08:44):
turn these use looking shoes into relatively new looking shoes.
And it's profitable. As it was described to me, a
wash shoe adds two to three dollars of value to
that shoe, so it's really worth it for Megapaka to
do this. And it's just one more example of how
Megapaka is squeezing as much value as it possibly can
(09:06):
from these closet it imports. But even more to the
point from a sustainability standpoint, they're making them more attractive.
They're turning the trash into treasure.
Speaker 1 (09:17):
So Adam, there's another dimension that you describe to their
pricing system, which is once they've fixed this QR code
and given it what they think is the proper price,
it goes on the racks and then they start to
see whether it sells.
Speaker 2 (09:31):
What Megapaca does is it employs what's called a Dutch auction,
which is a Dutch auction is when you take an
item and you drop the price until somebody buys it.
And so what happens is a new garment goes on
the rack and it's selling at one hundred percent the
price that was affixed in the distribution warehouse with the
QR code. After a week, if it doesn't sell at
that price, it goes to another rack. Where it sells
(09:53):
at ninety percent of the price a ten percent discount.
If it doesn't sell after that, it goes to another rack.
But this is a nine weeks cycle until you're left
with what doesn't sell. But what's remarkable about this system
is that everybody kind of gets their own price points.
So the fashion forward Guatemala City lawyer who wants, you know,
(10:13):
a nice new suit at a discount, they can go
in there and buy Megapaca's price one hundred percent, and
as the price comes down, you get different people buying
the stuff till you get maybe to the ninety percent discount,
which is towards the end, you know, where maybe it's
farmers coming in from the hills around Guatemala City looking
for the stuff at their price point. Megapaka claims that
they are able to sell eighty percent of the stuff
(10:36):
that comes in to their stores. Most secondhand retailers in
the US only sell about a third of the stuff
on their racks, So it's extraordinary and there's a lot
packed into that, because you know, there is this feeling
that there's so much new stuff going on the racks
there that if you don't get into the store today
or tomorrow, you're going to miss something. It won't make
it to the twenty percent off side. So really it's
(10:58):
there's that huge brand recognition that it's just so important,
especially to Guatemalans who are looking for apparel.
Speaker 3 (11:06):
Like everyone, they like a good deal.
Speaker 1 (11:08):
That's Jose Rivera, he's Mega Paca's back office manager. He
says the company puts a lot of attention on the
store experience, both for customers and employees.
Speaker 3 (11:20):
You know, if you go to one of our stores,
we always like look for the details. You know, it
has to be well lit, we're organized, it has to
smell well. If you go to the restroom, it's going
to be a clean restroom. So just just part of
the whole shopping experience. This has come just back to
the beginnings that Maria and Gustavo always wanted to build
a company that you wanted to come to work for.
You know, it was funny, it was just not work.
(11:41):
It was also an enjoyable experience. All of these are
just extensions of the core values that are ingraining our company.
Speaker 1 (11:50):
Adam. So far, we've talked about how Mega Paka is
taking advantage of the flow of clothes from the US
into Guatemala where people really want to buy it. But
now you right, the company has a whole different model
for expanding, right.
Speaker 2 (12:07):
Mario Pania, who's the co founder of the company, has
always been a very ambitious man. And once they had
conquered Guatemala, if you will, right around the middle of
the last decade, he told me that he sat down
as partners, and I loved the phrase he used. He said,
we can sit around and rub our bellies, or we
can expand.
Speaker 1 (12:24):
Here's Jose Rivera again.
Speaker 3 (12:26):
This has always been an ongoing conversation since the beginning.
They always had in their mind to have a big company,
you know, so the natural step is always keep growing
to the next country.
Speaker 2 (12:38):
And so over the last eight years they've expanded into Honduras.
El Salvador in the southern part of Mexico. Certainly wasn't smooth.
Anytime you've during an international expansion, there's challenges, but they
feel that they've got that under control.
Speaker 1 (12:50):
And so Mario then.
Speaker 2 (12:51):
Got to the point where he's ready to exercise his
true ambition, which is to be the world's largest retailer
of second hand clothes. And as he said to me,
the only way to do that is to achieve in
the United States, you need to expand there and you
need to own the US market.
Speaker 3 (13:09):
The US has always been like the Holy Grail, you know,
like one day we're going to hit the US.
Speaker 2 (13:14):
And so that's what they're doing.
Speaker 1 (13:17):
After the break how Mega Paka intends to capture US customers.
As we just heard, Megapaka is bringing its business to
the US, and Adam says, for now, they're starting fairly small.
Speaker 2 (13:37):
The question always was how do you do this? You know,
is Megapaca just going to go in open stores and Texas,
in Utah and California, places which might be good markets
for them. No, They've launched a US website just this
month and they're going to see how it goes one.
It's going to give them data on how people shop
Mega Pakat in the US. Right now, the clothes that
(13:58):
are going on the website in the US are clothes
that would have gone to Guatemala. So it's one of
the partners that they buy from in South Carolina. They
are taking those clothes and they're basically diverting them into
the US market instead of sending them down to Guatemala.
Speaker 1 (14:13):
Adam says that Megapaca has its eye on particular customers
in the US.
Speaker 2 (14:18):
The people they're targeting are the millions of Central American
migrants into the US, the Central American expats who've grown
up with and grown to love megapaca megapacas.
Speaker 1 (14:31):
Jose Rivera explains it this way.
Speaker 3 (14:33):
We're going after the Latino market. You know, that's the
biggest minority in the US, So we're just trying to
give them a feel of home. You know, go to
a store where they where there's someone that speaks their languages,
that they have their music, people welcome you. That's what
we're aiming at, not as specifically the markets that we
already are based, but just the whole Latino market.
Speaker 2 (14:56):
If you go when you look for Megapaca marketing in
the US right now, you're not going to find it.
But if you want to go find Mega Pocket marketing
about their US website in Guatemala, you'll have no problem
finding it. Because what they're doing is they're going on
WhatsApp and saying, Hey, tell your uncle in Texas that
Mega Packet is in the US, and if you buy something,
(15:16):
you get twenty five percent off a Guatemala Mega Pocket.
Speaker 3 (15:19):
The first thing that we started is We advertise it
in the in Guatemala, Honduras and Alsabathers. You know, tell
your relatives in the US that Megapaca is. It's there,
and they can go to our webs and they and
they can buy. We also have decals on our trucks.
We also have advertising in our stores, and we're also
advertising on social media in the US.
Speaker 1 (15:43):
I asked Rose Rivera where he sees the company headed
in the US five years or ten years from now.
Speaker 3 (15:50):
So everything that we've been doing for years in the
countries that we're at right now, it's been just like
the preparing grounds for us to launch in the US.
So this is the website just gives us a better
idea where where a customer base is at. And if
we're getting a lot of orders, let's say from La
we know that that's where we we have to put
a story. We get in a lot of orders from Houston,
(16:12):
you know, from San Francisco, whatever those those orders are
coming from, the well the majority of them, we know
that that's a good place where that our customer base
is at, and that's where we have to put the
first stores.
Speaker 1 (16:25):
When we come back. What happens to all the clothes
Megapaca isn't able to sell Adam, You're right about how
the rise and fast fashion of these clothes that are
so cheap, and of the moment that people in America
(16:46):
buy them, where them a little bit, men just toss
them aside, has given great momentum to this industry.
Speaker 2 (16:52):
Yeah, well we know this. There's very good data out
there that Americans are wearing their garments lest they're wearing
them fewer times and for shorter periods of time, and
they're hitting the donation bins much quicker. What are those
garments that are hitting the donation bins. It's cheap clothing,
what we call fast fashion, as you allude to, and
that has really driven the growth of the global second
(17:14):
hand apparel industry, not just in Guatemala, but all over
the world. Is created excess supply. And it's interesting because
you know, it's not just the US where clothes are
being thrown away at a great rate. The fastest going
exporterer is actually China, which makes a lot of sense
because Chinese consumers have access probably to more and more
(17:35):
easily access fast fashion than anywhere else in the world,
and they too are throwing it away. I mean, so
you have this giant global churn of all this extra clothing.
You have all this supply and it's ready made for demand.
Speaker 1 (17:49):
Adam, you said that some of the clothing that comes
into the facility in Guatemala, despite all their care, can't
be used and they have to throw it away. And
even those items aren't necessarily destined for a landfill.
Speaker 2 (18:04):
No they're not. I mean. One of the exciting things
about Megapaka is that they've also gotten into the clothing
recycling business, and so they have an entire wing of
their site and their company called Nova Fiber, and what
they've done is imported European fabric recycling technology. So they'll
take those unwanted garments and it's not just unwanted garments
(18:25):
from the US. They are surrounded by new clothing manufacturers.
They're factories all around them in Escuintala. They'll send their cuttings,
unwanted pieces of fabric to Megapaka and Nova Fiber, and
those scraps and unwanted clothing will become something called shoddy,
which is this very low quality fabric mix that can
be used and is used as insulation. It's used in
(18:48):
mattresses as mattress padding, and in fact, Megapaka sells that
it stores mattresses made with shoddy produced in the Nova
Fiber facility, So they're really committed as much as possible
to using everything that comes in and in fact, some
of that shoddy has actually been sent back to the US.
In fact, while I was there, their first shipment of
shoddy to the US arrived at a company in Arizona.
(19:10):
So you see the circularity happening between Guatemala and the US.
It comes from the US, goes back to the US,
and that's just going to grow.
Speaker 1 (19:18):
After reporting all about it and spending time with them,
what's the thing that surprised you most about this operation?
Speaker 2 (19:24):
Well, I think the thing that surprised me most was
the how algorithmically determined its pricing and its stores are.
This is so far ahead of what other people are
doing in the industry. I mean, you have very large
secondhand retailers. For example, in Japan, book Off Corporation, which
is a company I've spent a lot of time with.
They're quite sophisticated, but they don't have this kind of
(19:45):
algorithmically determined pricing. Goodwill is much larger than Megapaka, and
they do some amazing things and they have their own
challenges and their nonprofit, but they don't have this algorithmically
determined pricing. And so if we can make this a
more sophisticated operation, I think it raises the brand of secondhand.
Speaker 1 (20:02):
Adams was so interesting. Thanks for taking us along for
the ride, Thanks for coming, Thanks for listening to us
here at The Big Take. It's a daily podcast from
Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the
iHeartRadio app, Apple Podcasts, or wherever you listen, and we'd
love to hear from you. Email us questions or comments
to Big Take at Bloomberg dot net. The supervising producer
(20:24):
of The Big Take is Vicky Virgolina. Our senior producer
is Catherine Fink. This episode was produced by Jilda Decarli
and Sam Gebauer. Kilde Garcia is our engineer. Our original
music was composed by Leo Sidrin. I'm West Kasova. We'll
be back tomorrow with another Big Take.
Have you ever wondered what happens to those old Levi's
and tired nikes that you drop off at a clothing
drive or leave in a donation bin. Well, there's a
good chance that at least some of the clothes you
give away will end up in Guatemala. It's the number
one importer of used clothing from the US. In part
(00:22):
that's because of one company that buys up tons of
donated clothes and re sells them in Guatemala. In across
Central America, it's called Megapaca.
Speaker 2 (00:33):
So most people in the US or even outside of
Central America have never heard of this company. But if
you go to Guatemala in particular, it is a household name.
The brand recognition is higher than Walmart, It's higher than Zara.
Speaker 1 (00:45):
Bloomberg's Adam Mintor visited Megapaca's vast operation in a Squintla,
Guatemala to see how it's transforming the business of secondhand clothing.
He reports that Megapaca is now expanding with the aim
of becoming a household name in a new, much bigger
market the US where the clothes come from in the
(01:07):
first place. I'm West Kasova today on the Big Take
mega Paka turns discards into dollars. Hey, Adam, how's it going.
(01:29):
It's going okay. I've been looking forward to talking to
you about this story because it's about a company I
have never heard of. And you've been covering the clothing
recycling industry for a long time, You've written books about it,
and yet this company, Megapaca, kind of escaped your notice
for quite some time. Tell us about this company. Yeah,
it did.
Speaker 2 (01:49):
Like a lot of people who follow US clothing and
sort of the globalized export of it. I had been
focused for so long on West Africa, East Africa, Pakistan.
We see all these pictures, but in fact, Central America
is the largest destination for US used clothing and Megapaca
is the number one importer in Guatemala and for that
(02:10):
whole region. And I just happened upon them because I
was at a conference in Costa Rica where they presented,
and I was just knocked out by the scale and
sophistication of what they do, and I thought, this is
something I have to write about.
Speaker 1 (02:23):
And everything they sell is used clothes from the US.
Speaker 2 (02:27):
Everything they sell is used clothes from the US. In fact,
that's a feature, it's not a bug. Their marketing is
everywhere all over Guatemala.
Speaker 1 (02:35):
So yam Omegapaca, Megapaca is mizienda in Guatemala.
Speaker 2 (02:41):
You will see their signs, these really elaborate graphics printed
on their trucks and it'll all say one hundred percent
imported from the United States. It's a selling point. They're
very proud of it, and people are very keen to
get it. Guatemalan consumers, like consumers everywhere really these days,
are very fashioned forward. They're very cued by what they
see on the internet. They're interested in the same fashions
(03:01):
as somebody in Brooklyn might be.
Speaker 1 (03:05):
Tell us how this company started and where they are now.
Speaker 2 (03:10):
So like all great entrepreneur heal stories, they started very modestly.
An entrepreneur, Mario Pania, looking for a business. He originally
thought he was going to import automobile parts from the US,
and he actually went to the US looking for automobile parts,
and he decided that was too hard, and he heard
about clothing. He knew, being Guatemalan that there was a
(03:31):
demand for secondhand clothing. There was an opportunity there, and
so he rented a car. I believe he had about
thirty five thousand dollars in capital, and he just started
driving around the US to thrift stores looking for clothing
that he could export back to Guatemala. And I believe
he drove around for three weeks until he found his
first load in New Jersey. And so they started out
(03:52):
importing clothes into Guatemala and wholesaling them to small pacas.
And if you've ever been to Guatemala or Central America,
you'll have recognized the pockets. They're just small stall street stalls,
often with hand lettered signs, that are selling bundles of used,
imported clothes. And so Mario thought, well, we'll just wholesale
to them. And then one day, as he described it
(04:15):
to me, the power bill came due and they needed
cash fast, and so they basically opened their warehouse and
said all comers come and buy clothes, and at the
end of the day they'd made sixty six dollars. And
as he said to me, I realized, then we're in
the retail business, not the wholesale business. And so they
started opening stores very slowly over the last twenty years
(04:35):
that have become an absolute retail juggernaut across Guatemala and
other Central American countries.
Speaker 1 (04:41):
So Adam, like you say, you went and saw this
operation in Guatemala, can you describe it, because it's astonishing
just how sophisticated it is.
Speaker 2 (04:49):
So when you walk into this warehouse, your first impression
is chaos. I sometimes think of it as like popcorn popping,
because you see garments flying everywhere and you're thinking, there's
no order to this. But it's incredibly sophisticated. When a
shipping container comes in, there's a first sort, that's what
they call it, and it's just very basic. We're going
to sort out the men's clothes from the women's clothes,
(05:10):
from the children's clothes, from the shoes, and whatever trash
is in there. Stuff that just can't sell that'll get
sorted as well. Those are the new employees who do that.
They're just learning the business. But the magic really starts
happening in the second sort, and that's where you see
how these thousands of garments that are coming through the
system per hour really get divided and turned into a
(05:33):
profitable business. So in the second sort, you have more
experienced employees who can sort the men's genes from the
women's long sleeve blouses from the children's trousers and they're
doing hundreds Each of these employees are doing hundreds of
these an hour, and when you watch it, I mean,
it's kind of overwhelming. I felt exhausted. I don't know.
I don't know how they do it and continue being
(05:55):
able to stand and can concentrate. But they're very committed
and they seem to really get some enjoyment about getting
this right, in part because if they do well and
they're being watched at all times for just the performance,
they can make it to the pricing stage. And that's
where Megapaca's very best, most experienced employees are, and it's
where Megapaca really makes its money. That's where you have
(06:20):
to figure out what each of these garments is going
to be worth when it hits the racks. And that's
not just somebody standing there saying, hmm, this looks like
a five dollars blouse to me. What they're provided is
computerized data on a screen in front of them that
tells them what similar garments have sold for in Megapaca
is now, as a few weeks ago, one hundred and
(06:41):
twenty three stores across Central America plus the websites, and
that gives them a range of prices. They can then
take those prices and look at the condition of a
specific garment and say this garment should be priced high
on the continuum potential prices that this type of garment
has sold at, and that pricing data is then fed
back into the system and it's tracked to the store
(07:02):
and they're judged on whether they hit it right. Is
somebody going to pay that price? I mean, if you
see five hundred gap T shirts over the course of
a week, you know you're going to have a pretty
good idea of where they wear, you know, And so
they're looking at that stuff and then going right back
to that algorithm printing out the price tag which has
a QR code on it. That QR code when it
(07:24):
goes to the shop, say in Guatemala City, will allow
Megapakat to say, Okay, this kind of thing from Fargo
North Dakota sells poorly in this store, but maybe that
same kind of garment from Fargo North Dakota sells really
well in a different Guatemalan megapaca. It's that detailed, it's
incredibly sophisticated, and it's nothing like being in a popcorn popper,
(07:45):
which is what I thought I was in what I
walked in there the first time.
Speaker 1 (07:49):
You mentioned that shoes coming in is another lucrative part
of the business, and you describe what happens to a
shoe that arrives in their facility. Paint us a picture
of that.
Speaker 2 (07:59):
What Megapac does is what a lot of small secondhand
dealers I've seen in Mexico do, which is they upgrade them,
they up value them. And the way you do that
is you wash them. Well, it's one thing to be
a small guy with a street stall, you know in Esquintola, Guatemala,
who buys ten shoes a week and washes them clean.
What Megapaca has is an entire washing line. It's on
(08:22):
the second floor of the distribution warehouse, and it's incredible.
You've got a little over a dozen employees who are
receiving shoes that have scuff marks, maybe some of them
are muddy. They've been donated to, you know, thrift stores
in North America, in the United States, and they need
to be cleaned up. In the space of two to
three minutes, they are able at these wash basins to
(08:44):
turn these use looking shoes into relatively new looking shoes.
And it's profitable. As it was described to me, a
wash shoe adds two to three dollars of value to
that shoe, so it's really worth it for Megapaka to
do this. And it's just one more example of how
Megapaka is squeezing as much value as it possibly can
(09:06):
from these closet it imports. But even more to the
point from a sustainability standpoint, they're making them more attractive.
They're turning the trash into treasure.
Speaker 1 (09:17):
So Adam, there's another dimension that you describe to their
pricing system, which is once they've fixed this QR code
and given it what they think is the proper price,
it goes on the racks and then they start to
see whether it sells.
Speaker 2 (09:31):
What Megapaca does is it employs what's called a Dutch auction,
which is a Dutch auction is when you take an
item and you drop the price until somebody buys it.
And so what happens is a new garment goes on
the rack and it's selling at one hundred percent the
price that was affixed in the distribution warehouse with the
QR code. After a week, if it doesn't sell at
that price, it goes to another rack. Where it sells
(09:53):
at ninety percent of the price a ten percent discount.
If it doesn't sell after that, it goes to another rack.
But this is a nine weeks cycle until you're left
with what doesn't sell. But what's remarkable about this system
is that everybody kind of gets their own price points.
So the fashion forward Guatemala City lawyer who wants, you know,
(10:13):
a nice new suit at a discount, they can go
in there and buy Megapaca's price one hundred percent, and
as the price comes down, you get different people buying
the stuff till you get maybe to the ninety percent discount,
which is towards the end, you know, where maybe it's
farmers coming in from the hills around Guatemala City looking
for the stuff at their price point. Megapaka claims that
they are able to sell eighty percent of the stuff
(10:36):
that comes in to their stores. Most secondhand retailers in
the US only sell about a third of the stuff
on their racks, So it's extraordinary and there's a lot
packed into that, because you know, there is this feeling
that there's so much new stuff going on the racks
there that if you don't get into the store today
or tomorrow, you're going to miss something. It won't make
it to the twenty percent off side. So really it's
(10:58):
there's that huge brand recognition that it's just so important,
especially to Guatemalans who are looking for apparel.
Speaker 3 (11:06):
Like everyone, they like a good deal.
Speaker 1 (11:08):
That's Jose Rivera, he's Mega Paca's back office manager. He
says the company puts a lot of attention on the
store experience, both for customers and employees.
Speaker 3 (11:20):
You know, if you go to one of our stores,
we always like look for the details. You know, it
has to be well lit, we're organized, it has to
smell well. If you go to the restroom, it's going
to be a clean restroom. So just just part of
the whole shopping experience. This has come just back to
the beginnings that Maria and Gustavo always wanted to build
a company that you wanted to come to work for.
You know, it was funny, it was just not work.
(11:41):
It was also an enjoyable experience. All of these are
just extensions of the core values that are ingraining our company.
Speaker 1 (11:50):
Adam. So far, we've talked about how Mega Paka is
taking advantage of the flow of clothes from the US
into Guatemala where people really want to buy it. But
now you right, the company has a whole different model
for expanding, right.
Speaker 2 (12:07):
Mario Pania, who's the co founder of the company, has
always been a very ambitious man. And once they had
conquered Guatemala, if you will, right around the middle of
the last decade, he told me that he sat down
as partners, and I loved the phrase he used. He said,
we can sit around and rub our bellies, or we
can expand.
Speaker 1 (12:24):
Here's Jose Rivera again.
Speaker 3 (12:26):
This has always been an ongoing conversation since the beginning.
They always had in their mind to have a big company,
you know, so the natural step is always keep growing
to the next country.
Speaker 2 (12:38):
And so over the last eight years they've expanded into Honduras.
El Salvador in the southern part of Mexico. Certainly wasn't smooth.
Anytime you've during an international expansion, there's challenges, but they
feel that they've got that under control.
Speaker 1 (12:50):
And so Mario then.
Speaker 2 (12:51):
Got to the point where he's ready to exercise his
true ambition, which is to be the world's largest retailer
of second hand clothes. And as he said to me,
the only way to do that is to achieve in
the United States, you need to expand there and you
need to own the US market.
Speaker 3 (13:09):
The US has always been like the Holy Grail, you know,
like one day we're going to hit the US.
Speaker 2 (13:14):
And so that's what they're doing.
Speaker 1 (13:17):
After the break how Mega Paka intends to capture US customers.
As we just heard, Megapaka is bringing its business to
the US, and Adam says, for now, they're starting fairly small.
Speaker 2 (13:37):
The question always was how do you do this? You know,
is Megapaca just going to go in open stores and Texas,
in Utah and California, places which might be good markets
for them. No, They've launched a US website just this
month and they're going to see how it goes one.
It's going to give them data on how people shop
Mega Pakat in the US. Right now, the clothes that
(13:58):
are going on the website in the US are clothes
that would have gone to Guatemala. So it's one of
the partners that they buy from in South Carolina. They
are taking those clothes and they're basically diverting them into
the US market instead of sending them down to Guatemala.
Speaker 1 (14:13):
Adam says that Megapaca has its eye on particular customers
in the US.
Speaker 2 (14:18):
The people they're targeting are the millions of Central American
migrants into the US, the Central American expats who've grown
up with and grown to love megapaca megapacas.
Speaker 1 (14:31):
Jose Rivera explains it this way.
Speaker 3 (14:33):
We're going after the Latino market. You know, that's the
biggest minority in the US, So we're just trying to
give them a feel of home. You know, go to
a store where they where there's someone that speaks their languages,
that they have their music, people welcome you. That's what
we're aiming at, not as specifically the markets that we
already are based, but just the whole Latino market.
Speaker 2 (14:56):
If you go when you look for Megapaca marketing in
the US right now, you're not going to find it.
But if you want to go find Mega Pocket marketing
about their US website in Guatemala, you'll have no problem
finding it. Because what they're doing is they're going on
WhatsApp and saying, Hey, tell your uncle in Texas that
Mega Packet is in the US, and if you buy something,
(15:16):
you get twenty five percent off a Guatemala Mega Pocket.
Speaker 3 (15:19):
The first thing that we started is We advertise it
in the in Guatemala, Honduras and Alsabathers. You know, tell
your relatives in the US that Megapaca is. It's there,
and they can go to our webs and they and
they can buy. We also have decals on our trucks.
We also have advertising in our stores, and we're also
advertising on social media in the US.
Speaker 1 (15:43):
I asked Rose Rivera where he sees the company headed
in the US five years or ten years from now.
Speaker 3 (15:50):
So everything that we've been doing for years in the
countries that we're at right now, it's been just like
the preparing grounds for us to launch in the US.
So this is the website just gives us a better
idea where where a customer base is at. And if
we're getting a lot of orders, let's say from La
we know that that's where we we have to put
a story. We get in a lot of orders from Houston,
(16:12):
you know, from San Francisco, whatever those those orders are
coming from, the well the majority of them, we know
that that's a good place where that our customer base
is at, and that's where we have to put the
first stores.
Speaker 1 (16:25):
When we come back. What happens to all the clothes
Megapaca isn't able to sell Adam, You're right about how
the rise and fast fashion of these clothes that are
so cheap, and of the moment that people in America
(16:46):
buy them, where them a little bit, men just toss
them aside, has given great momentum to this industry.
Speaker 2 (16:52):
Yeah, well we know this. There's very good data out
there that Americans are wearing their garments lest they're wearing
them fewer times and for shorter periods of time, and
they're hitting the donation bins much quicker. What are those
garments that are hitting the donation bins. It's cheap clothing,
what we call fast fashion, as you allude to, and
that has really driven the growth of the global second
(17:14):
hand apparel industry, not just in Guatemala, but all over
the world. Is created excess supply. And it's interesting because
you know, it's not just the US where clothes are
being thrown away at a great rate. The fastest going
exporterer is actually China, which makes a lot of sense
because Chinese consumers have access probably to more and more
(17:35):
easily access fast fashion than anywhere else in the world,
and they too are throwing it away. I mean, so
you have this giant global churn of all this extra clothing.
You have all this supply and it's ready made for demand.
Speaker 1 (17:49):
Adam, you said that some of the clothing that comes
into the facility in Guatemala, despite all their care, can't
be used and they have to throw it away. And
even those items aren't necessarily destined for a landfill.
Speaker 2 (18:04):
No they're not. I mean. One of the exciting things
about Megapaka is that they've also gotten into the clothing
recycling business, and so they have an entire wing of
their site and their company called Nova Fiber, and what
they've done is imported European fabric recycling technology. So they'll
take those unwanted garments and it's not just unwanted garments
(18:25):
from the US. They are surrounded by new clothing manufacturers.
They're factories all around them in Escuintala. They'll send their cuttings,
unwanted pieces of fabric to Megapaka and Nova Fiber, and
those scraps and unwanted clothing will become something called shoddy,
which is this very low quality fabric mix that can
be used and is used as insulation. It's used in
(18:48):
mattresses as mattress padding, and in fact, Megapaka sells that
it stores mattresses made with shoddy produced in the Nova
Fiber facility, So they're really committed as much as possible
to using everything that comes in and in fact, some
of that shoddy has actually been sent back to the US.
In fact, while I was there, their first shipment of
shoddy to the US arrived at a company in Arizona.
(19:10):
So you see the circularity happening between Guatemala and the US.
It comes from the US, goes back to the US,
and that's just going to grow.
Speaker 1 (19:18):
After reporting all about it and spending time with them,
what's the thing that surprised you most about this operation?
Speaker 2 (19:24):
Well, I think the thing that surprised me most was
the how algorithmically determined its pricing and its stores are.
This is so far ahead of what other people are
doing in the industry. I mean, you have very large
secondhand retailers. For example, in Japan, book Off Corporation, which
is a company I've spent a lot of time with.
They're quite sophisticated, but they don't have this kind of
(19:45):
algorithmically determined pricing. Goodwill is much larger than Megapaka, and
they do some amazing things and they have their own
challenges and their nonprofit, but they don't have this algorithmically
determined pricing. And so if we can make this a
more sophisticated operation, I think it raises the brand of secondhand.
Speaker 1 (20:02):
Adams was so interesting. Thanks for taking us along for
the ride, Thanks for coming, Thanks for listening to us
here at The Big Take. It's a daily podcast from
Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the
iHeartRadio app, Apple Podcasts, or wherever you listen, and we'd
love to hear from you. Email us questions or comments
to Big Take at Bloomberg dot net. The supervising producer
(20:24):
of The Big Take is Vicky Virgolina. Our senior producer
is Catherine Fink. This episode was produced by Jilda Decarli
and Sam Gebauer. Kilde Garcia is our engineer. Our original
music was composed by Leo Sidrin. I'm West Kasova. We'll
be back tomorrow with another Big Take.
Hosts And Creators
Sarah Holder
Saleha Mohsin
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Boysober
Have you ever wondered what life might be like if you stopped worrying about being wanted, and focused on understanding what you actually want? That was the question Hope Woodard asked herself after a string of situationships inspired her to take a break from sex and dating. She went "boysober," a personal concept that sparked a global movement among women looking to prioritize themselves over men. Now, Hope is looking to expand the ways we explore our relationship to relationships. Taking a bold, unfiltered look into modern love, romance, and self-discovery, Boysober will dive into messy stories about dating, sex, love, friendship, and breaking generational patterns—all with humor, vulnerability, and a fresh perspective.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com