E-commerce is huge in Southeast Asia, with the space receiving over US$500 million in investment in 2013. But in the Philippines there’s still a lot to be done, and mobile penetration and a lack of payment options appear to be the two obstacles in the way of e-commerce growth.
These are some of the insights shared by e-commerce experts and tech startups in the recent E-commerce Summit held by Philippine e-commerce watcher DigitalFilipino. Wilson Chua says it is not the population that dictates the success of e-commerce. He adds:
The predictor of e-commerce size is mobile internet penetration. When the mobile internet penetration in the country gets bigger, e-commerce gets bigger.
Philippine property marketplace startup RentPad affirms this. RentPad founder Chux Hizon says that upon their research on the market, it realized that the people are going mobile.
However, relatively few Philippine people are using mobile devices compared to their neighbors in Southeast Asia. According to last year’s study by Nielsen on smartphone penetration, the Philippines has one of the lowest mobile penetration rates in Asia at just 15 percent. Of that percentage, not all users are accessing the internet through their smartphones. According a different study by IT Seach Engine Optimization company Forward, only 40 percent of Filipinos their smartphones to access the internet on mobile devices.
Credit cards are not here
Adding to the burden of e-commerce players in the country is the low credit card penetration. With a 27 percent banking penetration rate in the country, only three percent of citizens own a credit card. This only means if an e-commerce business in the Philippines only accepts credit cards for payments, it will have a difficult time reaching customers.
Robertson Chiang, founder of payment gateway firm DragonPay, says that the boom of e-commerce in the country was when daily deals started. He adds:
It was the time that people wouldn’t mind trying it out, people started making risks. But a lot of people didn’t have credit cards and this was a big problem. Today, for any e-commerce business to prosper, they have to consider alternative payments mobile payments, rural bank payments – and is a major component.
DragonPay launched in the Philippines in 2010 after a huge wave of daily deals sites emerged. Now, it provides alternative payment services to consumers on e-commerce and daily deals sites in the Philippines.
Chiang says that he believes this helps increase the number of e-commerce transactions in the country. Through his personal studies and use of analytics, Chiang demonstrated that that “as of last year, 30 percent of e-commerce payments are done through alternative forms of payments.”
These alternative payments range from online payments, to physical ATM transfers, to over-the-counter payments. This means that companies such as DragonPay give consumers more options, and open the door to use more e-commerce sites.
However, Chiang adds that 95 percent of Philippine e-commerce volume is coming from Metro Manila alone. Other metro cities such as Cebu accounted for only 2 percent.
This means there’s still a huge untapped market for e-commerce startups. RuralNet, an electronic network for rural banks, is working on solving this problem. RuralNet CEO Daniel Arcenas says that it has 5 million depositors in its network of rural banks across more than 100 cities. This ought to create big potential for online merchants.
While increased mobile internet penetration and third-party payment solutions can help uplift the e-commerce space, there are other ways the tech community in the Philippines can work together to increase online purhcases.
Chua shares that startups in the Philippines need lower taxes and better ways to manage government regulations – according to a poll he conducted in the Startup PH Facebook group. He adds:
While the Philippines is looking at increasing taxes, Singapore and Hong Kong are outdoing themselves to see who can lower their taxes even more. If the government doesn’t get their act together then the entrepreneurial spirit in the Philippines will go to Singapore or Hong Kong, and the Philippines will lose the chance to make the next Google or Facebook.
Despite this, Chua says that startups in the e-commerce space have to keep their optimism. He says one of the advantages of being in e-commerce is the ability for the store to be open 24/7. He believes, despite slow progress maturity, a mature e-commerce industry will eventually arrive in the Philippines.
(Photo: DigitalFilipino Facebook page)
(Editing by Josh Horwitz)