Much has been said about the futility of adopting a unified “Southeast Asia Strategy” to tackle a region with diverse languages, cultures, and markets. While the author is spot on, he’s only scratching the surface of what makes the region such a tough nut to crack that even the obscenely well-funded Rocket Internet is no sure bet for success.
Frédéric Levy (LinkedIn), CEO and founder of CashCashPinoy, a company which says it’s the number one product flash sales site in the Philippines, certainly knows a thing or two about Southeast Asia.
The entrepreneur, who’s also the VP of the Digital Commerce Association of the Philippines, experienced first-hand the challenges of building a sustainable e-commerce business in a large but daunting emerging market. The most immediate problem is the lack of a support services for online retail ventures.
“E-commerce is still a pioneer industry. There are still a lack of partners adapted to e-commerce’s flow. My company could probably be run with only 20 people in Europe, which is a mature market.” he says.
To counter that, CashCashPinoy has resolved to outsource nothing, to control the full quality of the organisation. That includes sourcing, shipping, and logistics. The only thing it doesn’t do is delivery.
Operational support is not the only area that’s lacking. Digital marketing in the Philippines too leaves much to be desired.
“A lot of marketing tools which are classic in e-commerce are not yet fully developed in the Philippines. One of the key for e-commerce is affiliation. As of today, there’s no established affiliation platform. Qualified databases are not really developed. And it’s also complicated to discuss with publishers about CPA or revenue sharing.” he says.
Despite these hindrances, the group buying site has grown into a credible business. Since launching at the end of 2010, it has raised USD 1.8M in Series A funding and made USD 7M in revenue last year. It’s on track to hit USD 11-12M in 2013.
Cities and provinces
To call Philippines a singular ‘market’ would be a misnomer. For practical purposes, the country can be divided into two: cities like Metro Manila, and provinces. While this distinction is important from a demographics point of view, Frederic explains that the logistical infrastructure in these two markets are drastically different.
As expected, logistics in the city is fairly painless, with dozens of players offering smooth and cheap services. The story is different in the provinces, which are dominated by three major players who are leading the market and charging rates that cannot really support the development of a nationwide e-commerce industry in the country.
“Until recently, the most important logistic players didn’t see the need to match e-commerce needs. Things are starting to change though. In the mean time, several smaller players claim to be digitally compatible and e-commerce friendly. But not all of them are really able to support the flow and volume,” says Frédéric.
Given the state of logistics in the rest of the country, e-commerce startups may have no choice but to focus on selling services like restaurants and spas.
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