Is the Philippines Asia’s most promising e-commerce opportunity?

Written by Oliver Segovia. Oliver (@oliversegovia) is the CEO of AVA.ph, an e-commerce platform for premium lifestyle brands in the Philippines, and the co-author of Passion & Purpose from Harvard Business Review Press.

Kim is one of the 600,000 employees in the Philippines’ fast growing business process outsourcing industry. Her shift, a daily 8-hour rush serving banking customers in the US east coast, begins every midnight and ends when most local businesses begin. On stressful days, she typically needs a jolt of online retail therapy. But since she gets home an hour before the closest mall opens, the internet has become the equivalent of her retail best friend.

Meanwhile, halfway across the bustling Metro Manila megacity of 12 million people, Jen is about to start her day running a wholesale trading business. She brings in premium brands from the US, and has a loyal following. But since the waiting time for retail space in her preferred mall is three years, she’s built her loyal following of customers entirely online.

Both stories, comprising of composite characters, are a reflection of typical use cases that are replicated increasingly everyday across the Philippines.

With 34 million internet users, the country is the largest English-speaking online market in East Asia. It’s also growing fast. In Kleiner Perkins’ 2012 State of the Internet Report, the country was pegged as one of the world’s top 5 fastest growing internet markets.

And if you’re familiar with former Philippine First Lady Imelda Marcos and her 3,000 pairs of shoes, then it wouldn’t come as a surprise that Filipinos love to shop. The case of Kim and Jen above suggests that the growth in disposable income is exceeding the growth of physical retail space.

This is why many local brands have built their following online. At AVA.PH, a curated e-commerce platform for premium, beautiful products from over 130 brands, more than half of our partners are emerging local brands who crave for more distribution and presence online.

Though Indonesia was the region’s tech darling for the past two years due to its bigger market, local entrepreneurs and foreign investors have now fully realized how immensely complex and frustrating it is to scale an e-commerce venture in a market where consumers are distrustful of online shops, possess no universally accepted payment methods, and require complex logistics.

Those concerns certainly exist in the Philippines, but it has a few other things going for it, which combined, I’d argue represent a compelling risk-adjusted market opportunity:

English Speakers. Lots of them: The Philippines is the 5th largest English-speaking country in the world. This makes Filipinos more intuitively familiar with new products coming out of Silicon Valley. Despite having no local presence, Amazon ranks as one of the top 20 most visited sites among Filipinos.

Consumption-driven: Over 70 percent of Philippine GDP is consumption, driven by USD 21B in overseas remittances that continued to grow throughout the global financial crisis. This greatly exceeds Indonesia’s USD 6.7B in remittances. Its macro-story is pretty compelling too. With GDP projected to grow 6-7 percent  in 2012, it’s among the top the 10 fastest growing economies in the world.

Mobile Adoption: There was a time early last decade when the volume of text messages sent in one day in the Philippines eclipsed that of the European Union in a month. Today, there are over 75 million mobile phones in the Philippines. The number of smartphones with 3G access now number 10 million, growing at a 45 percent clip in 2012.

Mobile has become a discovery tool for e-commerce, and with increasing mobile penetration, expect a deeper level of engagement with users on their smartphones and tables. We’re already seeing signs of this. At AVA, 50% of our users first open our weekly email newsletters through a mobile device.

Social Commerce: Not only does the Philippines boast the highest Facebook penetration in the world, it also ranks the highest in share of time spent on social networking. When young entrepreneurs want to start a business, the first place to set up shop online is Facebook.