Line of Sight

Growth, opportunities in PH online shopping

IT’S the most wonderful time of the year once again! More people can be seen strolling and shopping in the metro’s shopping malls, bazaars, and tiangges—availing of the season’s back-to-back sales and promotions on products. As more people go out to spend, however, vehicle traffic has also increased, resulting in congested roads and highways, longer time on the roads going to our destination and back home, and longer queues on the check out counters.

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The stressful volume of vehicle traffic in the metro has led a lot of us to shop online. Online shops such as Amazon, Lazada, Zalora, Shopee, and OLX have recently gained popularity in the country. According to Statista, one of the leading statistics companies on the internet, revenue in the eCommerce in the Philippines amounts to US$1,237 million in 2017, and is expected to show an annual growth rate of 16.2%, resulting in a market volume of US$2,619 million in 2022.

Benefits of buying online

Consumers flock to online shops due to convenience, discounts and savings, and the wide array of selection in one website.

With just a few clicks, consumers can easily begin buying from shopping websites from their own internet-connected desktop computers, laptops, and mobile phones. After checking out their finds, consumers can begin waiting for the delivery of their purchases at their doorsteps in just a few days. The experience offered by these websites have lured some consumers away from the typical brick-and-mortar stores, going away with the usual physical experience of the product before the actual purchase.

Discounts and savings are what’s also driving consumers to online shops. In 2009, the Alibaba Group transformed China’s Single’s Day, the country’s de facto holiday for Chinese singletons, into a global shopping sale and generated huge revenues from this event. Last November 12, the Alibaba Group reported that it was able to generate US$25.3 billion of gross merchandise volume, which was greater than the total revenues generated by United States’ Black Friday and Cyber Monday combined.

With lesser people going to shopping malls and physical stores due to worsening traffic volume conditions and busier working schedules, people go to online shopping websites to purchase goods and services. These consumer market conditions are seen as an opportunity by major retailers. They have tapped the online platform to bring their products to new and existing consumers and generate additional revenues.

Opportunities in the market

As e-commerce industry in the Philippines grows, industry players have entered into several transactions to seize the opportunities the market brings. Robinsons Retail Holdings, Inc. recently acquired a 20% stake in the company that operates e-commerce site BeautyMNL, a leading local online retailer of personal care and beauty products. SM Investments Corporation has affiliated with Lazada to offer various fashion finds, accessories, and home and office products, among others. The Ayala Group completed its acquisition of a 49% stake in fashion and beauty website Zalora. In its disclosure to the Philippine Stock Exchange, the Ayala Group aims to capture the growing opportunities in e-commerce amid a robust domestic consumer market and an increasingly digital environment.

Other than the obvious takers of opportunities, logistics companies have also beefed up their capacities to ride on the growing trend and on the ongoing “Build-Build-Build” program of the national government. One of the considerations in purchasing certain goods or services online is the transportation cost. Most consumers want to ensure that the cost of bringing the items or services to their doorsteps are reasonable enough, and that the time it will take for the delivery to reach them should take only days. According to FedEx, 44% of the reasons why consumers abandon their carts online are due to high shipping costs. Hence, logistics companies are now reducing more unnecessary costs accumulated in the process, improving operational efficiencies by leaning towards more automated processes, and building warehouses in major city hubs to support last mile deliveries, to become more attractive service providers.

Lately, conglomerates have been acquiring logistics providers to expand existing operations and to capture the growing deliveries as a result of increasing purchases online. This year, Chelsea Logistics Holdings Corp. together with SM Investments Corp. bought indirect interests in the 2GO Group. Meanwhile, Metro Pacific’s MetroPac Movers, Inc. acquired Ace Logistics, a logistics firm also engaged in e-commerce delivery, after acquiring four other logistics businesses in 2016.

Future

The rise of online consumers is most likely expected to continue in the coming years due to the increase in the number of consumers getting connected to the internet, the increase in consumers’ disposable income as a result of the tax reform program of the national government and, of course, due to worsening road traffic conditions in major cities.

Our government, through the Department of Trade and Industry, have been very supportive of the growth of the e-commerce industry and has created a Philippine E-Commerce Roadmap 2016-2020. The objective is for e-commerce to contribute 25% to the country’s Gross Domestic Product by 2020.

Amidst the growth of online shopping, consumers shape the market. They gradually force industry players to adjust to rapidly changing conditions and to create an environment where both parties have a win-win situation: consumers save time while shopping, and retailers are allowed to make their products more accessible, not only in the domestic market, but also in the international market. After all, it is the digital age, it is a great time to make the gaps smaller, the markets larger, and Christmas merrier.

Andrew Macarayo is the In-charge of Audit & Assurance, P&A Grant Thornton. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firms in the Philippines, with 21 Partners and over 850 staff members. We are in Makati, Cavite, Cebu and Davao. For comments on this article, please email andrew.macarayo@ph.gt.com   or PAGrantThornton.marketscomm@ph.gt.com. For our services,visit www.grantthornton.com.ph.

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As published in Mindanao Times, dated 29 December 2017