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In the time period leading up to the pandemic, online retail sales represented a small portion of the overall market, around 3%. However, due to the effects of lockdowns, this share increased to nearly 4% in 2020, and an estimated of more than 5% by the end of 2022, owing to the impact of lockdowns and change in behavior for many Filipino.
Despite this growth, the Philippines is expected to lag behind other countries in the region in terms of online retail, due to factors such as slow internet speeds, inadequate logistics, and relatively low internet penetration. Only about 54% of the population is estimated to have used the internet in 2021, which is lower than the global average.
However, there is a significant potential for online retailers to reach the 92 million active social media users in the Philippines, who access the internet primarily through their smartphones. The government estimates that e-commerce contributed 3.4% to the country’s GDP in 2020, and this is projected to increase to 5.5% in 2022.
The government has attempted to boost the sector in the past, but these efforts have fallen short of the target set in the e-Commerce Roadmap 2016-20, which aimed to have the sector contribute 25% to GDP by the end of the plan’s time horizon. In 2020, the government passed the Internet Transactions Act to improve regulation in the sector, but implementation has been hindered by issues such as resistance from e-commerce platforms to provisions that would hold them liable for products that do not comply with existing laws.
Online marketplaces like Lazada, Shopee, Zalora, Ebay, and Kimstore have been becoming increasingly popular in the Philippines since the onset of the pandemic. Lazada, which is owned by Alibaba in China, has been making its products available to customers in the ASEAN region through its Taobao platform. Additionally, online grocery shopping has also seen an increase, with delivery companies like Foodpanda partnering with 7-Eleven stores. With the rise in online shopping, digital payment services have also seen a boost. The market is currently dominated by two players, Gcash and Maya, with Gcash having 60 million users and Maya boasting 47 million registered users. With a large youth base in the Philippines, there is potential for convenient credit facilities such as “buy now, pay later” schemes to be successful.
3rd-party platforms dominating the growth: Since the outbreak of the pandemic in 2020, the e-commerce market in the Philippines has grown rapidly, with a majority of this growth being captured by major e-commerce platforms. This is due to their established IT infrastructure and user-friendly interfaces, which give them an advantage over local competitors. However, local retailers are also seeing growth, with companies like SM Retail reporting a 600% increase in online sales growth in 2020, and the SSI Group reporting e-commerce sales four and a half times larger than in 2019. These retailers have invested significantly to continue improving their e-commerce offerings.
Expanding Categories: The pandemic has led to changes in consumer purchasing behavior in the Philippines with more people opting to buy essentials online. Digital platforms have had to prioritize easy and convenient access to everyday essentials, leading to a 15-fold increase in categories such as food staples and cleaning supplies. Retailers have adopted the use of personal shoppers to meet the needs of consumers looking for ways to avoid person-to-person contact. Examples of this include SM Retail launching a concierge service and Rustan’s Department Store launching a Personal Shopper On Call service. Despite the trend of personal shoppers, e-commerce platform Shopee broke a record by selling 12 million items in the first 24 minutes of its 12.12 year-end sale in 2020.
In Philippines, There are about 1.9% of people use credit cards, and 21% of people use debit cards. While there are 9.1% of people purchase on the internet, there is only 7% of people with online banking accounts.
For E-Commerce Customers in PhilippinesWhat are the major driving factors to purchasing online?
There is 43.31 million consumer goods e-commerce users in Philippines, and they spend total of around 16.79 billion USD dollars in 2021. That makes a per capita spending on consumer goods e-commerce of around 388 USD. Also, in those e-commerce users, about 31.8% of them purchase through their mobile phone.
E-Commerce Roadmap: The Department of Trade Industry
SM Retail: 2020 Annual Report
Our consumer research practice tracks what customers spend and how they make decisions across major economies in the world.
