ANC Future Perfect – DigitalFilipino E-Commerce Summit

ANC Future Perfect – DigitalFilipino E-Commerce Summit

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  • February 26, 2012

Last March 22, I was a guest at ANC Future Perfect and talked about the e-commerce landscape and DigitalFilipino E-Commerce Summit. Here are some insights I shared then and learned from the Summit.

State of E-Commerce in the Philippines

Last March 29, the Philippines historic connection to the Internet turned 18. I think we have gone a long way and grew so much. But am also sad that we don’t have enough data gathering process and tools in place to accurately measure it.

We Need Data: Philippine Information Society Data Alliance Project

For instance, broadband subscriber base has increased by 45% to over 2.9 million in 2011 compared to a year ago. However, most industry peers still peg the number of Internet users to 30 million in the Philippines. Around 1/3 of it were assumed to be household users. This number was also used for the past 2 years.

The Yahoo -Nielsen Net Index 2011 peg e-commerce growth to have declined from 3% to 1% partly attributing to Internet usage not achieving growth in some urban areas in the country.

Digital Philippines 2011 Yahoo – Nielsen Net Index Highlights

Jack Madrid (country manager of Multiply Philippines and president of DCOM) believes we are still on day 1 in e-commerce. His perspective on our e-commerce numbers is more or less similar to what Donald Lim has estimated – which is around P4.3 to P5 billion.

Of course, to folks like me (with my biases), the decline or this status quo in e-commerce transactions is not acceptable. Especially when you get to see other reports that paints a much more optimistic perspective on e-commerce. My take on this one is that around 18% to 20% of the current Internet user population do e-commerce trading (selling of products or services) where the actual closing of transactions can take place both online or offline.

ASEAN E-Commerce Database Project 2010 Report

As I look at the winners of DigitalFilipino Web Awards in 2011, where the list was generated based on pure performance numbers, they are mostly e-commerce players where revenue is derived from sales, advertising, and consumers-to-consumers trading with each other. I can’t help but wonder on the following:

  • Should airline site online sales not be included in our overall e-commerce revenue count? If yes (excluded), does that mean the online booking sales of hotels and tours shouldn’t be counted either? (My estimate is around 10% buy airline tickets online.)
  • Should we consider bills payment done through the Internet and mobile banking an e-commerce transaction? (My estimate is at 7% of current Internet users does online banking and likely to be doing bills payment too.)
  • How will we treat offline face-to-face sales that transpires between buyers and sellers who met through marketplace sites like Multiply, Sulit, AyosDito and the likes? This especially to sales of real estate properties and cars.

Indeed, there are a lot of e-commerce transactions happening in our country that are not captured. This includes professionals receiving payment for services rendered in marketplace sites like o’Desk, bloggers advertising income, and the likes.

With group buying sites also selling hundreds to thousands of coupons per day, we certainly need to have better measurement indicators to monitor our growth. This is the biggest problem we have right now. Our inability to accurately report the growth of the e-commerce sector. It is also the reason why it is not getting the support it deserves.

If your organization is interested in giving data, that can be posted publicly, to support the Philippine Information Society Data Alliance Project, kindly contact me.

Changing payment forms, online banking, and financial services

When Multiply empowered their members to accept payments from Paypal, credit card, mobile phone, and cash, I believe it really shook the e-commerce space as getting an online merchant account was never easy. With Cashsense also allowing merchants to receive payments through MLhuillier and 7/11, an online seller now has many resource available to process online sales.

But with current economic conditions, the decision to buy “aspirational” items may take more time. This includes finding second hand units or looking for some special bidding sites where these items are offered at low cost. This is where new sites like ShopInstallment fill the gap. Gadgets can be purchased in installment without having the need for a credit card. For a transaction to proceed, it requires submission of documents which a lot were unable to do so. As a result, only 10% of total interested buyers were able to avail of its installment program to date.

For those with personal needs, a loan can be applied from one-year old site Lenddo that grants money lending from cash loan to education loan. It intends to serve the young middle class who doesn’t necessarily have any credit rating yet.

Lenddo FAQ and Fact Sheet

As far as Internet banking is concern, admittedly, it is great to see more banks offering Internet banking services, bill payments, and the like. However, the reality of local inter-bank fund transfer is still not in place for the regular depositor. It is a premium service given by some banks and not a default service that any online banking user can gain access to (and pay for). I guess it will take a very long time before this can be a reality unless the Bangko Sentral ng Pilipinas will take on the leadership and impose this as a mandatory service to customers.

Internet Banking in the Age of Social Media

State of Digital Marketing in the Philippines

Donald Lim’s (country head of MRM Worldwide) presentation during the DigitalFilipino E-Commerce Summit is more trends-oriented – where it is likely to move forward especially in relation to e-commerce. It made me contemplate on how we are doing in this area.

When you look at the online marketing initiatives by a lot of brands today, much of it remains the same where a lot carry out the same old contest format (photo / video / status sharing, voting, game applications, blog, etc), blog post events / campaigns, etc.

Creating Award Winning Integrated Marketing Campaigns

In 2011 and this year, there are a few adventurous ones that included hash-tag related blitz where part of the success benchmark is whether it will trend or not. Hopefully, there will be more location-based services type of campaigns this year for the brick and mortar establishments.

A growing number of companies are allocating budget for digital marketing. But the bottom-line is, we can’t just keep spending money without having a clear indicator on how can it impact revenue. Success has to be measured beyond non-financial metrics.

In addition to hard core reliable data on our e-commerce situation, businesses need to understand prospects more – beyond what we typically get from traditional market research as the current user base (especially the young ones) are gradually responding differently to it – often not consistent to what they do.

We see consumers complaining on ever-rising cost on basic commodities but may think otherwise when buying premium products from expensive snack (such as the recent Magnum ice cream mania), clothes, to gadgets.

Regardless of what ways we market our service, the trigger point for purchase is still emotions. “We buy with emotion and justify it with logic.” Although this would require triggering various fascination factors depending on the segment we want to attract.

The need of management for clearer ROI versus the need of designers and marketers to take the risk with their creative ideas can result to conflict. But if you believe that purchasing actions can be triggered by emotions, giving such leeway will be necessary.

This personal belief was also affirmed when Donald shared SoLoMoNoCo, a term coined by Mark Cripps of APAC MRM Worldwide. It refers to Social + Local + Mobile + Numbers + Commerce. The two additions refers to the need for metrics to be tied up and how it influence or impact spending.

Death of Group Buying

Donald believes that group buying will soon reach its end. He shared the idea that from usual group buying, people will be inclined to explore for ways where they can share resources. In these hard times, I guess that is convenient and practical for market segments that have limited purchasing resource.

Also, I have talked to two industry contacts lately whose companies were formerly known for their group buying and special deal sites. The shift to services, offering their platforms to leading brands, was driven by noticing a market plateau. This is where despite decreasing number of players, the buyers segment is not growing – and even shrinking.

A reason given is dissatisfied merchants where coupon buyers don’t return to try another product or service. I guess the counterpart reason behind this is that a lot of merchants have also downgraded the product or service they offer just because they gave the product or service at a discounted price. This resulted to disappointed customers. Instead of saying, “I got a great deal.” They will say, “I got what I paid for and not the package as promised.”

Another reason cited is sales promotion regulation where current rules require any online site selling items on promotion (including the conduct of promotions that does not require a purchase) should get a Department of Trade and Industry Sales Promotion Permit at least 30-days prior to the actual promotion. The launch of industry association DCOM intends to address this issue, in collaboration with the Department of Trade and Industry, and encourage an environment supportive of e-commerce growth.

I think as soon as group buying came into play, special deals or daily deals site immediately tried to provide an alternative in our local space. In the end, those that offer great deals shall thrive. This segment being able to penetrate nearly 5% of the Internet population is off to a great start. Will they be able to sustain or grow further remains to be seen as many have tried and gone already. Currently, am monitoring sites that includes Ensogo, Groupon Philippines, CashCashPinoy, CleverBuy, DealGrocer, among others and will be posting a story about this segment soon.

Are Filipinos receptive to e-commerce?
If the top sites will serve as indication, I truly believe that e-commerce is taking off in the country. The percentage may be the same as I have been using the 18% – 20% number since my first Online Shopper Report. But that base is growing as the population average age increases.

[scribd id=10510042 key=key-1sg9adlm7qlobwhmjhp3 mode=scroll]

As we reach the demographic sweet spot this 2015, I believe e-commerce will also explode at that time as the average Filipino then will be 25 year old – which the government believes as major resource for our economic growth.

Youth’s Role in Social Media and E-Commerce Growth

This is also the reason why a strong push is being made and necessary, from groups to bootcamp events, encouraging more start-ups in the country. We need to support young entrepreneurs who understands the need of their rising generation. Help them become entrepreneurs rather than being reliant on traditional jobs.

Increase Online Trust

As more users try their hands on e-commerce, in addition to referrals, trustmarks are slowly gaining recognition. Multiply released the Multiply Trust program where sellers, merchants, and business can avail of. This gives them privileges from priority listing, faster payout, to marketing support.

Sulit, on the other hand, partnered with Qartas and publicly announced it last January 2010 to encourage sellers to get SureSeal or SurePass for identity verification. In return, they get priority listing for their products and services on the web site. However, the partnership between the two already ended last February 1, 2012. Sulit is expected to replace it with another system that will likely embrace an in-house approach due to cost constraints.

Dun & Bradstreet is also introducing itself to local players in this space – particularly in business-to-business segment. Its famous product or service is the DUNS Number that allows a business to have a unique ID and can be used globally when doing inter-corporate transactions.

Despite these trustmarks, consumers will have to be vigilant from products they purchase online to online promotions they joined in. From personal experience (that may have developed a bias on my part), industry associations, whether in e-commerce or digital marketing, will likely take and protect the interest of their members first rather that of their target consumers.

How about mobile commerce?

With a growing number of mobile devices from tablets to smart phones, we can expect more sites to extend their services in this channel soon. Sites like Reebonz already does it. (Although this is a Singapore site that delivers to the Philippines in partnership with BDO for payment processing.)

I guess it will be just a matter of time. Especially when the ratio reaches to more than 20% of the site’s total visitors, players will likely start taking the plunge.