Are Filipino Consumers Embracing Online Shopping?
By Vic Tria
According to Nielsen, consumers in the US today are embracing online grocery shopping nearly twice as fast as predicted just a year ago.
Roughly 20% of consumers bought groceries online—a figure that many considered the tipping point for adoption that would lead to the majority, or 70% of consumers, buying food and beverage online within the next 5 years.
Do you see this coming in our country?
Mergers and acquisitions, such us Amazon’s purchase of Whole Foods and recent announcements, have changed the equation so dramatically.
The majority of these consumers are millennials and post-millennials, the teenagers—all set to make that big leap to online grocery shopping. And we in retail business just have to work with them to make it happen.
On June 29, Amazon wiped out $17.5 billion from eight companies’ market values in one day with these two announcements.
1. Amazon recruiting entrepreneurs to run local delivery networks, a move against FedEx and UPS.
2. And Amazon acquiring Pill Pack, an online pharmacy startup.
What is fueling all of this online commerce boom?
Answer: Mobile online payment technology
Our affinity to cash is continuously decreasing, and a turnaround is in the air with even the unbanked segment, adopting e-wallets and mobile payment solutions—like PayPal, Apple Pay, Google Wallet, Facebook Messenger, Android Pay.
It is so simple. Just put in the app your credit or debit accounts, or simply load an amount that you need for your transaction and you are ready—be it online or in physical stores.
As mobile payment technology and online shopping make electronic payments more convenient, cash is becoming the big loser. Among millennials and post-millennials, e-payment is a no-brainer, someday soon the only cash in your pocket will be your virtual money.
Our affinity to cash is continuously decreasing, and a turnaround is in the air with even the unbanked segment, adopting e-wallets and mobile payment solutions
Let’s not even look outside Asia. Check our neighbor China.
Mobile payments have made inroads as a medium of settlement in Chinese cities.
Aside from convenience stores, shopping malls, and fine dining, mobile payments are even the norm among vegetable markets and other small-scale vendors. Alipay and WeChat Pay are the top two payment options in China, allowing you to shop for goods and services on the internet and in real physical stores.
China is going cash free and is light years ahead in online payments. China even pulls farther ahead of US in mobile payments with record $12.8 trillion in transactions in the last 12 months.
And these two payment systems are set to penetrate international markets.
Will it take long before this technology dominates our country?
The State of Mobile Payment and E-Commerce
According to We Are Social, the Philippines has 62 million mobile internet users, and 4% of the country’s population aged 15 and above, or roughly 2.5 million, are able to make online purchases.
In 2017, consumer expenditure on e-commerce has seen incredible growth across a number of interests and products.
Expense on travel has gone up by 30%, gathering about $643M, while purchases made on electronics & physical media increased by 15%, with total $543M.
Toys and other items of leisure and interest trail behind, but still with a growth of 27% totaling to $272M.
We know that cash is still king in the Philippines, but the figures here show that mobile payment and online transaction are making their inroads into the country.
The Philippines is the fastest growing smartphone market in Southeast Asia, expected to hit 90 million Filipinos on smartphones by 2021. And the appeal of mobile payment apps is growing—banks are offering this, and of course PLDT’s PayMaya.
Even VISA’s Consumer Payment Attitudes Survey said that 71% of Filipinos they surveyed shop online at least once a month; and 29% of them carry less cash than they did five years ago.
Filipino consumers are beginning to hold the power in their hands, with smartphones making it more convenient to shop online.
My PayMaya Story
I gave my wife, kids and household help their PayMaya cards last year, and I remember my wife asking me to explain to her in not so technical term what PayMaya is and how come our kids and household help can use them.
So, using a not-so-technical term I said it is like a ‘miracle drug’—our version of ‘miracle technology’.
Because PayMaya allows the masses or the unbanked the opportunity to participate in mobile and online financial transactions and enjoy all the benefits that come with it. A great technology for everyone to enjoy and truly benefit from.
So a teenager can have a VISA card with PayMaya, which has an equivalent mobile PayMaya app on her phone, that she can use for online and physical store transactions. And there is a growing number of establishments in the country today accepting QR code payments!
Now can you imagine a PayMaya-powered school ID for the school’s 100,000 students?
This is happening now. STI is just the start (video below), and more schools are following suit. Even local government units are deploying PayMaya-VISA-powered IDs for their constituents. In PLDT and Smart our IDs are PayMaya-equipped. And this is truly exciting, as more and more unbanked Filipinos will soon be part of the online economy.
Retailers must maintain or adopt an omni-channel strategy
Two weeks ago, Bangko Sentral ng Pilipinas (BSP) announced that they are pursuing a national QR or quick response code standard within the year to achieve a safe and efficient payment system in the country. The goal of the government is to increase retail electronic payment transactions from 1% in 2015 to 20% by 2020.
It is happening. All roads are leading to an online economy in our country. Imagine the impact to your business. Are the retailers ready? Are you ready?
Retail landscape has transformed—sell in one channel, fulfil in another and return in a third is the new normal, so managing this complexity needs to be the new “business as usual”.
What you need is a business model that would allow your consumers to have easy access to your products and services at any time, and any touch point available to them, and be able to pay or transact just the same.
Now, this does not mean the end of brick and mortar stores for the Filipinos.
The market is indeed rapidly changing so instead of just focusing all your efforts into your physical stores, you should also seriously incorporate an omni-channel strategy.
Omni-channel could just mean in simple terms having physical stores and active online touchpoints.
With the internet and mobile devices, consumers are actively using wealth of information to decide what to buy, where to buy, what price to pay, and what payment method to use.
They can shop with a few clicks through comparison shopping engines or through online retailers that carry the same product from several vendors.
And having an omni-channel strategy means providing your customers with a seamless experience by being consistent and present on all channels relevant to them.
I know “It’s easier said than done”, but please don’t let the fear of today’s unknown hold you back of what you can be in the future.
Technologies Retailers Must Embrace
As you try to evaluate the state of your digital transformation, I ask you all to look into these 3S’s that I would like to leave with you —single source of data, settlement, and security.
Single Source of Data
If there is one thing to never underestimate, it’s the wealth of customer data that needs to be processed, secured, and aligned across all channels, which in turn must be translated to your internal systems and processes in order to fulfil the customer’s expectation. With the plethora of customer touchpoints, it will be extremely difficult to store and translate data manually.
So, you need an enterprise resource planning or ERP platform that will be your “single source of data” in real-time, allowing you to maximize your omni-channel strategy.
Expand your settlement systems. Payment solutions like PayMaya make it incredibly easy for Filipinos to shop online and in physical stores, because you don’t need a bank account to make a purchase—which is particularly useful since 77% of Filipinos still remain unbanked, according to Bangko Sentral ng Pilipinas.
As I have said earlier, Filipinos can simply download the PayMaya app, create their own account, add money, and enjoy shopping via their virtual wallet.
Let’s hear it from fast-food giant McDonald’s Philippines who offers PayMaya payment system:
Having the ability to effectively manage and protect electronic data is paramount if organizations want to minimize their exposure to risk and leverage on available data. Two significant risk factors have recently emerged that are having a profound effect on data management systems—first, the growing need for protection against ransomware, and second, the need for Data Privacy Act compliance.
We should be aware of the risks of going at it blindly, and security should not be an afterthought. Get only the best and reasonably priced enterprise security solution.
Again, single database source, settlement, security.
Remember these as you craft the most ideal omni-channel platform for your retail business—that hopefully would allow you to be successful in both your physical stores and online touchpoints.
Let me land with this quote from National Geographic and techno-geek TV host Jason Silva, also our special guest in the last Philippine Digital Convention: "The biggest challenge to technological advancements is our apprehension."
I encourage everyone to be fearless and optimistic. The promise of the future is so exciting and almost at hand.
This is not the time to hold back. This is the time to be bold. This is the time to believe in the power of technology to bring your business and collectively our country to new heights.
And as you venture into this new frontier remember that you have your PLDT Enterprise to guide and work with you, with your teams, with your businesses. Maraming salamat po.
Vic Tria is the FVP and Head of PLDT ALPHA. This speech was delivered during the 25th National Retail Conference & Stores Asia Expo, which is the biggest and most important event in the Philippine retail industry, as it drew over 800 retailers owners, top-level retail executives, and industry suppliers.