State of E-commerce in the Philippines
It is a good time to be in e-commerce in the Philippines. The e-commerce industry has been seeing significant growth driven by increasing internet penetration across the country and a lot of, I would say, sustained and continuing changes in user behavior. A lot of Filipinos have been turning to online shopping. A lot of it is for convenience. Businesses can tap into the next growth market.
In a previous podcast, we talked about how the Philippine economy tends to be growing at about 6 to 9% and the retail industry tends to keep pace with that. But I think people have not realized that the online retail space, the online commerce space in the country grows at the mid-20s to 30 percent year on year on year. That means to outpace the economy, they must be taking someone’s lunch.
In this podcast episode, let’s explore the current e-commerce landscape in the Philippines by diving into the weekly online shopping behaviors of Filipinos and some of the key drivers that they use to determine what they purchase, why they purchase, what the top consumer products are, and see if you can’t derive any insights for this to leverage for your business.
Online Shopping Activities of the Filipinos
For the weekly online shopping activities of Filipinos, and I believe that the data was taken from Data Reportal report. In a survey that they conducted, 57% of respondents said they purchased a product or a service online in a week. 18.9% of respondents said they made a grocery purchase online in a week. 11% bought a secondhand item via an online store. 15.2% used an online comparison service and 11.9% use the buy now pay later service.
Now, if you think about these numbers, some of them might not sound very impressive, but think about it. These are weekly online shopping activities of Filipinos. That is a very engaged, very online customer base.
Top Consumer Goods in the Philippines
Now, in terms of customer good purchases, these are now based off annual spend on these consumer goods so we’re moving away from the weekly right because we don’t spend in the billions on a weekly basis, I wish, but we don’t spend billions on a weekly basis.
But topping the charts for top products the top consumer goods that were purchased online is electronics at a whopping 6.22 billion dollars. This is a 6.5 percent increase which roughly translates to $380 million more stuff year on year. For food, we purchased about $1.85 billion worth of. This is a $210 million increase year on year or an increase of 12.8% up year on year. Fashion, another item that we purchase highly online.
Right, like from stores that we’re familiar with like, you might go to Uniqlo but also Shein helps this a lot. Lazada, sorry Zalora participates in this also. 1.55 billion. This is an increase of almost 200 million from the previous year or roughly a 13% increase. Beauty and personal care products, about 850 million up 40 million from the previous year.
This was weird, beverages, right? 640 million. But I think these are like the like the online liquor stores, right? Like that have been doing well lately. And those guys really hit a gold mine. 640 million dollars’ worth of online beverage purchases. That’s 50% Sorry, that’s a 50 million increase from the previous year. Less than 10% increase in terms of revenue but still right 640 million from out of nowhere a couple of years ago. DIY and hardware is about half a billion at 490 at 490 dollars.
Toys and hobbies guilty 420 million dollars right a 30 million dollar increase from previous year or an increase of 7.7 percent. Yep, that’s me, that’s me and that’s my friends having kids. So that’s where that increase is coming from. Physical media, 410 million. This has remained unchanged and maybe a point of conversation for another podcast episode. Household essentials, 330 million.
Now this one, up 57%, right? This is from 210 million the previous year to 330, so it’s actually up by 120 million year on year. And then there’s furniture. About 180 million or 20 million dollars increase year on year. Thank you, IKEA. So we talked about the weekly spending habits that Filipinos tend to have and then we talked about the top consumer goods, right? Electronics at 6 billion, food at nearly 2 billion, fashion at 1.5 billion, beauty and personal care.
So maybe in this section you might be wondering if it’s time to be an entrepreneur, it’s time to be an online seller, where could your market possibly be? And it’s possibly listed in one of these items that I talked about. Like electronics at 6.2 billion, food, fashion, beauty and personal care, beverages, DIY and hardware, toys and hobbies, physical media, household essentials and furniture. These seem to be doing really well.
Now notice, except for I think… three, right? Like except for electronics, with beauty and personal care, and with DIY and hardware, almost all of them grew over 7% at about 8% or greater, right? Which sort of tells you how fast the online retail space is growing for some of these markets. Now, in some cases, like take for example, household essentials, it’s because that was a relatively untapped market which is why it grew so big, right? Like it was just ripe for disruption.
Online Purchase Drivers
Now, in a survey asking Filipinos what creates desire for them? What encourages them? What motivates them to make a purchase? Here were the couple of items that reached the top of the charts. Of course, just like everybody else, free delivery, right? But I think it was a previous episode where I said free delivery is not really free delivery. But free delivery, motivates people to order online. About 60, almost 61% of respondents said free delivery was a big motivator for them to make a purchase.
Personally, this has never mattered to me, but you know, I’m not one of the respondents. This one I highly agree with, reviews from other customers. Because let’s face it, if you’ve been on Shopee, if you’ve been on Lazada, there’s chock full of scam stores, scam merchants there. And one of the tips I always tell friends and whenever I make a purchase myself, is I check out the reviews. I will almost never buy from a merchant with a lot of negative reviews, especially consistently negative reviews. And I will never buy from a merchant with zero reviews, right?
Even worse yet, some of them have fake reviews where clearly, an AI was generated to weird some makata Tagalog review for the product. Like, the review is clearly not written in the way Filipinos speak. Coupons and discounts were the third influencer for what makes people motivated to buy. This explains the logic behind the double-digit sales, 3-3, 11-11, 6-6, up all of these double-digit sales.
Now, the other thing that I think is great because this number has gone down is COD. The ability to pay via COD or via cash on delivery is a big motivator. It actually comes up as the fourth, but I think if you look at it from the flip side, it only comes up as the fourth. This thing used to be 89% right and now it is only a 46.6% motivator.
There has been a lot of progress, like especially thanks to the fintech companies, thanks to the e-wallet companies, you know guys like Dragonpay, Maya, GCash, these guys have enabled a lot of transactions, especially since the number of credit card holders in the country hasn’t really risen by a lot.
The next one are products that are peddled by authentic content. Like so stuff that received good endorsements, good comments coming from social media feeds. I think if you are an e-tailer, you have to be particularly sensitive to how present you are on social media more than any… more compared to all other channels. And then the last one, which caught me by surprise, loyalty points. Like, I’m actually very bad at collecting points and utilizing points. But I’m surprised that this made it to the top six of purchase drivers. So, you know, good on these guys for maximizing the rewards and the benefits and the rebates that they can get for their purchases.
So, I’ll just do a quick recap. Weekly online shopping activities for Filipinos. We purchase products or services online 57% of the time on a weekly basis. We order groceries one to five times on a weekly basis. Secondhand items, online comparison services, and we’ve utilized the Buy Now, Pay Later service as part of our weekly shopping behaviors in terms of top consumer products, electronics, food, fashion, beauty and personal care, beverages, DIY hardware, toys, physical media, household items, furniture.
In terms of purchasing drivers, free delivery is at the top of the list. Reviews from other customers is the second. Coupons and discounts are the third. Both are at about 50%. The ability to pay COD, down 46% from 89. Likes or comments on social media about 37% influencer and loyalty points about a 37% influencer in terms of whether somebody will make a purchase for you.
Preferred Payment Methods of Filipinos
Now, let’s talk about people’s relationship with money online. What are the preferred payment methods that Filipinos have for making ecommerce transactions? And of course, topping the chart is still cash. Cash is still king. 86% of Filipinos paid via cash on delivery for their online shopping. Okay, now I do want to put some nuance on this 86%. It’s not necessarily that these 86% only utilize COD, but that means people that use GCash are probably not exclusively making purchases on GCash. People that use credit cards online are probably not exclusively utilizing credit cards online.
Like for example, when I make a purchase, I would say maybe 1 in 10 will be COD. Like that’s if I suspect that the merchant might deliver something different or if I want to inspect the package or whatever. But 9 out of 10 times, I will order via credit card. I will almost exclusively order via credit card. But I am not… I am still part of this 86% of Filipinos that pay via COD. Right? So, the majority of the lion’s share of all e-commerce transactions in the country are still happening via COD.
Now let’s talk about credit cards. In terms of credit cards, only 8% of Filipinos use credit cards for online transactions. Now this might be a weird number because less than 4% of Filipinos own credit cards, right? So how could 8% of Filipinos use credit cards online? And what that says is, 8% of all e-commerce transactions are done via credit card. You’re still looking at the same less than 3% pool of cardholders, right?
But that less than 3% only represents 8% of all online purchases. This is where I belong to. I’m part of the credit card group in terms of… Oh, but I’m also part of the cash group. Okay, so 86% of Filipinos use COD, 8% of Filipinos use credit cards. What about GCash or other mobile wallets? 33% of Filipinos, and this is at least because the number has risen recently. And part of it is Banco Central’s push for people to use online wallets and whatnot with the goal of getting like 70% of Filipinos to use to go digital in terms of money transactions.
At least 33% of Filipino e-commerce users use the digital wallet. And this is so far year-to-date. Like this is 2024. The top digital wallets in the country so far have been, you know, of course, GCash and Maya. Like they’re the big two. As of May 2023, GCash had 81 million active users and about 2.5 participating sellers and merchants all across the country. This is fantastic, like talk about empowerment. Good on GCash for empowering merchants and good on GCash for empowering customers.
But 81 million active users, 81 million potential GCash customers, and 2.5 partner merchants. That’s an amazing figure. The next one, of course, is Maya. Like for people that saw them evolve, you will have known them still as PayMaya. And they have 44 million verified users. Like that’s still an incredible amount of adoption. Now to add to this number, I do want to give kudos to Dick Chiang and his team, like Dragonpay, because they were really in it early. I remember as early as probably 10, 11 years ago.
Dragonpay is partnered with over 3,500 merchants and 85 payment channels. They’ve got like 35,000. They represent around 35,500 branches of different stores nationwide. And they process more than 400 million transactions online for Filipinos. And you know, oddly enough, not just Filipinos that are here, Filipinos globally. So, what does this mean for all of you? What does this mean for all of you?
Practical Application for Businesses
I will go back to one of the top industries in the Philippines. I’ll go back to one of the top consumer goods in the Philippines as a practical application. Let’s go to toys and hobbies, 420 million dollars, a 30 million increase compared to the previous year. Wow, hobbyists have a lot of money. It’s growing by 30%. And I remember if you went to Greenhills six years ago, you couldn’t scan a GCash QR code to pay for your purchase.
And you know, if you guys go to Greenhills, you’ll know those guys love cash. Like people in Greenhills do not like to take credit cards. Merchants in Greenhills do not like to take credit cards. And so you’re always forced to withdraw or you’re always forced to bring a large wad of cash. Toys are not cheap. Right today, I could go to Greenhills with just a card folio and either scan a BPI QR code or a GCash QR code and pay for my purchase. And this is for almost every specialized toy merchant that I go to.
And this is what I mean when I say empowering merchants and empowering customers, because that is an activity of my preference. Like I would prefer to scan your QR code than have a wad of cash in my pocket. So what I strongly encourage especially small business owners to do, and then even for enterprises, like how do you partner with retailers to make sure that your potential target audience and your potential target customers have access to your products or service, is have you partnered up with these payment gateway providers, with these e-wallet providers? Have you empowered your customers to make purchases with you that are more than just cash because the Filipino consumer is becoming more and more digital?
I will wrap up this episode of the Truelogic DX Podcast. I want to thank our marketing team and our friends at Podmachine for continuing to power these. Give us a shout out on social media. If you have comments regarding our work or a topic, you’d like us to explore, let us know. Truelogic DX is available on Spotify, Google, and Apple accounts. and I will see you in the next episode. Cheers.
