CASE STUDY:

WHAT'S DRIVING ECOMMERCE IN THE PHILIPPINES?

Katrina B. & Benedict L

3 Feb 2019 Last updated 30 Aug 2021 10 min read

What’s Driving eCommerce in the Philippines?

People have been eyeing the Philippines as another one of Southeast Asia’s rising
stars. Google’s e-Conomy Southeast Asia 2020 reported that the Philippines’
eCommerce market for consumer goods value grew from US$ 3 billion in 2019 to
US$ 4 billion in 2020, poised to grow to US$ 15 billion in 2025. 1

Image source: Hootsuite and We Are Social2

But the real reason to be excited about the Philippines is that it’s a relatively
untapped market by regional players. This is a country with 73.91 million active
Internet users, the second largest in Southeast Asia.* The Philippines also has the
third highest number of people who shop for consumer goods online just behind
Indonesia and Vietnam.2

What’s more, practically all of these internet users are on social media, according to
research by Hootsuite and We Are Social3. This makes it easy for you to reach out to
this audience and promote your cross-border offerings on Facebook, Twitter,
Instagram, and on online marketplaces like Lazada, Shopee, and Zalora, among
others.

These factors come together to paint an exciting future for eCommerce in the
Philippines. Here we’ll explore a few positive and negative factors driving
eCommerce opportunities in the country.

*note that the source that Digital 2021 Philippines used changed the way the
measure their statistics. The number shown here cannot be compared with the
number we used in earlier versions of this article.

Country Internet Consumer goods Value of eCommerce Average

users/ shoppers/ economy (Hoot + annual spend
millions millions Wearesocial) per user
ID 202.6 138.1 USD 30.31 billion $219
PH 73.91 38.88 USD 3.55 billion $91
MY 27.43 13.10 USD 4.46 billion $341
SG 5.29 3.07 USD 2.41 billion $785
TH 48.59 33.67 USD 7.29 billion $216
 VN 68.72 45.60 USD 6.03 billion $132
Summary of internet usage and eCommerce statistics from We Are Social and
Looking to ship your products internationally into the Philippines? We specialise in
end-to-end international shipments of goods for eCommerce merchants into the
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These factors come together to paint an exciting future for eCommerce in the
Philippines. Here we’ll explore a few positive and negative factors driving
eCommerce opportunities in the country.

Factors Supporting eCommerce

Middle class growth up until 2019 formed Philippines’ eCommerce base
According to the World Bank, the Philippines is one of the most dynamic economies
in the East Asia Pacific region. The Philippines has seen rapid urbanisation the past
few years until 2019, saw strong middle class growth along with a large and young
population. This country had sustained average annual growth of 6.4% from 2010 –
2019, up from an average of 4.5% from 2000 – 2009 and is on its way to becoming an
upper-middle-income country (US$ 3896 – 12,055) in the near term.10

Even though the external economy back in 2019 and caused the country’s GDP
growth to slow to 5.6 per cent in Q1 2019, the World Bank previously estimated
growth would accelerate back to 6.1% in 2020 and 6.2% in 2021 thanks to its strong
domestic consumption.11 In fact, strong domestic consumption was one of the
reasons why the Philippines’ GDP growth began recovering in Q4 2019 before the
coronavirus pandemic hit.12

The Philippines had been making significant progress in reducing poverty. The World
Bank also reports that poverty declined from 26.6% in 2006 to 21.6% in 2015 while
the Gini coefficient declined from 42.9 to 40.1. Lower Gini coefficients mean lower
levels of income inequality.13

Prior to 2020, a bullish economy propelled an emerging middle class of tech-savvy

millennial spenders, the oldest of whom are now assuming managerial positions in
organisations. In fact, the World Economic Forum previously predicted that this
middle-class segment would outspend Italy’s middle class by 2030 in a 2018 report. 14

These all helped to build up the Philippines’ middle class base who were forced to
accelerate their adoption of eCommerce as lockdowns began in 2020.
COVID-19 Accelerates eCommerce Adoption
Similar to other countries, 2020’s COVID-19 pandemic led to social distancing rulings
which led to eCommerce needing to fill the gap that brick-and-mortar stores left
behind. Lockdowns needed to take place to try and stem infections among
Philippines’ populace, known locally as community quarantines (CQ’s). As of the time
of writing, the Metro Manila region was placed under a new enhanced community
quarantine (ECQ) in August 2021.15 You can find the areas under restrictions from
August 1st 2021 here.16

While the Philippines has one of the highest numbers of internet users in Southeast
Asia, prior to the pandemic online shopping only accounted for 2 per cent of total
retail spending according to the Oxford Business Group. Oxford Business Group
mentioned that the pandemic drove many online, with nearly 4 in 5 Filipinos having
shopped online at least once in the 30 day period by July 2020, with most of them
using a mobile device to make their purchases.17
Oxford Business Review also listed how other businesses adapted. UNIQLO launched
click-and-collect and delivery options in July 2020. Malls began offering curbside and
drive-through pick-up options while many malls began personal shopper services. 18

Live-stream selling also began picking up steam during this period in the Philippines.
Shopee launched a live-streaming platform on their eCommerce marketplace back in
June 2019 where sellers can promote their products and offer discounts to their
stream viewers. Shopee Live recorded 30 million live stream views in April 2020. 19

Statista ran a survey on the usage of online shopping before, during and after the
pandemic. Using ‘before the pandemic’ as a baseline, online shopping usage doubled
during the lockdown periods and settled to 60 per cent more than ‘before pandemic’
levels of usage.20

With lockdowns still occurring even in 2021, it’s likely that eCommerce usage will
continue to gain steam in the Philippines in the months ahead.
Growing government support
Recognising the importance of eCommerce for the Philippine economy, the country’s
Department of Trade and Industry (DTI) developed the Philippine eCommerce
Roadmap 2016-202021. Its primary goal is to get online business activities to account
for 25 per cent of the country’s GDP by 2020, up from 10 per cent in 2015.

The government is committed to seeing through this roadmap, and has made
especially in the areas of:

 Infrastructure – improving Internet access, eGovernment systems, eBanking,

ePayment, tax systems, consumer protection, and logistics
 Investments – supporting and promoting opportunities such as foreign direct
investment and capital flows
  Innovation – helping digital startups enter the commercial market

With the importance of eCommerce becoming more pronounced in 2020, the

Department of Trade and Industry launched an updated e-Commerce Philippines
2022 Roadmap which also includes plans to create and improve a network of ICT
services and promote cashless payments. Secretary Roman M. Lopez of the
Department of Trade and Industry Philippines shared the following during his
keynote address at Digital Pilipinas 2021. 22

“That’s why we launched early this year the updated e-Commerce Philippines 2022
Roadmap, which the public and private sectors had collaborated in crafting together.
Through this roadmap, we aim to increase the contribution of e-commerce to the
Philippines’ GDP. To this end, the roadmap’s goals are: increase the number of e-
commerce enterprises from 500,000 in 2020 to a million by 2022; develop a digitally
skilled workforce to support the growing e-commerce sector; and empower online
consumers and build trust between merchants and buyers.” – Secretary Ramon M.
Lopez.

Overall, this means the Philippines is in the process of building clear rules and
support systems for you and other online merchants. There are some kinks, as with
any other country adopting digital transformation, but the government understands
the importance of opening its doors to both domestic and foreign players in the
eCommerce industry.
Interest in goods found abroad
Filipinos are prolific shoppers, hungry for goods and services not found in the
Philippines—a fact you can leverage when figuring out which goods consumers in
this market would be interested in.

Prior to the pandemic, a typical Filipino holiday itinerary to nearby cities like Hong
Kong and Singapore isn’t complete without a day or two set aside for shopping
alone.23 In fact, going abroad used to be the only way Filipinos could shop at stores
like H&M24 and Uniqlo,25 which only opened stores in the country in 2014 and 2012,
respectively.

The desire for products not found locally was also cited by a Nielsen report as one of
the primary reasons driving eCommerce consumers in the Philippines to shop
online.26 The opportunity here for online sellers is obvious: you can stand out in this
market by offering products Filipino consumers don’t have access to locally.
The convenience of a digitalised shopping experience
The Philippine population of 110.3 million people skews towards a young, tech-savvy
group of Millennial and Gen Z consumers (the country’s average age is 25.7 years). 27
Unsurprisingly, these consumers are prolific users of the Internet, spending an
average of 10 hours and 56 minutes2 browsing the Internet each day. Nearly half of
that time—4 hours and 15 minutes—is spent on social media.

Like other countries in Southeast Asia, the advent of powerful and affordable mobile
devices is at the heart of this surge of Internet usage among Filipinos. The Philippines
has been a mobile-first nation since 201429, and this can be seen in Hootsuite and We
Are Social2’s findings that 98.5 per cent of adult Filipinos use mobile phones of any
type. In contrast, only 77.3 per cent have access to a laptop or desktop computer. 30

As such, it’s important for you to provide an online shopping experience that’s
optimised for the smartphone screens of mobile-first shoppers. That means simpler
navigation requiring fewer clicks, clear call-to-action buttons, vivid but lean images
that load quickly, an intuitive browsing experience, and even eCommerce ads
optimised for mobile screens.

Looking for more trends and facts on eCommerce in the Philippines? Find out more in
our eCommerce Guide to the Philippines!

Challenges of eCommerce in the Philippines

Cash-based payment methods dominate, for now
One of the reasons behind the relatively slow uptake of eCommerce in the country in
the past few years is the continued dominance of cash-based transactions. According
to the Philippines’ central bank, cash accounted for 99 per cent of all local
transactions as of January 2018.31

Rapyd states that cash transactions are still widely used as the Philippines still has
more than 50 million people unbanked.32 As a result, many retailers including many
smaller retailers or social commerce merchants still rely on cash on delivery
transactions.33

Originally, the Philippines has been slow to adopt eWallets, with only 1.3 per cent of
Filipinos owning electronic money accounts based on Bangko Sentral ng Philippines’
2017 Financial Inclusion Survey.34 Meanwhile, merely 1.9 per cent of Filipinos over
the age of 1515 have a credit card.35 68 per cent of Filipinos with savings keep them at
home instead of at a bank in 2019.36
Local e-wallets have been aggressively marketing their services in the country.
Popular ones include GCash, Paymaya, Alipay, and Grab, 37 which are offered by two
of the country’s largest providers of mobile accounts and Internet connections.
Social commerce, especially through Facebook and Facebook Messenger, has also
been found to drive the adoption of e-wallet payments 19 in the Philippines, according
to a report by PayPal.38

The government of the Philippines has also been ramping up efforts to help its
unbanked and underbanked population. Through its National Strategy for Financial
Inclusion, it plans on doubling the number of Filipinos with bank accounts from
2019’s 35 per cent to 70 per cent by 2023 – which should lead to more Filipinos using
debit and credit cards in the future.39

What’s clear is that online merchants should be willing to accept cash-on-delivery,

while also educating consumers about e-wallet payment options.
Logistics concerns due to unique geography
With the Philippines being an archipelago of more than 7,600 islands, logistics
naturally presents a challenge you will have to prepare for when serving customers
in this country. Consumers living in the sprawling capital of Metro Manila enjoy
access to huge shopping malls, flagship brick-and-mortar stores, and even same-day
online delivery from large marketplaces like Lazada and Shopee. 40

However, suburban and rural areas with fewer shopping malls are an underserved
market where you can cater to customers who can’t find the products they want or
need in nearby brick-and-mortar stores. To do this, you will need a reliable cross-
border shipping partner and last-mile delivery service provider that can deliver
packages nationwide, without drastically increasing your shipping fees.

But even with a logistics partner, it’s important to set realistic expectations on how
soon customers can receive their orders. For example, online marketplaces like
Lazada make it clear that they can deliver to all serviceable areas, with a few
limitations due to geographic restrictions. For orders outside of Metro Manila, the
promised turnaround time is 12 days22, even if deliveries don’t necessarily take that
long.41

You should also take note of the Philippines’ most popular eCommerce shopping
events to anticipate supply and demand well in advance. In the Philippines, shopping
season typically starts during the “ber” months (i.e. September to December).

This is also a good time to research sale wishlists to get an idea of what Filipino
consumers are eyeing, especially during the end-of-year holidays. This will help you
plan for timely delivery during the festive season.
Growing pains with Internet connectivity
The Philippines has one of the slowest and most expensive Internet connections in
Southeast Asia,42 which has also been mentioned by the World Bank.43 Coupled with
high mobile phone and social media usage, this means online merchants must pay
attention to mobile optimisation, particularly when it comes to the sizes of their
product images, This ensures that consumers can easily load on a smartphone on a
3G data connection.
Keep in mind that Facebook, the country’s most popular social media network 44 has a
free version for mobile phone users in the Philippines. That means online merchants
can leverage the network to advertise and sell their products.

In fact, PayPal’s research shows that 87 per cent of Filipino merchants sell products
on social media.45 Facebook also drives traffic and engagement on Lazada, Shopee,
and Zalora.46
Changing eCommerce perceptions
A universal challenge for any online merchant is gaining buyers’ trust. For
eCommerce, this means using a combination of strategies, ranging from prompt
delivery to accurate product descriptions.

You also need to account for the low trust Filipino consumers have in credit cards.
According to a MoneyMax survey, many Filipinos are reluctant to get credit cards
because they fear it will lead to overspending and debt. 47

Considering the challenges in Philippine eCommerce, online merchants can also build
trust by offering alternative payment options to credit cards. This may be in the form
of cash-on-delivery and local e-wallets.

Given the popularity of branded products, eCommerce merchants can also capitalise
on consumers’ trust in major brands. This does not mean that you must sell only
branded items. Merchants can sell non-branded or less popular products in bundles
with major branded items, or sell similar products that provide the same features
and functionalities.

When it comes to eCommerce in the Philippines, there are a few critical factors to
remember:
  Pay attention to local economic conditions and plan your supply chain
accordingly.
 Filipinos shop online to find products not found locally or in brick-and-mortar
stores. Social media listening will go a long way towards understanding the
unmet needs of Filipino online shoppers.
 The majority of Filipinos access the Internet on mobile devices, so be sure to
optimise your eCommerce shopping experience accordingly.
 Cash is king in this country. Check if your eCommerce logistics specialist has
partners or recommendations for last-mile-delivery service providers who
have COD as a payment option.

 The Philippines’ geography presents challenges in terms of keeping shipping

fast and affordable. Again, find a reliable logistics partner and be sure to set
expectations ahead of time to ensure shoppers know how soon they can
receive their orders.

The Philippines offers massive potential for eCommerce players who can beat the
competition in establishing an online foothold in the country. However, doing so
means responding to the challenges mentioned above. With planning, targeted
marketing, and the right cross-border shipping partner by your side, you should be
able to adapt to the needs and preferences of eCommerce consumers in the
Philippines.

Looking to ship throughout Southeast Asia? Contact us using the link below to find
out how!
Interested in e-commerce in the Philippines? Find more of our articles below:

 Main Philippines Country Page

 Guide to Ship to Southeast Asia
 Mini Guide on How to Ship to the Philippines
 Who are the Philippines’ Online Shoppers?
 The Philippines’ Top 3 eCommerce Product Categories
 The Philippines’ Hottest Online Sales Periods

References:

1. Google, Temasek and Bain – 2020 e-Conomy SEA 2020

2. Digital in the Philippines: All the Statistics You Need in 2021 — DataReportal –
Global Digital Insights
3. Digital in the Philippines: All the Statistics You Need in 2021 — DataReportal –
Global Digital Insights
4. Digital in the Philippines: All the Statistics You Need in 2021 — DataReportal –
Global Digital Insights
5. Digital in Indonesia: All the Statistics You Need in 2021 — DataReportal –
Global Digital Insights
6. Digital in Malaysia: All the Statistics You Need in 2021 — DataReportal –
Global Digital Insights
7. Digital 2021 Singapore
8. Digital in Vietnam: All the Statistics You Need in 2021 — DataReportal – Global
Digital Insights
9. Digital in Thailand: All the Statistics You Need in 2021 — DataReportal – Global
Digital Insights
10.The World Bank. “Philippines Overview.” – accessed 18th August 2021
11.Philippine Statistics Authority – GDP posted double digit growth of 11.8
percent in the second quarter of 2021, the highest since fourth quarter of
1988 – accessed at 18th August 2021
12.Straits Times – Philippines 2019 GDP growth hits 8-year low on weak farm
output, budget delay
13.Philippine Statistics Authority – GDP posted double digit growth of 11.8
percent in the second quarter of 2021, the highest since fourth quarter of
1988– accessed at 18th August 2021

14.World Economic Forum – The Philippines’ growing middle class is on track to

outspend Italy’s by 2030
15.Al Jazeera – Philippine capital in new lockdown as thousands rush for vaccine
16.NCR Plus placed under GCQ with heightened restrictions from August 1 to 15 –
Presidential Communications Operations Office
17.Oxford Business Group – Is the heightened demand for e-commerce in the
Philippines here to stay?
18.Oxford Business Group – Is the heightened demand for e-commerce in the
Philippines here to stay?
19.Oxford Business Group – Is the heightened demand for e-commerce in the
Philippines here to stay?
20.Statista – Philippines: usage of e-commerce from COVID-19 lockdown 2020
21.Department of Trade and Industry Philippines
22.Opening Keynote Message of Secretary Ramon M. Lopez, Digital Pilipinas 2021
| Department of Trade and Industry Philippines
23.Rappler – Typical Pinoy Hong Kong holiday
24.H&M – H&M’s first store in the Philippines finally opens
25.UNIQLO – UNIQLO’s First Store In Philippines To Open In June
26.Nielsen – Connectivity Makes eCommerce Click accessed in 2019
27.Worldometers – Philippines Population (2021)
28.Digital in the Philippines: All the Statistics You Need in 2021 — DataReportal –
Global Digital Insights\
29.Technology Inquirer – In 2014 PH to become mobile-first country and other
social media trends

30.Digital in the Philippines: All the Statistics You Need in 2021 — DataReportal –
Global Digital Insights
31.Business Inquirer – BSP goal: 20% of PH transactions digital by 2020
32.Rapyd – The Philippines Top Four Payment Methods
33.Techwire Asia – Rising digital tide in Philippines is laden with eCommerce
potential
34.Bangko Sentral ng Philippines’ 2017 Financial Inclusion Survey accessed in
2019
35.Bangko Sentral ng Philippines – Financial Inclusion in the Philippines
36.Philstar – Digital banking policies toward greater financial inclusion
37.Techwire Asia – Rising digital tide in Philippines is laden with eCommerce
potential
 38.Paypal – Beyond Networking: Social Commerce as a Driver of Digital Payments
39.Philstar – BSP targets to double number of Filipinos with bank accounts
40.ABS-CBN – Lazada invests ‘massively’ on logistics to enhance customer
experience
41.Lazada PH Helpcenter
42.Esquire Mag – PH Internet Industry Ranks 97th Out of 100 Markets in
Competitiveness
43.Filipinos pay more for slow Internet services – World Bank
44.Digital in the Philippines: All the Statistics You Need in 2021 — DataReportal –
Global Digital Insights
45.Paypal – Beyond Networking: Social Commerce as a Driver of Digital Payments
46.iPrice Philippines – Ang Map ng E-Commerce Philippines
47.The MoneyMax.ph Financial Life Survey
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