Online shopping: What could make Filipinos buy?

It’s the run-up to the holiday season. The time for Christmas parties, exchange gifts, and family reunions is almost at hand. Among majority of Filipinos, the most joyous part of the year has always been the Christmas season. However, chances are the Christmas season may also be the most stressful holiday period. Typical culprits can include the heavier-than-regular vehicular traffic, crowds and chaos in shops (in malls and more so in discount centers), and the seemingly non-ending (and confusing) choices for those gifts for family, loved ones, friends and colleagues. Under these settings, online shopping can be an attractive alternative.

The Philippines is relatively late in online shopping even among its Asian neighbors. This may be a function of the country’s low internet penetration rate (the share of internet users to total population), which was at 33% as of December 2011 (source: Internet World Stats). This is much lower than the rate in the Philippines’ more developed neighbors but is at par with the country’s relative economic equals.

ASEAN penetration rate
		Internet users	Penetration rate
Country	Period	(miilions)	(%)
Singapore	Jun-10	3.7	77.2
Brunei	Jun-10	0.3	70
Malaysia	Dec-11	17.7	61.7
Vietnam	Jun-12	31	33.9
Philippines	Dec-11	33.6	33
Thailand	Dec-11	18.3	27.4
Indonesia	Dec-11	55	22.1
Laos	Dec-11	0.5	8.1
Cambodia	Sep-12	0.7	4.4
Myanmar	Jun-10	0.1	0.2

Source: Internet World Stats

However, despite just being in the middle of the pack in terms of internet penetration, the Philippines is among the top countries worldwide in terms of social media network usage. The Philippines ranks 8th in the world in number of Facebook users (source: Socialbakers) and 10th in Twitter users (source: Semiocast). The interesting question then is: does the relatively large number of social network users in the Philippines translate to a large online shopping market?

Based purely on the size of the social networking population, the potential online shopping market in the country is huge. Unfortunately, there is a dearth of statistics to conclude if social network users indeed generate actual online shopping in the Philippine setting. There are some indications, however, that online shopping is gaining popularity.

Sulit.com, which used to be the dominant online buy-and-sell site, is now facing stiff competition from AyosDito.com. There is already an eBay site for the Philippines as well. Online shops such as lazada.com, zalora.com, and Kimstore.multiply.com are now quite popular. Group buying sites, such as Ensogo, dealSPOT and Deal Grocer, have also gained traction over the last couple of years.

Be that as it may, the volume and growth of online shopping do not just depend on the size of the market. On the assumption that all technical requirements are properly in place, the characteristics of such a market may prove to be even more important than its size. Just as with any business venture, an understanding of the characteristics of such target market may eventually define the success of Philippine online merchants.

While Filipino buyers may consider the same thing as other buyers — e.g., finding the right balance between price and quality, looking for a good deal — there are some peculiarities that need to be acknowledged (and addressed) by online merchants. Some of these peculiarities and their possible implications include the following:

1. Filipinos have the “suki” (or favorite) mentality. It is not uncommon for Filipinos to search and find an item they like from a shop or site, and then go to their suki merchant to purchase the said item. Aside from possibly getting a good deal, Filipino consumers trust their suki to sell only quality items. Online merchants would thus do well to obtain and present all the necessary certifications and testimonials about their service. Word of mouth endorsement is also very powerful for Filipinos.

2. Filipinos also have a “tingi” mentality, typically buying regular goods in micro packages. This is mainly due to the perceived affordability of smaller sizes. For online merchants to succeed, the products and services they offer must be (or at least perceived to be) affordable. The increased popularity of group buying sites may be due to the perceived affordability of its offerings.

3. Physically touching (and sometimes even smelling) merchandise is important to a lot of Filipino shoppers. To give potential online shoppers a chance to do this, online merchants may consider establishing a small physical store or even a kiosk.

Would addressing these characteristics ensure success? Not necessarily. However, adding in the Filipino tradition of warmth and excellent customer service, the probability of being an online hit should be further enhanced.

By Raul S. Tomas CIA is a Managing Consultant with the Advisory Services Division of Punongbayan & Araullo.

Executive Brief – November 2012

Punongbayan and Araullo