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E-commerce: The Future of Retail - The Business Advisor

E-Commerce: The Future of Retail

Much has been said about the Philippines and its internet usage. With around 60 million of its citizens (58% of the population) having access to the internet, the country’s penetration rate scores above the global average. When it comes to the actual amount of time spent online, Filipinos record the highest in the world at 8 hours and 59 minutes per day on average.

The Digital in 2017 Global Overview report reveals fascinating data about the behavior of netizens. Just what do we Filipinos do with all of that time, exactly? Aside from social media (47% of online activity), online shopping comes in 2nd with a 29% share. The popular national pastime has found home within the digital landscape.

E-commerce in the Philippines has been showing promise. Total revenue of businesses selling online in 2017 is projected to reach an estimated $1.2B (P59.7B)—a 22% increase from 2016. And many experts are optimistic: Roughly 30.3 million people (29% of the population) have made a purchase via e-commerce in the past year. With an active online community (we are currently Facebook’s most engaged market with 57 million users), the odds are stacked in e-commerce’s favor.

Given this, there is a ripe opportunity for businesses to take advantage of e-commerce, especially in such a promising market. Below are a few of its many benefits, along with case studies, to get you inspired.

Benefit #1: Gain new customers as you go beyond location limits.

One of the game-changing features of e-commerce is the lack of geographical barriers. Traditionally, brick-and-mortar stores could only reach customers who were within the vicinity; in turn, customers could only shop by making a trip to their favorite stores.

With an e-commerce website, all you need is an internet connection. Due to drop-shipping, digital payments, and online security, it is now easier than ever for companies to set up a digital storefront that complements their physical one. With the benefit of reaching customers who were held back by physical distance before, e-commerce is an efficient way to widen your market reach.

Take The SM Store for example. In 2014, the mall conglomerate digitized their department store brand with a complementary e-commerce website. The tactic was part of the company’s strategy to deepen their penetration in an emerging, lucrative demographic: digital-savvy, millennial shoppers.

"We hope that with this new e-commerce site, we will be able to reach out to more of our customers by bringing more attractive brands online and provide them a more exciting and diverse shopping experience with SM," Jorge Mendiola, President at SM Retail Inc., said during its launch.

Now on its third year, The SM Store’s site has complementary offline services for all its shoppers. Door-to-door deliveries are available for most of the Philippines, and customers have the option of picking their online purchases up at many SM stores near them. Coverage includes Manila, Luzon, Bacolod, Cagayan de Oro, Cebu, General Santos, and Mandurriao, to name a few.

With the ultimate aim of providing accessibility and convenience through innovation, SM’s execution is a great example of how an established retail brand can still widen its market reach through e-commerce and do it well.

Benefit #2: Incur lower costs as you increase the efficiency of another revenue stream.

Another great aspect of e-commerce is its potential in decreasing your expenses. There are many items that affect physical storefronts: storage costs, utility fees, and even salaries for salespersons to man them.

When it comes to e-commerce, a lot of these costs are slashed. Instead of holding inventory in multiple retail locations, businesses can simply store them all in one warehouse and only pay for utilities there. For salaries, sales personnel are taken out of the equation. As an end-to-end shopping experience, e-commerce websites let customers conduct their own research, find for their preferred sizes and colors, and even facilitate their own checkouts.

For many businesses, shifting the shopping experience to an automated system does not just lessen costs. It also reduces margins for error, allows for easier scaling, and streamlines processes—all of which contribute to the bottom line.

One company that has benefited from such efficiency is Max’s Group Inc (MGI). As the country’s leading casual dining chain operator, they operate many well-loved brands: Max’s, Jamba Juice, Teriyaki Boy, etc. To maximize the potential of their portfolio (currently 500 stores across 13 brands), they have also launched their own website dedicated to deliveries.

Serving customers all over the Philippines, the site includes Yellow Cab, Pancake House, Krispy Kreme, and more. Users simply have to create an account, place an order, and facilitate their own delivery. And this execution has paid off. In a disclosure made to the Philippine Stock Exchange last March 2017, MGI’s online and delivery revenues stood 24% higher than the previous year at P1.08B.

As they attributed this jump to a centralized ordering and dispatch platform, it is clear that the efficiency of e-commerce has reaped great rewards for the food conglomerate.

Benefit #3: Beat the competition by being accessible whenever consumers feel like buying.

Another great thing about e-commerce? Round-the-clock operation. You never have to close your e-commerce store simply because you do not have to. As long as its infrastructure is solid, it can run on its own. With the exception of deliveries having a fixed window, e-commerce websites operate on any time frame.

In fact, the co-founder and Chief Executive Officer of Lazada Philippines can attest to this. At the Mobile Moves Business event last January 2017, Inanc Balci shared, “We get the most number of orders within work hours.” Describing how orders spiked in the morning and afternoon, he emphasized that this insight is uniquely applicable to e-commerce users in the Philippines.

With 4.3 million products sold in Lazada today, and as one of the few technology companies in the country with annual revenues of P1B, being an e-commerce business that is available whenever consumers want certainly benefits the shopping behemoth.

The promise of digital

E-commerce is definitely exciting and here to stay. It not only serves as another platform to expand your business, but it is also a totally new playing field for the best and the brightest.

Are you ready to take your business further, maximize opportunities, and expand towards this digital future?

Interested to learn more about our products and solutions? Arrange a consultation with a Globe Business Advisor today.


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