Acclaimed as the heaviest internet users in 2019, Filipinos spend an average of 10 hours a day online (CNN Philippines,2019). It would not be a surprise if Filipinos would allocate a portion of that 10 hours to shopping because with just a click, you can have that newest bag or pair of shoes delivered straight to your home. The advancements in technology has been one of the major drivers of change in the world, but right now, a pandemic is drastically changing us – including the way people shop.
According to the Global Web Index 2019, at least 75% of Filipino internet users aged 16 to 64 have availed a product or a service online. The total consumer goods purchases reached US$3 billion in 2019 and is forecasted to grow to US$12 billion in 2025 (Janio Asia, 2019). Although only 2% of the total retail market is done online (CNN Philippines, 2019), the Philippine e-commerce market is considered as one of the fastest-growing in the world. However, the emergence of the Coronavirus is both pushing and pulling the online retail industry.
Shopee 6.6 Sale
Since most businesses were affected by the pandemic, online shopping platforms thrive to continue businesses during this trying time. It has been an ongoing trend to have a sale whenever the number of the month and day coincide such as 11.11, 12.12, and the most recent, the 6.6. This year’s mid-year sale or what they call the 6.6. sale is enticing a lot of people to add stuff to their online carts through various discounts, vouchers, and freebies. Others call this sale the Bounce Back sale as this is a major sale in the country after the imposition of community quarantine.
THE THEN AND NOW
The pandemic is shaping online consumers in many ways. People from different generations are adapting their shopping habits. In the United States, there’s a 74% increase in online shopping as a response to the coronavirus (Retail Customers Experience, 2020). About 40% of American online grocery shoppers during the second week of March are first-time online shoppers (JLL, 2020). Payment methods are also changing. In the Philippines, the Bangko Sentral ng Pilipinas (BSP) is encouraging digital payments as a precaution. Some online shopping platforms have already implemented cashless payments for faster and safer transactions.
Online grocery shopping in the Philippines only accounts for 0.2% of the total grocery market in the country (Data Reportal, 2019). Despite the small percentage, the industry is growing fast and the enhanced community quarantine (ECQ) caused the increase of online grocery shoppers. Virtual markets such as Murang Gulay Atbp. and Bigas PH tripled its demand since the ECQ, although it has to be noted that shoppers also include people who are donating. Aside from the increasing demand, virtual markets are also expanding their reach as they open their service to other places aside from Metro Manila.
The utilization of food delivery services is becoming one of the norms in the Philippines. In 2018, about eight million Filipinos ordered food online at least once. Grab PH reported that 10-12% of their company’s revenue is coming from Grab Food and is continuously growing. The penetration rate of food delivery services in the South East Asia region in general is low, however, since the lockdown, people’s mobility decreased and demand for home-delivered food increased. More and more food establishments are registering for food delivery couriers since most of them are only allowed to provide takeout orders.
For online shopping, electronic gadgets and physical media have the greatest share for the total revenue of consumer products bought online in 2018. According to a survey conducted by Kantar, there’s a 32% increase in online shopping during the early days of the lockdown across some Asian countries including the Philippines (JLL Philippines, 2020). The products that people are mostly buying are health-related products that can either help prevent the spreading of the virus or products that can boost their immune system, pantry food, and other essential things. During the ECQ, shoppers are making sure that their homes are Covid-free. Lazada Philippines and Shopee have seen an increased demand for home-cleaning products. Aside from those, there is also a 70% increase in purchases of mobile load and data.
IMPACTS TO RETAIL AND WAREHOUSING SECTORS
With the temporary closing of commercial establishments and shifting of consumers from actual stores to online stores, it is undeniable that the retail industry is impacted by the pandemic. While supermarkets and groceries experience a 20% increase in sales during the lockdown, malls and the fashion industry saw a decrease in their sales according to a survey conducted by the Philippine Retailers Association in March. Aside from the virus, the rise of e-commerce is becoming a challenge to the retail industry. There’s an increased entry of Small Medium Enterprises (SMEs) in online shopping platforms. Lazada sees growth in consumer grocery shopping, app usage, and time browsing items, and does not think these trends will stop when things go back to normal. To be able to address these demands, Lazada offers simpler and more affordable business plans for SMEs.
The e-commerce industry, on the other hand, is pulling the warehousing space demand up. Warehousing space requirements of supermarkets, pharmaceuticals, and other retail companies increased during the outbreak. The rise of e-commerce spiked the demand for warehouses in the cities to be able to deliver goods in the shortest time possible. Vertical warehouses are also considered as smaller spaces are needed for the goods (JLL, 2020). Lazada Philippines’ Chief Operating Officer, Carlos Barrera, already expressed that apart from the digital advancements that they are pushing to prepare for a post-Covid world, they are continuously expanding their logistics network (Tech in Asia, 2020). Aside from warehouses, the demand for cold storage facilities has also increased to answer the demand brought by online purchases.
It is still uncertain if these new practices will be the new normal. Retail Dive believes that consumer behavior in a post-Covid world will be reshaped by fear. According to Shekel Brainweigh, a company that develops advanced weighing systems for the global retail and healthcare markets, consumers will be more careful after the containment of the virus and might prefer touchless transactions (Retail Customer Experience, 2020). People will be more cautious about the origin of a product and its hygienic situation before buying it (Business World, 2020). Moreover, the behavior of consumers is not only dependent on how they feel, but it also depends on how retailers will handle their businesses in a post-Covid world. Shoppers must feel safe in entering physical stores and therefore retailers must show how clean their place is, how they practice social distancing, and how they provide alcohol and sanitizers in their premises. The way we will live the post-Covid world is everybody’s concern. As much as this pandemic hit everybody unexpectedly, businesses must plan for whatever is coming next – that in order to thrive, they must learn how to adapt to the new normal.
Written by: Marjorie Santos
Aviso Valuation and Advisory Corp. is a real estate consultancy firm that offers valuation and business advisory services compliant to international standards such as the International Valuation Standards (IVS) and International Financial Reporting Standards (IFRS). To assure that we only produce high-quality deliverables, as needed, we do tasks beyond the usual appraisal process like verifying pertinent property documents (i.e. land titles, tax declarations, etc.) with the appropriate government agencies for due diligence purposes prior the acquisition of the properties.
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References:
https://janio.asia/sea/philippines/who-are-philippines-online-shoppers/
https://janio.asia/articles/what-s-driving-ecommerce-in-the-philippines/
https://cnnphilippines.com/business/2019/01/04/philippine-e-commerce-2019.html
https://www.jll.com.ph/en/trends-and-insights/cities/how-covid19-is-changing-the-grocery-business
https://datareportal.com/reports/digital-2019-ecommerce-in-the-philippines
https://www.retaildive.com/news/the-consumer-after-covid-19/575634/
https://www.techinasia.com/pushing-tech-envelope-nurture-ecommerce-postcovid19-world
