TECH AND INNOVATION

Are We Ready for Digital Retail?

PRIME Philippines Research & Advisory • May 13, 2020

The Philippines’ retail landscape has changed its course in the last two months, following the recent effects of the COVID-19 global pandemic in the country. Since the commencement of the quarantine period, vehicular and human mobility have been reduced, causing uncertainties for a number of retail establishments. As the country’s physical retail scene continues to struggle, PRIME Philippines, the leading real estate advisory and consultancy firm in the country, assessed and presented the viability of going digital for most retail establishments to thrive.

 

In 2019, PPRO, a payments services company produced a payments and e-commerce report for Asia Pacific and recorded that in the Philippines, around 48.7 million internet users aged 16 to 64 have purchased products online with a total value of USD 952 million of consumer goods purchases. The same report highlighted that the value of B2C e-commerce spending rose by 50%, to USD 3 Billion, from 2018 to 2019. It is expected that more retail establishments will continue to shift their physical transactions to digital in order to adjust and make strides with the current situation. 

 

As part of the precautionary measures of the government, retail malls and independent stores have been forced to temporarily close down. Based on Google’s COVID-19 community mobility reports, these resulted in an 82% drop in the use of retail and recreational facilities such as restaurants, shopping malls and cinemas from February 29 to April 11. The retail market is seeing more stores transitioning from physical to online as an alternative to the temporary unavailability of most brick-and-mortar retail stores. 

 

A report by Philippine Payments Management, Inc. (PPMI), a payment system management body under the National Retail Payments System Framework of the Bangko Sentral ng Pilipinas, presented a surge of retail e-payments transactions through InstaPay alone during the quarantine period. InstaPay fund transfer transactions in April solely reached 8.8 million, a 32.18% hike from the 6.7 million in March. The probable reason for the retail digital payment hike is the limited mobility of people to physically ‘buy and pay’.

 

Delivery services using online platforms have also peaked during this period, specifically in the food and beverage industries. Despite the low penetration rate of food delivery services at 5.5% last year in the country, more food merchants are expected to sign up with delivery platforms such as GrabFood, Foodpanda, Lalamove, and Deliveroo to accommodate the growing number of orders. 

 

Although more consumers and retailers are likely to embrace this digital shift, some challenges are still present. E-commerce is still not a perfect alternative for consumers who are not technology-literate or skeptical with the security of digital purchasing, especially with basic necessities. Other drawbacks include unexpectedly high online traffic and demand for products and deliveries that can’t be fulfilled online. If such expectations are not met on the customers’ end, it can have a lasting impact on customer and brand loyalty, turning to competitors to fulfil their needs.

 

Most physical retail malls and stores are yet to fully operate despite the improvisations on the community quarantine. Venturing into digital retail is observed to be the most ideal course of action for retail establishments as people and vehicular movements are still restricted. The move to go digital has seen to improve the way of life for most individuals. Though a lot of uncertainties still surround digital retailing, it is likely that both consumers and retailers who were initially hesitant to use e-commerce will see its importance in the current situation and eventually adapt.

Tags:
PRIME Philippines, real estate, retail sector, digital retail, Philippine Payments Management, Inc. (PPMI), e-commerce, COVID-19
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