Understanding E-commerce in the Philippines
Baseline Survey on Digitalization of MSME (September 2020)
The Department of Trade and Industry (DTI) embarked on the formulation of the E-Commerce Philippines 2022 roadmap which used a framework based on security + structure + speed = sales. E-Commerce Philippines 2022 envisions a country where MSMEs can fully participate in the digital economy.
DTI e-Commerce Office conducted a baseline survey covering MSMEs to determine their level of digitalization and how that compares with the ASEAN data. The baseline study used a mixed random sampling design to address the need for a probability study using DTI-BSMED’s CPMS and to focus on areas that significantly capture the Philippine economy (NCR, Region III, and Region IV-A). MSMEs operating within the three target regions were filtered to form the target database of respondents using a computer-based random selector.
Based on the study, the digital profile of MSMEs in the Philippines is as shown below:
1BASIC–MSMEs use basic digital tools(e.g. Microsoft Office, email, WhatsApp, personal computers, mobile phones); INTERMEDIATE – MSMEs have an online presence (e.g. Website, social media, e-commerce sites, tablets, printers); ADVANCED – MSMEs use advanced digital tools, or digitalization is part of the core business model (e.g. ERP, CRM, analytics, big data, automation, pure online business, scanners, bank card readers, central servers, imaging devices). 2 STRAND-Asia selected questions from the survey that are related to the usage of ICT tools for business. These questions were used to derive a Total ICT Score, which was used to generate the levels of ICT usage. After deriving Total ICT Score, K-Means clustering was performed to generate three clusters that define levels of ICT usage – ‘Level-1, ‘Level-2’ and ‘Level-3’. To determine significant profiles of levels of ICT Usage, a classification model, Chi-square Automatic Interaction Detection (CHAID), was utilized.
Most respondent-MSMEs (74%) use ICT tools mainly for business development and finance. Common ICT tools used are smartphones, laptops/desktops, and printers. When aided, 94% of MSMEs are aware of Digital Wallets mainly GCash, Paymaya, and Paypal.
MSMEs rate the importance of digital innovation in business at 3.6 on a scale of 1 to 5, with 5 being most important. Those who favor digital innovation say that it helps improve efficiency/productivity and customer experience. They use Social Media, mainly Facebook, for personal reasons. About four-fifths (82%) are familiar with e-commerce platforms, mainly Facebook and Instagram.
Only 26% of MSMEs are aware of digitalization programs offered by the government and other institutions. About three-fourths (73%) say that they need capacity building, particularly in financial management, customer development, and content management.
More than half (54%) of MSMEs do not require delivery services. Close to one-third (35%) of MSMEs do their own deliveries and only 18% use third-party agencies. Preferred delivery partners are Lalamove (67%) Grab (49%), and LBC (33%).
Given the digital profile of MSMEs, the roadmap should encourage MSMEs to use ICT tools and social media to improve business operations, engage in e-commerce initiatives by partnering with reliable platform providers, logistics services and payment gateways, embrace a culture of innovation to ensure continuous improvement and development, and make full use of government’s programs.