INTERNET RETAILING IN THE

PHILIPPINES
Euromonitor International
June 2014

INTERNET RETAILING IN THE PHILIPPINES

LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1
Trends .......................................................................................................................................... 1
Competitive Landscape ................................................................................................................ 2
Prospects ..................................................................................................................................... 3
Channel Data ............................................................................................................................... 3
Table 1
Table 2
Table 3
Table 4
Table 5
Table 6

Internet Retailing by Category: Value 2008-2013 ......................................... 3

Internet Retailing by Category: % Value Growth 2008-2013 ........................ 4
Internet Retailing Company Shares: % Value 2009-2013 ............................ 4
Internet Retailing Brand Shares: % Value 2010-2013 .................................. 5
Internet Retailing Forecasts by Category: Value 2013-2018 ........................ 5
Internet Retailing Forecasts by Category: % Value Growth 2013-2018 ....... 5

Euromonitor International

Passport

INTERNET RETAILING IN THE PHILIPPINES

INTERNET RETAILING IN THE

PHILIPPINES
HEADLINES
Internet retailing grows by 13% in current value sales in 2013 to reach Ps11 billion
Greater diversity in payment options boosts internet retailing
Apparel and footwear internet retailing makes the largest contribution to internet retailing in
2013
Relatively new entrants take the internet retailing landscape by storm
Constant value sales of internet retailing are expected to grow by a CAGR of 11% over the
forecast period

TRENDS
In 2013, internet retailing enjoyed healthy current value growth of 13%, ending the year with
sales of Ps11 billion. This was the result of increasing internet usage among Filipino
households, as well as overall greater ease in performing online payments. This was linked to
the growing number of Filipinos employed by business process outsourcing companies
online, who typically receive payments through online means, such as PayPal or Xoom. This
has paved the way for more options other than credit cards to make purchases online.
In addition, internet retailers have increasingly partnered with couriers to offer cash-ondelivery payment options, along with other payment schemes, such as payment through
banks or G-cash. This has helped ease typical fears of revealing credit card information
online, making internet retailing a much more attractive way of shopping.
Nevertheless, the continued upward trend was slower in 2013 than in 2012 in internet
retailing. This is attributed to the dramatic rise in internet retailing sales with the entry of
multinational brands Zalora and Lazada in 2012. Although both companies continued to be
aggressive in their expansion and in maximising the potential for online sales, 2012 recorded
a faster growth rate, owing to it being the entry year of these two dynamic retailing
companies.
In 2012, internet access in the home rose to 35% of the population and this continued to rise
in 2013. Much of the growth was linked to the rising smartphone usage, which rose to 53% in
2012, as computer ownership sat at only 20% of all households in the country. Although
broadband internet remains unavailable in many rural areas, the use of smartphones
accessing the internet through mobile phone signals contributed to the rising internet usage in
the country.
Up to 2013, apparel continued to be the strongest performing product category in online
retailing. Perhaps the relatively low payout required is the main factor behind its continued
appeal, especially for first-time online shoppers. Over the review period, even direct selling
companies increasingly added apparel to their catalogues, which may have contributed to
Filipinos becoming more familiar with purchasing apparel without trying them on.
Furthermore, much of the growth may have been driven by the aggressive expansion of
Zalora, which focuses on selling apparel.
Meanwhile, beverages remained one product category that has yet to return any significant
sales in internet retailing. The unpopularity of this item for online purchases is due to the

Euromonitor International

Passport

INTERNET RETAILING IN THE PHILIPPINES

fragile nature of some of its packaging formats as well as its being mostly consumed on
impulse. Tissue and hygiene products are also negligible in internet retailing due to their very
cheap prices and easy accessibility through numerous sari-sari stores in the country.
With the growth in internet retailing over the review period, many players in store-based
retailing are increasingly also venturing into online channels, in the hope of mitigating any
adverse effects to their store-based businesses. As of 2013, however, there was still little
effect on any specific manufacturer or brand, largely because products sold via the internet do
not always focus on any one brand.
With the rising popularity of apparel and consumer electronics in internet retailing, specialist
retailers offering these items are the most affected, albeit still minimally as of 2013. The threat
appears to be more in terms of lesser-known brands, and not for well-known retailers.
Considering the rapid penetration of smartphone usage in the country, mobile internet
retailing is also increasingly becoming the centre of attention. For example, as of 2013, Zalora
had already launched an Android app to enable smartphone users to access its online store
conveniently through their phones. The continued expansion of Globe Telecommunications
GCASH in partnership with rural banks is paving the way for mobile commerce in the country.
When it comes to delivery, internet retailers typically partner with courier companies, such as
LBC, JRS Express, 2Go, and Xend. Some players, such as Zalora, offer free shipping for a
minimum purchase of Ps1,000 for Metro Manila and certain key cities, or Ps2,500 for
locations not included in the list of key cities. They also offer a returns policy for most items
within a period of 30 days.

COMPETITIVE LANDSCAPE
In 2013, Zalora and Lazada have quickly risen to become the top players in Philippine internet
retailing. Their leadership position stems from their effective positioning in their specific
product categories, such as Zalora in apparel, and Lazada in consumer electronics.
Zalora recorded a 33% value growth in 2013, the fastest among its competitors. With its
strong marketing campaigns and wide array of products, the group was able to capitalise as
one of the first mainstream internet retailers in the Philippines. Lazada also had strong value
sales in 2013 with a growth of 24%.This was linked to the rising usage of smartphones in the
Philippines, not only driven by increasing consumer interest but also by the increasing
affordability of the numerous brands of smartphones available in the country.
With the concentrated efforts of pure players, they are performing at the top of the charts
compared to multichannel retailers. Although multichannel retailers have the advantage of
brand awareness with the presence of their bricks-and-mortar stores, pure internet retailing
players are much more adept in optimising their online presence and more effective in online
marketing. For example, Zalora is present and active in nearly every social media network
imaginable, particularly in Filipino favourites, such as Facebook, Twitter, and Pinterest.
Although there are also numerous domestic players in internet retailing in the Philippines,
such as myAyala.com, it remains obvious that international operators have the skills and
training required to be more efficient, such as in terms of customer service. This is the main
reason behind the rapid expansion and acceptance of these international players.
The rising acceptance of internet retailing in 2013 may owe a part of its success to the boom
of customer-to-customer transactions in previous years. A large percentage of customer-tocustomer transactions was driven by the popularity of Multiply several years prior to 2013,
which has since closed in the Philippines. Since then, Facebook has become a popular
channel for customer-to-customer purchases, making Filipinos more comfortable with the idea
of shopping and paying online.

Euromonitor International

Passport

INTERNET RETAILING IN THE PHILIPPINES

Passport

PROSPECTS
Internet retailing is expected to continue performing robustly throughout the forecast period.
Constant value sales are expected to grow by a CAGR of 11% as online transactions will
become increasingly more common and familiar to Filipinos.
The continued rise in growth rate of internet retailing is also linked to the expected rise in the
number of aggressive online players, as well as to an added boost from m-commerce. In the
first three years of the forecast period, m-commerce is expected to account for 5% of total
internet sales, largely due to the higher convenience of smartphone usage and the added
ease provided by apps.
With the positive prospects for internet retailing, there is no significant threat to growth.
Perhaps a challenge, however, will come from a lack of nationwide penetration, as shipping
continues to be difficult across the different islands. If anything, growth is expected to soar for
the Metro Manila area, where delivery can be carried out within one or two days, whereas
other areas in the Philippines, apart from key cities, might still need time to adjust to shipping
conditions.
By 2018, as much as 40% of the population is expected to have home internet access. Of
course, most of this will still be through smartphones, with the increasing incidence of tablet
usage with internet access, as more tablets increasingly have slots for Sim cards.
With the continued rise in smartphone usage, it is possible that consumer electronics will
become more popular over the forecast period. Although apparel is likely to remain the bulk
contributor, in terms of growth, it may easily be overtaken by consumer electronics as
demand for the category soars.
This means that Lazada, with its focus on consumer electronics, may enjoy a strong
performance during the forecast period. Then again, with Zaloras plans to launch an initial
public offering (IPO) during the forecast period, it may also prove to be aggressive in terms of
expansion, also signalling the possibility of either of these two players, also sister-companies,
leading the fray in internet retailing in the Philippines.
Meanwhile, smaller online companies, especially those that are typically family-owned, are
expected to underperform during the forecast period. They will generally be outpaced by the
larger players, leaving them with very little scope, especially in the first few years of the
forecast period when internet retailing will continue to expand in the Philippines.
With the increasing power of social media networks, internet retailers will do well to make sure
they cover their bases in this regard. This will be especially true in the forecast period, when
there will be an increasing number of social media networks deemed by the average internet
user as being an essential component of their social life. An effective online marketing
strategy will remain key in promoting internet retailers, whilst also ensuring the most
convenient payment and delivery schemes offered, taking into account the difficulty of
shipping to cities outside of Metro Manila.

CHANNEL DATA
Table 1

Internet Retailing by Category: Value 2008-2013

Ps million, retail value rsp excl sales tax

2008

Euromonitor International

2009

2010

2011

2012

2013

INTERNET RETAILING IN THE PHILIPPINES

Beauty and Personal Care

Apparel and Footwear
Consumer Electronics
and Video Games Hardware
Consumer Healthcare
Consumer Appliances
Home Care
Home Improvement and
Gardening
Housewares and Home
Furnishings
Media Products
Food and Drink
Traditional Toys and
Games
Other Internet Retailing
Internet Retailing
Source:

Table 2

Passport

107.5
2,730.6
570.8

116.6
2,923.7
668.6

130.5
3,138.3
855.6

147.3
3,391.7
1,115.3

154.3
3,784.0
1,736.0

160.1
4,201.2
2,210.9

81.8
1.8
27.9

0.1
76.1
1.8
28.5

0.3
93.4
1.9
29.4

0.5
103.8
2.0
30.3

0.5
111.8
2.0
31.3

0.6
127.8
2.1
32.2

54.7

60.9

67.9

75.9

84.6

93.5

879.9
78.6
12.0

960.9
70.7
11.5

1,037.7
73.8
12.3

1,141.5
77.8
13.3

1,232.8
82.5
14.2

1,313.0
86.9
15.1

1,584.4
6,130.0

1,658.1
6,577.5

2,035.9
7,477.0

2,331.2
8,430.5

2,799.6
10,033.7

3,133.1
11,376.5

Euromonitor International from official statistics, trade associations, trade press, company research,
trade interviews, trade sources

Internet Retailing by Category: % Value Growth 2008-2013

% current value growth, retail value rsp excl sales tax

Beauty and Personal Care

Apparel and Footwear
Consumer Electronics and Video Games
Hardware
Consumer Healthcare
Consumer Appliances
Home Care
Home Improvement and Gardening
Housewares and Home Furnishings
Media Products
Food and Drink
Traditional Toys and Games
Other Internet Retailing
Internet Retailing
Source:

Table 3

2012/13

2008-13 CAGR

2008/13 Total

3.8
11.0
27.4

8.3
9.0
31.1

48.9
53.9
287.4

13.4
14.3
1.1
2.9
10.5
6.5
5.3
6.7
11.9
13.4

9.3
3.0
2.9
11.3
8.3
2.0
4.8
14.6
13.2

56.2
16.1
15.3
70.9
49.2
10.6
26.3
97.7
85.6

Euromonitor International from official statistics, trade associations, trade press, company research,
trade interviews, trade sources

Internet Retailing Company Shares: % Value 2009-2013

% retail value rsp excl sales tax

Company

2009

2010

2011

2012

2013

Zalora Philippines Inc

Lazada Philippines Inc
Amazon.com Inc
Ayala Corp
eBay Inc
Others
Total

3.5
2.3
1.4
92.9
100.0

3.6
2.5
1.4
92.5
100.0

5.7
4.0
3.2
2.3
1.2
83.6
100.0

8.2
7.5
2.8
2.1
1.1
78.3
100.0

9.6
8.2
2.5
2.0
1.0
76.7
100.0

Euromonitor International

INTERNET RETAILING IN THE PHILIPPINES

Source:

Passport

Euromonitor International from official statistics, trade associations, trade press, company research,
trade interviews, trade sources

Table 4

Internet Retailing Brand Shares: % Value 2010-2013

% retail value rsp excl sales tax

Brand
Company

2010

2011

2012

2013

Zalora
lazada
Amazon
myRegalo
eBay
myAyala
Others
Total

3.6
2.5
1.4
92.5
100.0

5.7
4.0
3.2
2.3
1.2
83.6
100.0

8.2
7.5
2.8
2.1
1.1
78.3
100.0

9.6
8.2
2.5
2.0
1.0
76.7
100.0

Source:

Table 5

Zalora Philippines Inc

Lazada Philippines Inc
Amazon.com Inc
Ayala Corp
eBay Inc
Ayala Corp

Euromonitor International from official statistics, trade associations, trade press, company research,
trade interviews, trade sources

Internet Retailing Forecasts by Category: Value 2013-2018

Ps million, retail value rsp excl sales tax

Beauty and Personal Care

Apparel and Footwear
Consumer Electronics
and Video Games Hardware
Consumer Healthcare
Consumer Appliances
Home Care
Home Improvement and
Gardening
Housewares and Home
Furnishings
Media Products
Food and Drink
Traditional Toys and
Games
Other Internet Retailing
Internet Retailing
Source:
Note:

Table 6

2013

2014

2015

2016

2017

2018

160.1
4,201.2
2,210.9

165.3
4,491.3
2,591.6

173.4
4,795.2
2,947.9

182.7
5,119.6
3,248.6

193.0
5,466.4
3,516.4

204.1
5,626.3
3,807.1

0.6
127.8
2.1
32.2

0.8
137.2
2.0
32.3

0.9
147.5
2.0
32.5

1.0
158.8
1.9
32.9

1.1
171.4
1.9
37.1

1.2
185.1
1.8
41.8

93.5

100.3

107.5

115.0

123.1

131.7

1,313.0
86.9
15.1

1,378.6
89.1
15.6

1,440.7
91.5
16.0

1,498.3
94.3
16.3

1,550.7
97.4
16.7

1,597.2
100.8
17.0

3,133.1
11,376.5

3,544.2
12,548.2

4,110.8
13,865.8

4,879.9
15,349.4

5,862.8
17,037.9

7,231.9
18,946.1

Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources
Forecast value data in constant terms

Internet Retailing Forecasts by Category: % Value Growth 2013-2018

% constant value growth, retail value rsp excl sales tax

Beauty and Personal Care

Apparel and Footwear
Consumer Electronics and Video Games Hardware
Consumer Healthcare

Euromonitor International

2013-18 CAGR

2013/18 TOTAL

5.0
6.0
11.5
14.8

27.5
33.9
72.2
99.0

INTERNET RETAILING IN THE PHILIPPINES

Consumer Appliances
Home Care
Home Improvement and Gardening
Housewares and Home Furnishings
Media Products
Food and Drink
Traditional Toys and Games
Other Internet Retailing
Internet Retailing
Source:

Passport

7.7
-2.7
5.3
7.1
4.0
3.0
2.4
18.2
10.7

Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Euromonitor International

44.9
-13.0
29.8
41.0
21.7
16.0
12.6
130.8
66.5