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Why Philippine e-commerce still relies on convenience stores

In much of the country, especially in rural areas, infrastructure remains an issue.

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In an emerging market like the Philippines, being “online” means more than simply having a digital presence. Having e-commerce enablers is just as important, and it’s a unique aspect of this market.

In much of the country, especially in rural areas, infrastructure remains an issue. Aside from faulty internet service, logistics companies find it difficult to access plenty of homes due to the lack of good roads. Outside urban areas, shipping services remain expensive, at times costing as much as 10% of the total value of the items bought online.

E-commerce platforms and startups have addressed this problem by setting up pickup points, usually a central establishment like a mall or a convenience store, where customers can collect the goods they’ve ordered online. Some of these places have even turned into “digital hubs,” where shoppers can be assisted by an agent who will make the online purchase for them.

The country’s largest convenience store, 7-Eleven, has installed point-of-sale (POS) counters in every branch under the brand CLiQQ. Initially meant for the online payment of bills, from monthly electricity dues to airline tickets, CLiQQ eventually introduced an e-commerce service that allows shoppers to buy products that are not usually found in a convenience store, such as socks and makeup. The items would then be shipped to the branch to be picked up by the customer after a few days.

Digital services aggregator Posible.net has also enabled small neighborhood retailers, or what Filipinos call sari-sari stores, to be “malls” in their own right through the Posible app, which allows sari-sari store operators to order goods online on behalf of customers. The platform was also initially developed for payment services, but two years after its launch, CEO JG Puzon saw another potential for it: agent-assisted e-commerce.

“To give you context, our partners are usually [located] in innermost roads. In the provinces, this means we are not [on] the same street as convenience stores or malls. In urban areas, this means we are in areas where most shoppers may not have formal addresses,” Puzon explains. “This means we are catering to two types of customers that logistics companies can’t serve: the ones outside of their reach, and the ones that they should be able to but can’t, just because they’re not on the map.”

Currently, Posible’s e-commerce site lets customers order anything, from personal care products to small furniture and appliances. Interestingly, one of the most ordered items through the platform are monobloc chairs. “And these are [from] customers located near malls. They simply don’t want the hassle of commuting and lugging that big of an item around,” Puzon says.

In both cases, instead of delivering orders to homes that may be too costly to reach, e-commerce sites could just drop off items in established stores that are usually found in a more accessible area in a rural town. The popularity of this system points to an issue that’s often overlooked, which is the Filipinos’ distrust of e-commerce.

According to a study, a number of Filipinos still doubt the legitimacy of goods being sold online – and it’s a valid concern. Even the country’s two biggest online shopping platforms, Shopee and Lazada, have put up “malls” to help shoppers differentiate official product distributors from small shops that may not always sell goods sourced from legitimate distributors.

For Puzon, services like Posible’s somehow alleviate the doubt Filipino customers have for online services since transactions are facilitated by a person they trust, such as the owner of the sari-sari store at the street corner.

For these services, items are paid offline, which could be seen as contradictory to e-commerce’s premise of convenience and reliability. But in the Philippines, as in most emerging digital markets, the presence of an authority figure – whether an establishment or a person – is still needed to assure the customer that a transaction was made. This reflects the central bank of the Philippines’ findings that despite their awareness of e-wallets, majority of Filipino internet users still don’t use them due to safety and security concerns.

For the foreseeable future, hybrid commerce, or e-commerce that relies on the services of offline channels, will still be evident in countries like the Philippines. Physical components are still needed for the market to be able to adapt to e-commerce entirely, and they will remain important to brands who wish to build a bigger presence in the age of online shopping.

This article first appeared in Tech in Asia.