Originally published in InterAksyon.com

MANILA, Philippines — “We are still at day one.”

That was the resounding message of Jack Madrid, the country manager for social commerce site Multiply Philippines, as he attempted to provide a perspective of the current e-commerce landscape in the Philippines during the recently held Digital Filipino E-Commerce Summit.

Despite headways made in establishing a legal framework for e-commerce, pushing for a stable online trade infrastructure, and upping Internet penetration in the country, local e-commerce has yet to step out of its nascent stages.

In an estimation of the size of the local e-commerce industry, Madrid surmised that with almost a million Internet users engaging in online transactions, the total industry size could be around P4.3 billion.

Still, the figure comprises less than 1 percent of the total local retail market, and dwarfs in comparison with the $963 billion estimated size of the global e-commerce market by 2013, according to JP Morgan.

We are still looking at a relative reluctance of people to transact online,” Madrid told an audience of Internet marketers and budding e-commerce practitioners.

The issue, according to him, is both “habitual and cultural. “ We’re still uncomfortable as a people on the lack of guarantees of an online purchase. We’re also a little bit hesitant about not knowing who we’re buying from, and a little bit apprehensive of the quality of the goods.”

This attitude toward online commerce has given renewed preference for face-to-face meetups when transacting with online stores, part of the “suki mentality” where customers would like to know whom they are buying from.

Few credit card holders

Madrid ventured that the low online purchasing activity could be attributed to the low number of credit card ownership in the Philippines, pegged at around five to six million or around 5 percent of the population.

The vast majority of Filipino users practically locked out of the e-commerce cycle by not having a credit card has given rise to unique modes of payment that allow such users to still participate in online transactions.

Telecom firms, for example, have been actively pushing their mobile money services to the cellphone-toting public. Smart Communications Inc. has a service called Smart Money, while Globe Telecom has G-Cash.

Reports have indicated that combined, the two mobile services process as much as P13 billion worth of transactions per month, although this is still largely focused on purchasing load credits and mobile-to-mobile transactions than online purchases.

Some financial institutions, such as UnionBank, have pioneered “online-only” account offerings that do not require maintaining balances unlike standard savings accounts, and can be used to transact online using payment gateways such as PayPal.

But perhaps the most unique form of payment presented during the Summit was the case of ShopInstallment.com, an online facility that allows users to pick through a catalog of gadgets to be paid on small monthly installments.

A unique payment system

According to Erick Kalugdan, CEO of Zivis Inc., the company who owns ShopInstallment.com , the idea for the online commerce site was hatched when a friend who had problems moving inventory of gadgets and appliances that his company offers on an installment basis approached him.

“[My friend] approached me saying that the problems they encountered with their physical showrooms is, first, the accounting of their inventories and display units,” he shared.

It cost them millions to just have inventory, so it’s money sleeping in their showrooms. Especially with gadgets, in six months, they are almost obsolete, and so the price fluctuates,” he added.

This was compounded by the expensive rental costs for their showrooms and the high labor requirement of their operations. The natural solution, Kalugdan said, was to move part of the operations online.

At the ShopInstallment.com website, users could choose from a catalog of the latest gadgets and technologies such as smartphones to the more out-of-the-box offerings such as fitness equipment.

Once the customer has chosen a particular gadget, they would have to apply into the program, which would require them to submit pertinent documents such as proof of income, proof of residence and proof of identity, which will be verified and processed by the site’s offline counterpart.

Once approved, the firm would deliver the product to the customer. The monthly installments can be settled through brick-and-mortar payment facility Bayad Center, which has more than 1,000 branches nationwide.

The case of ShopInstallment.com is novel at best yet displays the Filipino ingenuity of making do with what’s available.

Offering gadgets on installment tends to attract penny-pinching consumers into shelling out money for purchases, but also lowers the barrier to entry for high-priced goods paid on installment basis, which is traditionally only offered by credit card companies.

Establishing trust and confidence

But despite the availability of such financial facilities for low-income consumers, the “cultural” apprehension of Pinoys in purchasing online has yet to be truly addressed. This is what global business information firm D&B hopes to change.

D&B (Dun & Bradstreet), offers a suite of online trust solutions that would help companies allay the fears of customers in transacting with them online.

This is achieved through the issuance of a DUNS Registered Seal and a DUNS Number, which the online properties of firms can place on their websites to boost the confidence of customers in their online transactions.

To get the seal, companies would have to apply with D&B Philippines, who would then do background checks and get all the relevant information about the company in order to establish its credibility and proof of its legal existence.

Still, such trust-gaining “seals” are still a bit prohibitive particularly for small and medium business–which comprises more than 90% of the total businesses in the country. According to local D&B executives, the cost of the seal could range from a low of P15,000 to as much as P18,000 per year.

Banding together

In the wake of the slow development of the e-commerce industry in the country, various online commerce entities have decided to join forces to form a group that would push their interests online.

That group is now known as the Digital Commerce Association of the Philippines (DCOM), of which Multiply’s Madrid is the Founding President.

It is only now that there is an emergence of very serious players in the e-commerce space, so we decided to band together and form an association just to show and work closely with the government,” Madrid said.

The e-commerce stalwart said they are pushing for drafting best practices for online merchants and educating merchants on how they could be the best retailers they could be.

Madrid said the group is also in preliminary talks with the government, particularly with the Department of Trade and Industry (DTI), “to make sure that we are governed in a fair environment which promotes the growth of e-commerce.”

We really want to make the opportunity of e-commerce available to all merchants in the Philippines, and we want all of them to be competitive not just locally, but globally as well,” he stressed.

With such initiatives, e-commerce companies such as Multiply and the vast number of online group-buying sites in the Philippines hope that in the next few years, the Philippine e-commerce market would finally move at a more progressive pace.