Adapting to E-commerce

February 2nd, 2018

Shoe brand PayLess closed 20 percent of its 4,000 stores last year. Giant clothing brand H&M has announced that they will be closing more stores this year because their stores “were negatively affected by a continued challenging market situation with reduced footfall to stores due to the ongoing shift in the industry.” It was also recently published that toy store Toys R Us is planning to shut down 180 stores across the US due to bankruptcy.

These are just some of the retail brands which closed their physical stores due to the rising competition against online stores. More and more consumers now prefer going online instead of driving to the stores, manually looking for styles and sizes, and falling in line for the cashier.

While brick-and-mortar businesses, or commonly called as “offline businesses,” brings a sense of trust and professionalism due to the presence of their physical stores and actually evaluating the product, it adds additional cost in maintaining their facilities or human resources.

This is the current dilemma of many brick-and-mortar businesses – the upsurge of online businesses.

What is so great about going digital anyway?

Many entrepreneurs today start their businesses in digital platforms such as Amazon, Alibaba, Lazada or Shoppee. In fact, I was told that some micro retail entrepreneurs even use social media platforms such as Facebook and Instagram as their tool to reach their market. You just have to post a photo, indicate the specifics of the product, and wait for interested customers to purchase a product.

With just a click of a button, one can now reach a wider market through these online platforms. E-commerce has been in demand for the past years because of its visibility to consumers not just locally but globally. With the access to the internet, everyone can see your products and read about your services online. There are actually many things that are on sale online including electronic copies of books and music. I remember buying some of the books I read when e-commerce was just starting.

E-commerce has opened a channel for fast and convenient shopping. Shoppers can browse for various items from different brands and upon check out, they can pay for all the items in one billing. E-commerce also extended the usual store hours. Consumers are no longer confined to the opening and closing hours in order to make a purchase. They can buy products anytime, anywhere.

And because of the emergence of these online platforms, digital payment schemes have been developed to ease the payment process. Aside from credit cards, mobile payment solutions like GCash and PayMaya were also developed. Since many Filipinos still do not have bank accounts, these payment scheme can easily support online transactions. Cashless payments are empowering consumers and strengthening their buying powers online.

More and more companies and banks are introducing digital processes into their systems. FINTQ, the financial technology arm of PLDT and Smart’s Voyager Innovations recently launched the program KasamaKa in partnership with Bangko Sentral ng Pilipinas to promote greater access to finance in the Philippines. Globe Telecom also has its subsidiary called Globe Fintech Innovations Inc. (Mynt) which plans to accelerate financial inclusion and provide payment services. Mynt operates GCash.

Because of these advantages, more companies are exploring ways to bring their businesses online. Although I believe that while there is a growing market online, there are still consumers who prefer touch and feel experience of buying an item. Therefore, the merging of brick-and-mortar and e-commerce can solidify the business. For example, retail companies can retain their shops while maintaining a website for online purchases. This union can be called brick-and-click model. One good example is H&M which recently partnered with an Alibaba company called Tmall which is a Chinese e-commerce platform.

E-commerce can better help MSMEs reach their success in the future. Although many would think that e-commerce is a threat for brick-and-mortar, I believe that it is more of a great opportunity for MSMEs to grow faster. Let’s take for an example the model of Grab and Uber which are both ride-sharing mobile application services. Through their model, many drivers today can be considered micro-entrepreneurs. Zennya, another mobile application, connected qualified masseuses or therapists to customers.

These digital platforms have indeed changed the landscape of doing business. In fact, my youngest daughter Isabella continues to sell some of her old books and items in Shoppee.

As ASEAN Business Advisory Council Singapore assumes chairmanship this year, we expect a deeper focus on digital commerce and technology. And in order to keep up with the changing trends, we are retooling our mentors for them to be aware of the great opportunities of these trends.

We are not saying that traditional businesses should close down their shops and go full online. Instead, online can complement their offline strategies. Yes, online will really affect offline thus they have to adapt to it in order to benefit from it.