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As E-commerce Disrupts PH Retail Industry, Suppliers Should Prepare for the Inevitable

Suppliers of traditional retailers in the Philippines should rethink their fallback strategies against client bankruptcies, amid the constantly evolving global e-commerce market.

December 10, 2019 by Randolf Santos

Online shopping continues to disrupt the brick-and-mortar retail business worldwide, and it already has found its way into Philippine shores.

The e-commerce market in the country will generate more than US$1.4 billion in revenue by 2023 from US$743 million in 2017, based on Statista’s forecast for the industry. The report showed that revenue growth will streak upward in the next four years, hence slowly threatening the stability of business for traditional retailers.


What Contributes to Online Retail’s Growth?

There’s no doubt that Filipinos still love to shop at malls despite the advent of e-commerce websites such as Lazada, Shopee and Zalora. However, the convenience of buying consumer goods without ever having to leave home seems to be the main selling point of online retail. On a technical aspect, the so-called Industry 4.0 will propel growth for the country’s e-commerce market.

The fourth industrial revolution refers to disruptive trends and technologies that also include the Internet of Things and cybersecurity. The Association of Southeast Asian Nations (ASEAN) has begun to review Industry 4.0’s potential impact on the economies of ASEAN countries. For instance, the Regional Comprehensive Economic Partnership identifies e-commerce as an integral part of preparations for the next industrial revolution.


E-commerce Brought Down Retail Titans

Forever 21 Inc and Toys ‘R’ Us comprise some of the big-name global brands that filed for bankruptcies since 2017. Consumer preferences that swung in favor of online retail predominantly caused the companies’ downfall. The famous toy retailer nearly shut down all U.S. stores, while the fashion brand plans to close almost 180 stores in the country. What does this imply for Filipino retailers?

Mixed-use real estate projects that include shopping malls may still be plenty, but will foot traffic remain sustainable over the long term? In the case of Forever 21, the company’s operations in the Philippines will continue because of its business relations with SM Retail Inc. Other traditional retailers don’t have such luxury of partnering with a retail giant. If an established brand succumbs to the competition from e-commerce, then the likelihood of going bankrupt increases for small- or medium-size retailers.


Popular Market Segments for Online Retail

Consumer electronics and media will account for the biggest share of revenue in the e-commerce industry at almost US$258 million in 2019, according to Statista’s analysis. Revenue from fashion sales will amount to nearly US$227 million in the same year. These two segments will be the top two market niches for online retail through 2023, when both submarkets will contribute more than US$650 million in e-commerce revenue.

Suppliers for traditional retailers of electronics and fashion items may have noticed weaker business this year. Trade credit insurance prevents you from second-guessing the outcome of retail trends, even when your company continues to enjoy a steady flow of orders. What would you do if your biggest client fails to pay on time?


Conclusion

It’s never too early to consider how your business can cope with a growing online retail market in the Philippines. Insurance has now become more necessary than ever for suppliers to protect their businesses from the most at-risk customers. VESL connects you with lenders and reputable insurers who can protect and identify the vulnerability of your end-buyers and clients. Register now for free and discover how our pay-per-invoice deals have helped different companies to recover up to 90% of business losses.


References:

https://www.statista.com/outlook/243/123/ecommerce/philippines#market-revenue

https://businessmirror.com.ph/2019/11/07/trade-tech-issues-seen-to-shape-aseans-future/

https://www.reuters.com/article/us-u-s-retail-bankruptcy-factbox/factbox-major-u-s-retail-bankruptcies-since-2017-idUSKBN1WF1U8

https://www.bworldonline.com/forever-21-bankruptcy-wont-affect-phl-stores-sm/