Barrier to e-commerce growth online shoppers prefer paying cash

CEBU, Philippines – The lack of trust and the low penetration of online payment are among the key barriers to the growth of e-commerce in the Philippines, according to Lazada Philippines CEO Inanc Balci.

Balci said that lack of trust remains an issue among Filipinos and they are still uncertain about making online payments for online transactions. Instead they still opt for cash-on-delivery transactions over credit card payments, he said.

Balci said only three to seven million Filipinos own a credit card and around 30 million have bank accounts. Even credit card holders would still prefer cash-on-delivery in their first online purchases.

"Lack of customer knowledge and market size are another challenges," Balci said in a recent interview.

The Philippines' geography is another constraint, which makes logistics operations very challenging, the CEO pointed out.

Because of the country's diverse geography, Balci said that low-density areas with low retail presence are hard to reach plus the expensive delivery infrastructure. Given these factors, online shopping firm Lazada have established hubs in various parts of the country to improve delivery.

Despite these constraints, the CEO said he would expect the rising smartphone penetration in the Philippines to help boost the online business. "There has been a tremendous growth in mobile in the country, so that is one of the factors that's fueling the growth of e-commerce in the Philippines," he said, adding that a faster Internet speed is also crucial for the industry's growth.

Balci added smartphone prices are going down because of local brands selling cheaper products in the market. As mobile phone usage rises, he said this would have a direct effect on mobile commerce penetration. In 2015, he said there were 10 million additional mobile Internet users in the country.

He shared that about 50% of visitors to Lazada come from mobile platforms.

Balci is optimistic that online shopping will continue to grow although presently, online sales only account for 1% of the total retail sales in the country. "The Philippines (online shopping) is going to be bigger than the Western countries," he said.

Currently, a hefty percentage of Filipinos still prefer traditional shopping.

The chief executive believes that more retailers are joining the online revolution.

"Online is not competing with offline. Online is an additional channel for merchants. E-commerce is, I think, the biggest entrepreneurial opportunity in the country at the moment," he explained.

Lazada is also present in Indonesia, Thailand, Vietnam and Singapore. (FREEMAN)