THE majority or 80 percent of e-commerce transactions in the Philippines are still cash-on-delivery transactions, according to a report by the Asian Development Bank (ADB) and United Nations Economic and Social Commission for Asia and the Pacific (Unescap).
This despite the high Internet penetration rate in the Philippines. The report, titled “Embracing the E-commerce Revolution in Asia and the Pacific,” said there are 56.75 million Filipinos who have access to the Internet.
The report said this can be due to the lack of available e-payment options that force Filipinos to resort to cash on delivery, placing consumers at risk.
“The lack of well-developed e-payment systems forces e-commerce firms to rely on fragile business models. For instance, COD can create friction between buyers and sellers, because it involves a high degree of uncertainty whether vendors get paid. Another is the safety of customers, who can be threatened if they refuse to pay for unsatisfactory goods,” the report stated.
This could be one of the reasons e-commerce transactions in the country remain low. In 2015 the report said, only 0.5 percent of retail sales in the Philippines are conducted online in 2015.
Apart from these reasons, geography concerns, particularly for island economies, prevent the increase in e-commerce transactions.
The Philippines, being an archipelago, further complicates the delivery and return of goods bought via online or electronic transactions.
“An underdeveloped delivery system is a major roadblock for developing e-commerce. But improving delivery systems are difficult when geographic factors are involved. For example, Indonesia has more than 17,500 islands. The Philippines has 7,641. So delivering products cost-effectively is challenging,” the report stated.
The underdeveloped e-commerce system poses a huge disadvantage, especially to small and medium enterprises (SMEs) who stand to benefit the most from such a system.
In a statement, the ADB said that through e-commerce systems, SMEs can “reach global markets and compete on an international scale” while “creating many jobs in the process.”
The ADB cited the need to develop viable e-commerce ecosystem which requires a holistic approach and concerted efforts by all stakeholders in e-commerce development, including national governments and international development institutions, trade associations and industry bodies, businesses (e-commerce vendors, payment service providers, and logistics service providers, among others) and consumers.
It added that policy priorities should be on establishing a legal and regulatory framework for e-commerce, harmonizing international laws and standards, promoting information and communications technology infrastructure development, broadening Internet access and affordability, and supporting financial and e-payment infrastructure.
“Emerging digital technologies are transforming the e-commerce landscape and offer a new set of modern solutions and opportunities to build more inclusive growth and spur innovation,” ADB Vice President for Knowledge Management and Sustainable Development Bambang Susantono said.
“It offers a chance to narrow development gaps—whether demographic, economic, geographic or cultural. It also helps narrow the rural-urban divide. However, realizing the full potential of e-commerce calls for coordinated regional and global efforts,” Susantono said.
Asia and the Pacific is the world’s largest business-to-consumer e-commerce marketplace and continues to grow rapidly, the report said.
By the end of 2015, the size of e-commerce relative to gross domestic product was 4.5 percent in Asia and the Pacific compared to 3.1 percent and 2.6 percent in North America and Europe.
The Internet retailing market share of Asia and the Pacific is expected to reach around a half of the global total by 2020.