A string of new warehousing and industrial parks, in addition to new expressways and rail links, are set to boost the growth of the e-commerce industry on the most populous island of Luzon. Online retailers are eager to take advantage of the opportunities arising from improved connectivity within and between islands. Flagship public infrastructure projects, such as the Luzon Spine Expressway Network and the North-South Commuter Railway Extension, are set to improve connectivity between Manila and its surrounding regions in the couple years following 2019, boosting productivity and creating new business opportunities in the process.
Due to the extensive infrastructure pipeline, major developers have been investing in logistics projects, which will be a boon to e-commerce growth over the medium term. For example, Filinvest Land, a local real estate company, is developing a 64-ha logistics and industrial park in New Clark City, scheduled to be operational in 2020. DoubleDragon Properties, another Philippines-based real estate firm, acquired a 6.2-ha lot in Luisita Industrial Park in Tarlac in 2017, which is set to add about 32,000 sq metres of industrial space upon opening in 2020. Elsewhere, in anticipation of online sales growing from a 1.5% share of the retail market in 2018 to 6-7% between 2021 and 2023, e-commerce company Lazada Philippines plans to triple its fulfilment capabilities over the same period by opening new warehouse facilities across all of the main island groups. Lazada operates its largest fulfilment centre in South-east Asia in Laguna, a province adjacent to Manila.
Online sales in the Philippines generated $1.5bn in 2018, according to a report by Dublin-based e-commerce platform eShopWorld. As e-commerce continues to grow alongside the increased connectivity of islands, logistics firms – particularly multi-channel shippers – are making note of the opportunities this presents for their distribution network, increasingly adopting IT platforms and data analytics to improve operations in response to changing market dynamics. “E-commerce is disrupting the logistics sector,” Emmanuel Bautista, executive director and head of ASEAN at Hong Kongbased LF Logistics, told OBG. “The market now requires fast deliveries in small quantities to many destinations.”
In developed economies, apparel, electrical, food and ICT goods are particularly strong subsectors of online shopping. If this trend is followed in the Philippines, local e-commerce could help fuel the re-emergence of the country’s once-dynamic textiles and garment industry, as well as encourage the manufacturing of an array of electrical components to meet rising domestic demand.
The proliferation of new townships and the expansion of opportunities in alternative markets such as North and South Luzon, in addition to Cebu and Davao, is an important development for e-commerce companies, as product delivery to the end user has traditionally come at a high cost and consequently dampened online sales. Same-day delivery services by Lazada, for example, are confined to a limited number of destinations in Luzon and Cebu. “Growing e-commerce demand has forced all companies in the sector to focus on last-mile delivery services. Developing an efficient system to reach the final consumer is a top priority,” Daniel Ventanilla, general manager of shipping firm NYK Line, told OBG.
According to a June 2018 report by the Asian Development Bank and the UN Economic and Social Commission for Asia and the Pacific, the Philippines’ capacity to develop an effective nationwide delivery service is constrained by its more than 7000 islands. Nevertheless, the report noted that over 85% of Filipinos across the archipelago had access to a home delivery service as of 2015, higher than the rate in neighbouring Indonesia, which stood at 80% that year. Another factor that inhibits e-commerce growth is the relatively low penetration of digital payment services, demonstrated by 80% of e-commerce customers making cash-on-delivery payments during 2017 (see Banking chapter).