Setting up An E-commerce Business In The Philippines

What are the primary legal requirements for setting up an e-commerce business in the Philippines? From this article, you will also find supportive market insights and reasons to why now is an excellent time to launch your business.

Why Set Up an E-commerce Business in the Philippines

Google-Tesmark Holdings’ joint research shows that Philippines’ e-commerce market share will reach 9.7 billion of Southeast Asia (SEA) projected digital economy in 2025. The Philippine tech-savvy population is driving e-commerce with retail industry at its forefront.

Fast Increase in Youthful Connected Users

Statistics show that an average person uses the internet for 216 minutes daily. Let’s make sure you know how to target these digital natives that grew up together with the increasing use of technology.

Here is how to summarize the user behavior online based on ASEAN Up:

• Internet users – 67 million
• Social media users – 67 million
• Unique mobile users – 61 million
• Mobile social users – 62 million

Out of all the user engagement metrics, reaching the active online users is what everyone eventually desires. It may be in the form of creating a lead, making a sale, upselling, etc. Hereby note that the most e-commerce users come from those in between 25-34 years of age:

E-commerce Revenue is Growing Steadily

E-commerce industry has 37.75 million users in the Philippines now. The surge of shoppers purchasing online continues to influence retail businesses. Estimations show that an additional 18.02 million people will be shopping online by 2022.

Let’s take a look at the impact they have on revenue:
The number of online consumers is growing and we can now see that they are also spending more. Addressing this increasingly affluent target group is one of the exciting challenges you would have in the Philippines. The largest producing segment is currently electronics and media, excellent growth is also seen in:

• Fashion
• Food
• Furniture
• Toys

Internet Penetration is on the Rise

Philippines’ internet penetration is currently 48.8% and it is said to reach 50.5% by 2022. For instance, smartphone penetration is expected to jump from the current 32.2% to a 40.2% by the same time.

Most of today’s users spend their time online while being on a laptop or desktop computer. Only slightly less of them use a smartphone and least of the people choose a tablet. The percentages are as follows:

• Laptop or desktop computer – 81.6%
• Smartphone – 81.4%
• Tablet – 49.3%

Consistent and Stable Market Leaders

The tech and startup ecosystems are growing fast, which is excellent for testing and building up a business. Although, leaders in the market today show that the e-commerce industry is stable enough for long-term investments. Decide on where you’d position yourself next to those that are running the online scene now.

Success stories of 2017 show that Lazada dominated all year round, followed by Shopee. Lazada led in Google Play mobile shopping apps for all quarters. Shopee on the other hand led Q3 and Q4 in iOS mobile shopping apps.

Lazada also has the highest e-commerce search interest penetration. They are leading with a maximum of 42% search interest and are respectively followed by:

• Shopee
• Zalora
• eBay
• Kimstore

Mobile Commerce (M-commerce) and Application Market are Trending

The m-commerce numbers are increasing in the Philippines but also worldwide. Hence, it is important for an e-commerce business to also adapt especially to this segment.

According to the Rappler, Philippines is also the fastest growing app market in SEA. Statistics show that 5 out of 10 people have recently bought something with their smartphones (games, apps, music.) Also, the mobile phone subscriptions for the total population indicate to an impressive 119 million (ca 117% penetration rate). Out of this base:

• 95% are prepaid
• 55% have a mobile broadband subscription
• Less than 10 have said they have a broadband subscription
• 80% are subscribed to the lowest speed tier plans (1-3 Mbps)

The Philippines is Implementing an E-payment System

Online and mobile payment methods are not made available everywhere in the Philippines. In fact, there are areas where it’s common to only pay in cash. At the same time, private companies have been efficient in innovating in mobile payments and commerce.

While cash payments are most preferred, these statistics may also change soon. The Bangko Sentral ng Pilipinas has created a program called the National Retail Payment System (NRPS). This new initiative aims to increase the electronic payment usage in the Philippines. The Visa’s Consumer Payment Attitudes Survey has proven demand and that Filipinos are ready to go cashless. E-payment system is set to go live during the current year.

You should also think through the payment methods you wish to make available for your business. As well as if you have any questions regards to the foreign exchange and exchange control.

Registering an E-commerce Company in the Philippines

Once you’ve established that you’d like to set up an e-commerce business there are things to keep in mind. First, you must acknowledge the purpose of your business and who you’d like to target. The amount of your paid-up capital and the requirements of forming a company depend on the nature of your business.

Paid-up Capital for an E-commerce Business in the Philippines

The amount of paid-up capital is set by law and relates to the ownership of your company. You must have enough funds as well as meet the requirements set for starting companies. Keep it in mind as special terms apply for foreign ownership.

We have summarized this information in a table below for you. Find out how much paid-up capital do you need, as well as what are the incorporation and activity requirements:

Fully Foreign-owned Domestic Corporation	Locally-owned Domestic Corporation
Targeting local or Philippine market. Restricted to engage in retail* Paid-up capital: $US 200,00 * Paying a higher capital enables engaging in the retail industry.	Targeting the local or international market. Paid-up capital: Minimum amount of PHP 5,000 (~ $ US 93.9196)
Targeting international or overseas clients. Restricted to engage in retail. Paid-up capital: Minimum amount of PHP 5,000 (~ $ US 93.9196)	No restrictions to engage in retail/online retail.
Engaging in retail/online retail. Paid-up capital: $US 2.5 million

On a similar topic, read about the foreign investment negative list. From this post, you’ll see which industries have limits or are fully unavailable for foreigners.

Reach out to Emerhub to discuss further on how to set up an e-commerce business in the Philippines. Leave your contacts below or get in touch with us through the company registration page.