How to start an E-commerce business in the Philippines

Marketing

March 22, 2023September 1, 2023

In the Philippines, the E-commerce market is currently valued at a whopping $15.62 billion, and it is expected to skyrocket to $29.54 billion by 2027.

This shows how undeniable the dramatic shift to E-commerce has been. New businesses flocked to the digital space, and brick-and-mortar shops did the same. That being said, it’s now integral to incorporate online selling into your business.

Thankfully, starting your own E-commerce business has never been easier, faster, and more affordable.

If you’re thinking about how to start an E-commerce business and you’re not sure where to start, this article will be your new best friend.

We’ll walk you through everything you need to know about it – from its advantages and disadvantages, the best E-commerce platform for you, and how to work on your delivery and logistics management, among other things.

What is E-commerce?

Electronic commerce, often abbreviated as E-commerce, is a process where businesses trade goods and services over the internet.

E-commerce allows your business to reach millions of customers without much effort. By adopting an E-commerce strategy, you’ll have a virtual global store that generates sales and profits with the click of a button.

Without question, E-commerce is truly an incredible selling strategy for start-ups since it allows them to reach their target market at a lower cost.

A lot of businesses in the Philippines have shifted to E-commerce because it’s a more convenient and cheaper way to sell products.

By having an E-commerce store, you can also efficiently manage your inventory and streamline your delivery easier through the help of third-party ecommerce services like Payo.

Pros & Cons of Starting an E-commerce Business

Before you start your own E-commerce business, it’s important to know its advantages and disadvantages. Here are a few:

Pros

Low costs

When you start an E-commerce business, it usually does not require a large budget.

You can start small, and go for free platforms such as Facebook Marketplace, or you can set up your own website for a fraction of the cost compared to building your brick-and-mortar store.

Location is not an issue

One of the best things about selling online is that you can sell your products and services to customers from anywhere in the world. There’s no need to worry about the proximity of your business/warehouse to your customers.

It is easy to showcase products

With E-commerce businesses, you just need to invest in good product photos and videos. You can even include customer-generated media and reviews on your website to encourage more people to buy your items.

It is easy to target customers

Thanks to E-commerce, your business can reach millions of potential customers easily, wherever they are located.

This can be done by using the right keywords and descriptions. It’s not like brick-and-mortar stores whose customers are limited to people within your business vicinity. You can also use advertisements and social media posts to widen your customer reach.

It offers great potential income

E-commerce businesses give you better chances to generate more income compared to a brick-and-mortar store because it costs less to maintain an online business.

Scaling your business is easy

Scaling your business is very straightforward when it comes to E-commerce since you can easily add new products to your inventory, and increase your sales and profits by using better marketing and advertising strategies.

You can sell 24/7

One of the benefits of ecommerce is that you, your partners, and your customers can take orders 24/7, 365 days a year.

If your customers want to take advantage of the convenience and flexibility E-commerce provides, they can do that any time they want.

Cons

There is no in-store experience

For certain customers, it’s not just about the products they want to buy; it’s also about the experience they get from shopping in a physical store. By shopping online, they won’t be able to touch or feel the product, which can be a deal-breaker for some people.

It is dependent on the internet

For your customers to access your E-commerce platform, they need an internet connection. If the internet is down, your customers will not be able to view or buy your products or services. However, now that most people are connected to the internet, this seldomly becomes an issue.

No one can buy if your site crashes

If your E-commerce site crashes or malfunctions, you won’t be able to serve any customers. This can be problematic, especially during peak sale periods.

It is very competitive

Since there are millions of E-commerce businesses out there, it can be challenging to stand out. This is why you have to take time to get to know your competitors, and establish what’s unique about your business, and work on getting your brand out there.

There may be potential privacy and security issues

Although E-commerce websites are now safer than ever, there may still be issues on safety and security. Someone may be able to hack into your database and steal the personal and financial information from your customers. You might not get this information back, and if it gets out, your reputation may become irreparable.

Avoid this problem by investing in the security of your platforms.

Types of E-commerce Business Models

Now, let’s look at the different types of E-commerce business models. Keep in mind that you can fall into more than one of these categories.

Business to Consumer or B2C

For this business model, you sell directly to end users. For instance, if you buy in an online store as a customer, it means they are following this model.

This is an amazing business model to follow for low-cost products and services.

Business to Business or B2B

This type of model involves businesses selling their services or products to another business.

Usually, the buyer is the end-user, but they typically sell it to their consumers as well. This business model has a high order value, but a longer sales cycle.

Business to Business to Consumer or B2B2C

For this model, companies sell their services and products in partnership with another organization to a customer.

This is not the same as white labeling where companies rebrand an item as their own. For this model, the consumer understands that the product they are buying is from an original company.

Business to Government or B2G

This business model involves businesses selling their goods or services to government entities, whether it’s a municipality, city, the national government, or a specific government agency.

This business model involves a bidding process.

Consumer to Business or C2B

This model enables individuals to sell services and goods to companies. For this model, sites may enable customers to post their work and have businesses bid for it.

Direct to Consumer or D2C

Direct-to-consumer is another popular business model in the ecommerce industry.

For this model, products are sold directly to end customers without any help from third-party wholesalers or retailers.

Consumer to Consumer or C2C

This model usually happens in online marketplaces that connect consumers to each other.

Best E-commerce Platforms in the Philippines

Once you pick the E-commerce business model you want, it’s time to pick your selling platform. As the E-commerce business in the Philippines continues to thrive, more and more platforms have become available to online sellers.

Your choice ultimately depends on factors like your target audience, budget, and your timeline in setting up your store. Here are some of your options.

Self-hosted website

Self-hosted websites give you the ultimate customization and flexibility. By starting from scratch, you can be totally in control of its design and upkeep.

While this may not be the perfect platform for beginners, you can simply hire web developers to take care of the site building for you. Once it’s running, you can be in charge of the maintenance.

Social media platforms

Nowadays, many social media platforms have integrated shops as part of their service. Facebook and Tiktok are two of the top E-commerce social media platforms today.

Because it has millions of users, you can promote your products or services to a large audience. Most social media platforms also support live selling which is great for businesses that want to push their digital presence.

Online marketplaces

Almost every person who shops online is active on online marketplaces like Lazada and Shopee.

These platforms allow business owners like you to leverage built-in platform features and services to ensure your business reaches its maximum potential. With a huge customer base, online marketplaces are also a convenient way to reach out to a large target audience.

Despite the high competition, there’s still a chance for you to get your share of the pie.

E-commerce Website Builders

If you want to build your website but you don’t have the budget to hire a developer, this is the ultimate choice for you.

E-commerce website builders are designed to easily create a new website with as little technical knowledge as possible.

Most of these platforms feature drag-and-drop editors, and you may also add various plug-ins to make your customer experience more seamless. Shopify, Wix, and WooCommerce are some of the most popular examples entrepreneurs love.

How to Start an E-commerce Business in the Philippines

You may feel overwhelmed once you start an E-commerce business, especially if you’re new to the industry. To help guide you in your journey, we’ve compiled a step-by-step guide for you to follow.

Step 1: Choosing a product/niche

This step will dictate the performance and outcome of your E-commerce business, so make sure not to rush this process.

Think of a niche that you can consistently sell and that has a demand in the market all year round.

You may choose broad niches like fashion, food, healthcare, or furniture, or stick to specific ones like mountaineering gear, surf suits, limited edition shoes, or blackout curtains – the sky’s the limit. Don’t be afraid to get creative.

Without narrowing down your products to a niche, you will have a hard time building a loyal customer base. Having a niche will ensure your consumers will trust you and think of you as an industry leader.

Therefore, you will have a higher chance of getting to the top of the value chain. Not only that, but it will also avoid confusion.

Step 2: Market research

Solid market research is needed to know exactly what you’re up against. To help you with this, perform a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis by answering the following questions – who’s your competition? What are their strengths and weaknesses? What will you be doing that’s different from your competitors?

You may also do a customer survey to know what exactly your customers will like, as well as their preferred price points.

When your business has a clear focus, you can easily differentiate yourself from your competitors. This step will also determine your company’s value proposition and brand positioning.

Learn More: How to do Market Research for E-commerce

Step 3: Setting up the business

Since you’ve already decided on a niche, it’s now time to start building your E-commerce business. Create a logo and a comprehensive business plan to make sure everything is organized.

Once you’ve done this, register your business name to make it official. Here’s an extensive guide on starting a business in the Philippines that you can also check out.

Step 4: Setting up & optimizing sales channels

Now that your business has begun, you may start setting up your E-commerce store. However, don’t expect to get sales the moment you launch your store.

You still need to optimize your sales channels to make your products easily accessible and visible to your audience.

But how exactly can you do this?

First, you need to create a compelling offer for your audience. Let your customers know how your product can make their life easier. Without this key information, your customers will have no reason to buy your product.

Second, learn how to use SEO to rank higher in search engines. This will help make your products more visible and easier to find on Google and your platform of choice.

Third, you also need to establish a solid social media presence. Post your products on social media platforms and online marketplaces. This step can help you significantly drive your sales to the next level.

Fourth, optimize your ecommerce store or your listings from online marketplaces for maximum performance.

Step 5: Choosing the best Payment Gateways

Nowadays, customers expect you to make purchasing easier for them. This is why having a wide array of payment gateways is a must to accommodate different customers’ needs.

You need to make it easier for them to pay through bank transfer, GCash, Grabpay, Cash on Delivery, PayMaya, and other platforms.

Step 6: Delivery & Logistics Management

Some of the most important tasks of a business owner is to make sure your inventory is safe, and that your customers get their orders as soon as possible.

While these tasks may seem easy in theory, these are very demanding and time-consuming.

To make this easier, you need to pick a logistics partner that’s not just reliable and reputable, but also efficient. Otherwise, you will be losing a lot of money as a result of delayed deliveries.

Here’s what you need to take care of when it comes to delivery and logistics management:

Order fulfillment services

Packing orders is no easy feat, especially if you’re serving hundreds of customers per week.

Order fulfillment services involve receiving, processing, and delivering orders to customers. This can be done by you, or a third party.

Warehousing

Product storage is another major thing you need to take care of. You need to have a warehouse that’s highly secure to avoid theft and damage.

Aside from that, the warehouse should also be clean and well-organized.

Live Customer Support (Sales Retention)

Customer support is a highly underrated yet vital aspect of running a business in the digital age.

With good customer support, your customers will be acknowledged daily, and be assured that you’re listening to their concerns – this will also make them more likely to come back to you.

Cash on Delivery Integration

Cash on delivery is one of the most convenient ways for customers to pay for the products they’ve ordered. It’s also a highly popular method for Filipinos, especially for those who do not have bank accounts.

To make cash on delivery a possibility, you’ll need to have a logistics partner that can effectively and promptly deliver your orders.

Parcel Tracking

With a reliable logistics partner, your customers can track orders anytime they please. This will greatly help get rid of delivery anxiety and drive customer satisfaction.

Tracking also helps business owners to ensure that orders are delivered on time.

Step 7: E-commerce Marketing

While you might have a great product and a reliable logistics partner, you still need effective marketing methods to drive sales.

There are plenty of ways to promote your products online, but each has its advantages and disadvantages.

For instance, content marketing is a method of advertising that involves creating blogs, posts, videos, and webinars that are relevant to your audience.

When your customers see, read, or watch these, your products will be introduced to them and they will generate interest in your brand.

Another effective strategy you can try is email marketing which involves sending targeted emails to your customers. This will allow you to establish a genuine connection with your customers.

Check Out: Payo’s Free E-commerce Checklist

Tips for when you start an E-commerce Business in the Philippines

With everything discussed above, it’s obvious that you need to consider a lot of factors before you start an E-commerce business. You have to take care of various aspects before, during, and after the actual business process. To make the process easier, follow the tips below.

Don’t rush your planning process

Getting your business off the ground may seem exciting, but rushing your planning process will only cause more problems in the future.

Begin by clarifying your goals and objectives for your business. From here, create a comprehensive business plan. If you skip this step, you might end up with a business venture that won’t last for long.

Be in multiple sales channels if needed

While you can market your products solely on your website and Google ads, you might need to leverage other sales channels to have better exposure.

For instance, you can set up your Facebook and Instagram pages, and be active on TikTok Shop, Shopee, and Lazada.

This may seem time-consuming, but it will bring you a lot of benefits. That said, it’s always best to prioritize your online presence in platforms where your target customers are most active.

Determine your USP early

Your unique selling point (USP) should be one of the first things you should establish before you officially launch your online store.

This will help you position your business better and get ahead of your competition. You can come up with your USP by asking yourself the following questions:

Why should customers come to your online store instead of your competitors?
Why should customers buy from you if you were both selling the same product at the same price?
Why should your customers pay for the items they have ordered?
How do you differentiate yourself from your competitors?

Understanding your USP is vital for your business venture. For instance, if your products are sold at a lower price than other competitors, you can use this as your USP.

Open a corporate bank account

Setting up a corporate bank account for your business can be confusing, especially for first-time business owners.

However, this step is non-negotiable, especially if you want to take care of your business finances well. If you mix your personal and business funds, you may end up mishandling your money.

Create some buzz before launching

Your store will only be successful if you have enough people supporting you. To do this, you can start by creating social media pages to gain awareness.

Don’t forget to ask for support from your friends and family, and let them know you’re opening an online store so they can share it with their network.

If you want to go the extra mile, utilize the power of PR by getting your story about the store’s launch published in different publications and online magazines.

Simplify the checkout process for your customers

The majority of customers leave websites when they encounter issues during the checkout process.

To prevent this from happening, you need to have a smooth and uncomplicated process for your customers to purchase your products. After all, you don’t want to lose sales, right?

You can use available tools to simplify your checkout process. For instance, you can use Shopify’s One Step Checkout feature.

Always give top-tier customer service

Customer service is one of the most important things to consider once you start an E-commerce business. If your customers feel that you have given them the best experience, you will greatly increase your chances of making repeat orders.

Be sure to keep your customers updated on the status of their orders, and once the order arrives, send them a personal message to make them feel important. If you receive a message on your email or social media pages, reply as soon as you can.

To give your customer service a boost, you can consider hiring a staff to handle the various customer requests. This will free up your time from handling queries and allow you to focus on running your business.

Consider tapping influencers or brand ambassadors

Reaching out to influencers or brand ambassadors is not only a great way to reach a wider audience, but it can also boost your brand and encourage engagement.

Most influencers will charge you for a promotion, but there are also ones that are okay with x-deals and affiliate commissions. Whether you have the funds to pay influencers or not, make sure to treat them professionally.

Always have a short and long-term vision

It’s easy to get carried away with excitement once your online store is making money, but you should always have a long-term vision for your business.

You don’t want to put too much effort in the beginning and then forget about your online store a couple of months after.

Having both long and short-term goals will help you determine where you want to go with your business.

For instance, your goal for the next 6 months may be to increase your sales by 20%. In the next year, you may want to double your current inventory.

While it’s okay to be ambitious, you always need to bring your feet back to the ground and be realistic in your goals.

Use failures as a learning experience

While it’s easy to get frustrated and want to give up, you should always use your mistakes as an opportunity to improve your business. For instance, if your items are damaged during the shipping process, maybe you can change your courier or protect your product better.

Incentivize repeat customers

As a business owner, you want to keep your customers happy so they will keep coming back to your store.

But how can you do this? By offering incentives that are exclusive to repeat customers.

Think about what your customers will find extra value in, and create a loyalty program that can make them excited about returning.

Keep your store mobile-friendly

A high number of customers use their mobile phones to search online for items. If your online store is not mobile-friendly, it can be difficult for you to close these potential sales.

With that in mind, you should work on improving the mobile experience of your online store, especially if your target market is young people.

Research tools and services to make managing your store easier

You should always tap into available research tools to help you better manage your store.

For instance, you can use Google Analytics to see how customers are interacting with your website and to find out which pages have the most traffic so you can focus more on them if necessary.

You may also leverage services like Payo to take charge of logistics so you can better focus on how you can improve your business further.

E-commerce Business FAQs

Still got questions about E-commerce? We’ll answer them below.

Do I need to have technical knowledge to start an E-commerce business?

Some E-commerce platforms require you to know your way around the technical aspects of setting up your website, but others, like Shopify, have an easy-to-use platform, even for those who are not tech-savvy.

That said, you must know how to run social media accounts to ensure your online presence remains high. This will help you increase your customer base.

What are the legal requirements for starting an E-commerce business?

In the Philippines, you need to register your ecommerce business name with the Department of Trade and Industry (DTI).

You must also get a permit from your barangay and local municipality/city. For tax purposes, you also need to register with the Bureau of Internal Revenue (BIR).

Do I need to register my E-commerce business with the government?

Absolutely. Registering your business with the government is not only a requirement, but also a way for you to prove to potential customers that your business is legitimate.

What payment methods should I offer on my E-commerce website?

This should be decided based on your target market. For instance, while credit cards and debit cards are the most common payment methods in ecommerce, you should also consider accepting other payment methods such as GCash, PayMaya, and Cash on Delivery.

Also note if your target customers prefer BNPL (Buy Now, Pay Later) services.

How do I handle shipping and returns?

One of the most important things you need to consider when creating an ecommerce store is your return and shipping policy.

You should clearly specify your time frame and conditions for returns, including your refund or exchange policy.

For instance, you can offer a 15-day return policy, as long as your customers have a valid receipt or proof of purchase, and the item has not been damaged.

You should also specify if customers need to pay for return shipping or if you will be responsible for it.

How do I promote my E-commerce business?

It is vital to have a strong content marketing strategy for your ecommerce store.

This will not only help you grow your social media presence, but it will also help you increase your sales, organic traffic, customer engagement, and customer lifetime value.

You can do social media marketing by using hashtags, posting frequently, and using relevant photos, videos, and captions. You can also use influencer marketing and tap into your customer database to spread the word about your online store. Finally, leverage the power of ads – both on social media and traditional platforms.

How much does it cost to start an E-commerce business?

Your costs will depend on the type of E-commerce store you want to create. For instance, selling products on Facebook Marketplace is free, but if you plan on creating your own website from scratch, expect to pay P75,000 or more.

Meanwhile, platforms like Shopify cost roughly $29 to $299 per month.

How long does it take to set up an E-commerce business?

This depends on the type of E-commerce business you plan on creating. In theory, you can get your business up and running in a few hours.

However, it is recommended to work on your ecommerce store for weeks or months to ensure it looks good and runs smoothly.

How do I create a website for my E-commerce business?

This can be done by using a website builder, or by hiring a web designer or developer.

What kind of support should I offer to customers?

Customer support should always be prioritized. This is a way for you to show people that you are listening to their concerns and suggestions, and that you are willing to provide the solution to their woes.

Email, chat, and message support are recommended. Also don’t forget to reply to comments/questions on your posts.

How do I ensure the security of customer information?

One of the most important things for ecommerce store owners to consider is information security.

There are several things you can do to ensure the safety of customer information.

First, you can create a privacy policy for your site that clearly states how you will use and disclose customer information, including any third-party companies you might use.

Your company should also have the right security protocols in place to prevent cyber-attacks.

As always, you should ensure your customers’ information (credit card details, contact information, etc.) is safe and secure. This can be done by using SSL encryption and ensuring the information is stored on a secured server.

How do I handle inventory and stock management?

Before you create an E-commerce business, you need to determine how you will handle inventory and stock management.

The easiest way to handle this is to get a third-party service to do it for you since it can be extremely stressful.

Can I start and run an E-commerce business from home?

Yes, you can start an E-commerce business from home, and even run it from there as well. This is perfect for people who want to get started immediately at a minimal cost.

How do I measure the success of my E-commerce business?

This depends on the type of E-commerce business you plan on creating. In general, there are several key performance indicators (KPIs) you should be tracking.

For instance, you should be measuring your ROI, number of transactions, conversion rate, and sales and revenue growth.

Aside from those, it is also recommended to measure your revenue per customer, website traffic, cart abandonment rate, and customer acquisition cost, among many others.

What are some common mistakes to avoid when you start an E-commerce business?

The most common mistakes to avoid when starting an E-commerce business include:

lack of proper planning
not being in the right platforms where your target customers are most active
not having a clear value proposition
failing to utilize tools and resources that would help your business grow
not investing enough time to build your brand.

But as long as you plan well, your E-commerce business will surely reach its maximum potential.

Now that you’ve gone through our article, you know all of the basic things to know when starting your business. If you need a reliable E-commerce partner, look no further than Payo!

As one of the country’s leading E-commerce enablers, we’ll help you from every aspect of your business — from Live Customer Support and Fulfillment to Cash on Delivery Integration and Advanced Remittance.

Sign up with us today or send us a message at [email protected]. We look forward to helping you thrive in E-commerce!