‘Poor internet, high logistics costs hinder Philippines’s e-commerce growth’: Steve Sy of Great Deals

With an ambition to become the Alibaba of the Philippines, e-commerce enabler Great Deals announced early this week a US$12 million financing round from Navegar, the largest private equity investor in the country.

It is rare for a company in the Philippines to raise such a massive sum in the very first round of funding, but for CEO Steve Sy, it is a well-deserved feat. He founded Great Deals in 2014 after spending many years as an entrepreneur in the retail and e-commerce sectors. He identified a glaring need to enable entrepreneurs like himself to succeed in the internet economy.

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In this conversation with e27, he talks about the country’s e-commerce industry and Great Deal’s roadmap.

Edited excerpts:

You have worked in the retail and e-commerce industry before starting Great Deals. How has the industry grown over the last few years?

I entered this industry in 2012 during its infancy stage when the penetration was shallow, and the chance of even small merchants dominating the online retail world was very high. I have seen e-commerce’s hyper-growth in the last few years.

Now, merchants need to find a strategic partner to help them succeed. As a ripple effect, our company has been growing a hundred per cent year on year.

Why did you go for a single investor for this funding? What is the synergy with Navegar? How much stake did you dilute this time?

Rather than an investor, we wanted a strategic partner that would help us grow in the right way. I believe that with Navegar’s support, our company will propel to better heights. I diluted only minimum stake.

You aim to become the Alibaba of the Philippines. In what sense — as an enabler or a marketplace? Do you have B2C e-commerce arm?

We are having what we call the network externality effect. Aside from Great Deals, we are also pioneering companies that will soon be a vital part of the digital economy.

Also Read: How top e-commerce platforms are fuelling Philippines’ online economy

We booted a live-streaming service company, a farm-to-kitchen marketplace business, and we also have an SME for drop-shipping in the country. Each of these initiatives is interrelated in the e-commerce industry.

Our ultimate goal would be to contribute to the development of the ecosystem.

E-commerce is still just 2 per cent of the the country’s GDP. What is holding back the growth of this industry?

I believe that our poor internet infrastructure is holding back its growth. Despite this, a recent study shows that we Filipinos spend the most time on the internet.

The e-commerce sector in the country has everything in place for massive growth. What is still lacking? Is there still a trust deficit between e-commerce and consumers?

We lack two things: better internet infrastructure and low logistics cost. Due to regulations, unemployment and other factors, the Philippines has the highest logistics cost, and we are evaluated as the worst performer, not just in ASEAN but also globally.

In a country like the Philippines, poor traffic conditions often affect the timely delivery of products. How do you manage to address this challenge? What is your strategy?

Our plan is to set up several fulfilment centres across the country. The warehouses would be closer to the major cities, and consequently, the deliveries would be faster.

Do you also partner with offline firms to help them go online and tap into the e-commerce opportunity in the Philippines?

That’s what we do. We work together with offline business or firms with a weak online presence to help them tap into the e-commerce space.

Some of your clients, like Zilingo, have a foreign presence. Do you handle their overseas market requirements as well? How does it work?

We’re only operating nationwide, but we have been having talks regarding this possibility. We are not closing our doors.

What are the top three items consumers prefer to buy online?

Most probably, they are diapers, milk and electronics.

What are the unique characteristics of the Philippines’s e-commerce consumers? What do they expect from an e-commerce platform?

I can share three characteristics of a Filipino consumer. First is our preferment for cash-on-delivery payment method. People feel safer and find comfort in the thought that they would receive their package because it is unpaid.

Also Read: Great Deals raises US$12M from Navegar to be the Alibaba of Philippines

Second is the peak purchase time. Most buyers place their orders during their lunch period, which is between 12 pm and 2 pm.

Lastly, shoppers like reverse showrooming. It is when people visit brick-and-mortar stores to browse items but purchases online where they have access to discounts and free shipping. Those are the typical consumer behaviour right now.

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