Some common folks theorize that fishing can still be good after a storm. This works on assumptions that: 1.) storms do not necessarily bother deep-sea fish, so bottom fishing is an option; and, 2.) fish don’t get to feed much during a storm and are thus hungry after. So, even if waters are still murky or cloudy after a storm, it can be easy to get fish to bite as long as you get their attention with the right bait.
I am inclined to think that this fishing “sense” can work just as well in business, especially in turbulent times. But, as I noted in my column last week, even the best fishing pole and line and bait will be useless if the fish will simply not bite where you are. Or, there are just no fish to catch there. For it all starts with knowing where to fish.
The same goes for business, of course. It all starts with some idea, based either on a hunch or on data, of a possible market and what that market wants. After all, with a population of over 100 million and with it a consumer base of, say, 30 million, selling any product at a profit of even just 10 centavos to all those consumers every week, then that’s a net of P3 million a week or P12 million a month.
The coronavirus disease 2019 (COVID-19) storm is now still raging and the fish are not biting. But eventually, the storm will end, and we will be left with turbid and murky waters. However, we will also be left with a lot of hungry fish looking to feed. Now is the time to decide and prepare for what fish to catch and where to catch them; with what bait and how to catch them and when. New oceans of opportunity are emerging.
“We expect e-commerce online penetration (in ASEAN) to grow three to four times to anywhere between $90 billion to $120 billion in the next five years,” said resource person Olivier Gergele during a recent webinar with the Philippine Retailers Association. A BusinessWorld report quoted him as saying that e-commerce growth would accelerate after the weakening of traditional retail channels due to the COVID-19 outbreak.
Gergele, a partner at Ernst & Young (EY) Singapore, was also quoted as saying that Indonesia’s e-commerce industry was expected to grow to around $42 billion to $56 billion by 2025 from $13.3 billion in 2019, while Thailand’s industry was expected to grow to to around $16 billion to $21 billion from $5 billion. “Moving forward, as players are able to overcome and practically anticipate the exponential growth, the exponential demand, we can really expect online penetration to see a significant boost,” he added.
As for Philippine retailers, perhaps going online now is not a matter of choice but of necessity. The numbers have been bad since February. And only a few can continue to weather the situation if it persists until the end of the year. Offline retailers, Gergele said, already saw a 20% to 40% decline in foot traffic in February and March. And, I reckon the percentages to be even higher in the months of April to June.
As Gergele noted, “In the Philippines, some retailers have been grappling with early losses of up to 80% in the past month [March]. The sector really requires significant intervention… to survive.”
Gergele added that he expected the roll out of alternative business models to accelerate across Southeast Asia, including “dark kitchens” or food prepared for takeout rather than for restaurant dining, as well as digital community platforms. He also said that the online ecosystem in ASEAN was expected to be profitable in two to three years, shortening the timeline for e-commerce companies, which was usually four to 10 years.
So, the question now is where do we go from here. Some data available indicate a few trends that may be worth monitoring. In the US, for instance, data analytics firm Earnest Research tracked credit card and debit card purchases for nearly six million Americans for the week ending April 1, 2020, and their data showed some interesting results.
As quoted in “Working Paper 2020-59” by the Becker Friedman Institute at the University of Chicago, the Earnest Research data showed that US spending on airlines, hotels, rental cars, taxis, ride sharing, and movie theaters was down 75-95% year on year. Spending on fast food, auto parts, and autos was down 35%, and spending on apparel was down 70%.
At the same time, spending on home improvement, video streaming, gaming, food delivery, meal kits, and online grocers had “boomed.” The “Working Paper,” by Jose Maria Barrero, Nick Bloom, and Steven J. Davis, also noted that “the bulk of these spending cuts and shifts will reverse when the pandemic recedes and the lockdown ends, but some aspects of the shift are likely to persist.”
In the Philippines, BusinessWorld quoted National ICT Confederation of the Philippines (NICP) President Michael Tiu Lim as saying that the pandemic was a “double-edged sword.” While there has been growth in some ICT companies such as food delivery apps, service-oriented apps related to tourism and restaurant reservations have been hard hit. “There are certain sectors in the ICT industry that are doing well, [but] the others will not be doing well. In the overall balance, I think companies that don’t do well outweigh the companies that do well, unfortunately.”
And this, to me, is where our focus should be now. At this point, it appears that creation lags destruction. That COVID-19 is destroying more systems and structures faster than we can create new ones. That COVID-19 is decimating more capital than we can generate to restart the economy and to sustain growth. But there will be a turning point, for sure.
There is no doubt in my mind that more businesses will need to find their way into the ICT space if they wish to survive. But success in that space will also depend a lot on the readiness and the ability, particularly of smaller firms, to do work from home, and to do business online, as well as the availability of reliable technology and connectivity to do business.
At least in the aspect of digital finance, we seem to be moving forward. The value of digital transactions was reported to have almost doubled to P417.68 billion for the months of March and April compared to the year-ago level of P212.61 billion as more Filipinos opted to tap electronic channels amid the Luzon-wide enhanced community quarantine.
In a report, the Philippine Star quoted Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno as saying that more consumers have been shifting to e-payments because of the limitations on people’s movement and activities as a result of the COVID-19 pandemic. He noted that more people now use PESONet and InstaPay, the automated clearing houses for electronic fund transfers under the National Retail Payment System (NRPS) of the BSP.
BSP data show the number of PESONet and InstaPay transactions reached 17.3 million for the months of March and April, or 3.4 times last year’s 5.07 million. In March, PESONet transactions surged 61% year on year to P148.55 billion. In April, the value jumped 88% to P176.26 billion. For InstaPay, transactions surged by 237% to P43.36 billion in March, and by 260% to P49.5 billion in April.
This, to me, is a step in the right direction. As consumers become more comfortable with digital payments and digital financial transactions, they can also be eased into becoming more comfortable with digital or online retail and online services. But crucial now, as professional services firm Accenture noted in a report on COVID-19, is the ability of organizations to adapt to new conditions “to meet the immediate needs of their marketplaces.”
It noted, “…those who have viewed digital commerce as a secondary channel now need to reorient every aspect of their business towards a digital commerce mindset. There exists an opportunity to double-down on digital commerce, augmenting existing offerings and creating new lines of service. While this represents an opportunity to grow revenue, attract new customers and drive channel shift, it depends on digital channels and capabilities having appropriate scale and stability to handle the crush.”
Marvin Tort is a former managing editor of Businessworld, and a former chairman of the Philippines Press Council