The Philippines, a country with a land area of nearly 300,000 square kilometers, is made up of more than 7,000 islands. This "country of a thousand islands" is rapidly emerging as an emerging hot spot in the field of e-commerce. The "Christmas season" a month ago once again demonstrated to the outside world the huge consumption potential of the Philippines. A little-known fact is that the Philippines, where it never snows, has the longest Christmas holiday in the world. The long Christmas season in the Philippines lasts from September to December, and because the English pronunciation of these four months all end with "ber", it is known as the "Ber Month Christmas Season". As soon as September began, 60% of Filipinos began Christmas shopping on online platforms, much earlier than other parts of the world. Data agency Kantar found that TikTok Philippine users are 1.9 times more likely to spend more on Christmas gifts in 2024 than the year before. In addition, users are twice as likely to increase spending on beauty and personal care gifts as the year before. Offline consumption also performed very well during this Christmas season. For Filipinos, offline consumption is not only about shopping, but also a form of leisure, social needs and lifestyle. Statista said in a recent data report that "the Philippines is a dynamic and rapidly growing digital market, with a large population (118 million) and rising incomes providing huge business opportunities." 01 New opportunities in the “Christmas season”During the four-month Christmas holiday, in addition to experiencing the colorful Christmas activities, shopping becomes one of the most important activities for Filipino consumers. Every September, radio stations, shopping malls and businesses will play Christmas songs, and streets will be filled with Christmas trees of all sizes and various lighting and light shows, such as elk, Santa Claus, and stars. For example, in Manila's large shopping mall SM Mall of Asia (MOA), a huge Christmas tree stands in the center of the mall, and the golden decorations sparkle in the sun. When the lights are turned on at night, it attracts countless consumers to come and check in and take photos. Christmas atmosphere on the streets of the Philippines Data released by Tabcut shows that the demand for Christmas decorations on TikTok Shop Philippines has skyrocketed. In September, 31,700 Christmas party lights were sold, up 6.5 times year-on-year; 23,000 Christmas curtains were sold, up 6.6 times year-on-year; and the sales of Christmas gnome dolls with luminous functions soared by 35,311.76%. Many of these products are produced in Zhejiang. According to CCTV Finance, my country's Christmas product exporters enter the peak period of production and shipment from May every year. In Ningbo, Zhejiang, some innovative products were launched, driving the rapid growth of Christmas product exports last year. Some companies expected the export of Christmas products to grow by about 40% last year. In addition, about 80% of Filipinos are Catholics. For most people, Christmas has more than religious significance, but it is also about spending time with family and friends. Therefore, eating, drinking, partying, and buying gifts are essential. In addition, Christmas parties of various organizations and companies have come out one after another, and some even stipulate that the price of gifts exchanged must be higher than a certain amount, which has caused a lot of money loss for many people. Therefore, products with "gift" attributes also usher in a consumption peak in the year. Filipino consumers prefer low-priced gifts when giving gifts. In addition to party decorations, popular gifts include women's perfume, INS-style coffee cups, magic water elf toys, etc., all of which are priced below $5. Tabcut data shows that 5,732 INS-style coffee cups priced at $0.66 were sold in September, a year-on-year sales increase of 218%. In addition, as visiting relatives and friends and hosting gatherings and banquets have become the norm, traditional Christmas foods such as bacon, barbecue, and turkey have become the first choice for toasting, and kitchen appliances such as barbecue machines, BBQ machines, and meat grinders from China continue to sell well in the Philippines. Air fryers from Chinese brands such as Midea and Joyoung are popular among Filipino consumers for their high cost-effectiveness, rich functions and good quality. Xiaomi even ranked second in the air fryer sales list in 2023. FsatMoss data showed that in the 28 days from October 28 to November 24, the sales of a meat grinder from Dreepor in the category of home appliances-kitchen appliances in the Philippines showed an upward trend, with a total of 6,448 units sold and total sales reaching 1.2012 million. Image source: FsatMoss The extremely strong consumption explosiveness stems from the unique attributes of Filipino consumers. First, the Philippines has a population of over 100 million, second only to Indonesia in Southeast Asia, and its GDP ranks fifth among the ten ASEAN countries; Moreover, a detailed report by the International Monetary Fund (IMF) predicts that the Philippines will soon become the youngest country in Asia, and the abundant young population means booming consumer demand and promising development prospects; Finally, although the Philippines is an island country with scattered land, its consumer population is relatively concentrated. The Manila metropolitan area has a population of 13.5 million. For brands, capturing the core metropolitan area is equivalent to capturing the main market. In addition, the Philippines has always been quite positive about overseas brands, with 72% of the country's top 50 brands coming from overseas. Nowadays, with the increasing popularity of e-commerce year by year, more and more new ways of playing have stimulated richer and more diverse consumer demand. According to data from 36Kr Global Research, 88% of Filipino consumers choose to collect product parameters, features and prices before shopping and make detailed comparisons. Many cross-border e-commerce platforms from China have created this convenience for them to "shop around". And 46% of Filipino consumers will be directly influenced by celebrities and idols to make purchases, which also brings development space for live streaming and product promotion. The "gamified" trading method has also been introduced to the Philippines. For example, Lazada has designed a game called LazLand, where users can "plant rice" by earning points through consumption. When the rice is mature, they will receive real rice or daily necessities of equal value as rewards, which greatly enhances user stickiness and activity. 02 Whoever controls the offline network controls the worldAlthough online consumption is in full swing, offline shopping is still the most mainstream way of shopping in the Philippines, accounting for about 90%. The places most frequently visited by consumers are basically shopping malls, restaurants and chain retail stores. On October 1 last year, the Chinese tea brand Tianlala opened in the Greater Bay Area of Manila, Luzon Island. The store's sales on the first day exceeded 9,000 yuan, and then, without any promotional activities, the daily sales stabilized at nearly 7,000 yuan. This performance has exceeded that of some local Philippine brands. According to the observation of Huang Manyi, the overseas director of Tianlala, the business formats in the Philippines are quite polarized. One is large shopping malls, which have one-stop functions of eating, drinking, playing and shopping, and have relatively strong consumption power. In addition, due to the high temperature of over 30 degrees Celsius all year round, the flow of people inside the shopping malls is very sufficient; the other is street shops, which have lower consumption levels and their business conditions are greatly affected by environmental factors. Although there is polarization, the "offline-oriented" consumption pattern still brings new opportunities to Chinese consumer brands. Heilan Home, the "wardrobe of Chinese men", has been increasing its business in Southeast Asia. It has four types of stores in Southeast Asia, HLA concept, HLA men's clothing single store, EICHITOO women's clothing single store, and HLA lifestyle Heilan Preferred Store, which mainly sell groceries, trendy toys and other categories. They are basically mid-to-high-end stores, with large areas of more than 400 square meters and small ones of 100 square meters. The product pricing is higher than that in China. In the first half of 2024, Heilan Home's overseas revenue was 161 million yuan. Today, Heilan Home can be seen in large shopping malls such as SM Fairview City Mall and Robinson Manila Place in Manila, Philippines. In the story of Chinese companies going overseas in 2024, "emotional consumption" will definitely play a role. In the process of entering Southeast Asia with physical stores, Pop Mart chose to start from Singapore and Malaysia, where per capita income is relatively high, and gradually expanded to Thailand, Vietnam, and finally to Indonesia and the Philippines. Image source: Weibo @Pop Mart On November 2, 2024, Pop Mart's pop-up store landed in Manila, the capital of the Philippines, in the prime area on the second floor of SM Mall of Asia, the largest shopping mall in the Philippines. According to the video footage released by Pop Mart's official Weibo, there were a large number of consumers queuing up to buy on site. Pop Mart said that its first physical store in the Philippines is also under preparation, by which time Pop Mart will achieve full coverage of the six Southeast Asian countries. As mentioned above, the consumer population in the Philippines is relatively concentrated, which makes offline core business district resources particularly valuable. As offline competition becomes fierce, rents are also rising. According to the "Global Main Streets" report released by commercial real estate services firm Cushman & Wakefield, retail rents in Metro Manila's BGC will increase by 3% year-on-year in 2024 to US$51 per square foot per year, which is equivalent to approximately US$549 per square meter per year (approximately RMB 4,025). In comparison, the annual rent per square meter of Joy City in Chaoyang, Beijing is about 1,531 yuan, and the annual rent per square meter of Raffles City in Shanghai is about 2,448 yuan. 03 Half of the sea water is like fireFor overseas brands, is it still a good choice to enter the Philippine market now? The answer is yes. The World Bank recently raised its economic growth forecast for the Philippines in 2025, predicting that the country's GDP will grow by 6.1% in 2025, higher than its April forecast of 5.9%. The huge growth potential in the Philippines has also made many Chinese brands want to seize the golden window period, and even eager to copy the domestic "playing style" here. Among them, the most commonly used is price war, which is particularly evident in the field of small household appliances. Most Filipino consumers are price-sensitive, but young people are keen on pursuing the trendiness of big brands, so there is a huge market demand for small household appliances that are inexpensive and designed to resemble the looks of big brands, even OEM small household appliances. Take hair dryers, a common household product, for example. On Shopee Philippines, there are more than 20,000 products for sale. A hair dryer sold at the official Shopee Mall store of a major British brand costs 23,715 pesos (about 2,977 yuan), while another product with the same design language, which ranked first in monthly sales, sold more than 10,000 units in 30 days, and the price was only 1,384 pesos (about 173 yuan), a difference of about 17 times. The second best-selling brand is the Chinese brand "Zhuimi", with monthly sales of more than 8,000. The design of this brand refers to some popular big-name styles, with bright colors and a price of 3,190 pesos (about 400 yuan). The brand has captured many young Filipino consumers with its cutting-edge design and moderate prices. The situation is similar for electric fans. The top-selling brand also has a similar design language to international brands, with monthly sales exceeding 10,000 units and a platform price of 5,400 pesos (about 800 yuan). The second place is a Malaysian brand, with monthly sales exceeding 6,000 units and a platform price of about 700 yuan. The Chinese brand Jisulife ranks fourth, with monthly sales of 4,100 units and a price of about 430 yuan. But it should be noted that online brands will fail to achieve their goals if they rush. Engaging in price wars will instead reduce their own profits. Vivian, head of UGREEN's e-commerce, said that in the field of 3C consumer electronics, compared with other Southeast Asian markets, the Philippine market seems to have a low threshold, a large population and great potential, but it is actually not easy to do business in. Many categories in the market already have dominant brands with a complete layout and low prices. Deep-rooted offline consumption habits and diverse channels of brand recognition have made the offline competition environment more friendly, but supply chain and rental and personnel costs are issues that need to be considered, which has also prompted many upstream supply chain companies to begin overseas layouts. At the end of 2023, Hairong Technology, the "first cream stock" in China, announced that its newly established holding subsidiary, Hairong Philippines Import & Export Co., Ltd., has obtained a business license. A relevant person in charge of Hairong Technology said that the business scope of Hairong Technology's Philippine holding subsidiary is to engage in the import and export, distribution and retail of baking food ingredients, such as cream, chocolate, jam, etc. "By laying out the local market in the Philippines, the company's brand awareness will be effectively enhanced, the company's customer development in the Philippine market will be further improved, and the local market share of the company's products will be expanded." In the first half of 2024, Hairong Technology's overseas revenue has reached 48 million yuan, a year-on-year increase of 9.2%. Perhaps some people still remember the incident in July last year when two employees of Chinese pharmaceutical companies were killed in the Philippines. After this vicious incident, many companies that intended to expand into the Philippine market were discouraged. This may also be an important risk factor for Chinese companies to enter the Philippine market. According to a report by PwC, the business environment of major countries in Southeast Asia has improved significantly in the past 5-8 years, but not all of them have entered the world's top ranks, and there are large differences among countries. Due to historical reasons and geographical location, Thailand and Malaysia are in the first echelon in terms of business environment and degree of openness, while Indonesia and Vietnam have made more significant policy improvements in recent years. In addition, the financial and judicial systems, local protectionism and information transparency, as well as land and employment policies are still the main constraints on foreign investment. This means that Chinese companies also need to do a good job of risk management when choosing to expand to the Philippines. References: [1] “Review and Outlook of Chinese Enterprises’ Investment in the Healthcare Industry in Southeast Asia from 2015 to 2023”, PricewaterhouseCoopers [2] “Must-have for going overseas: Guide to overseas investment and cooperation - Philippines (2023 edition)”, Ministry of Commerce [3] Overview of the Philippine Market, Shopee [4] “TikTok Shop 8 Major Sites Research Report”, TT123 Author | Tang Fei Editor | Li Xiaotian |
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