Frederic Levy started his first venture, a digital agency, in the Philippines in the year 2007. He along with his partners, expanded the venture to China and Indonesia. He sold his first startup, NetBooster Asia, to WPP IN 2013. During 2010, Frederic started a flash site in the Philippines called CashCashPinoy which is now one of the leading players in the space.
We caught up with Frederic to know his journey of building CashCashPinoy and e-commerce industry in the Philippines in general. Below are the edited excerpts:
In 2009, there were only 650,000 Facebook users, and then suddenly it exploded. Today the Philippines has the largest percentage of Facebook users in the world. That is when we saw the next wave of digital happening in the Philippines, which is doing business on the internet. At that time there was no concept of flash sales in the country, and we realized that it would be a good hook. That is when we started the site towards the end of 2010.
E-commerce is a very dynamic industry. It is a 60 billion peso market. Things change very rapidly. After we started in 2010, within 6 months, Groupon and LivingSocial came to the region. Within an year, Rocket Internet came to the region. In 2011, there were 100 flash sites in the Philippines. But today we have only 3 sites in this space here, we are one of them.
During the end of 2011, we decided to pivot. We quickly realized that we will have a problem with Groupon type of model in the Philippines, because unlike in the US/India where every city is a huge market, the Philippines is smaller. In the Philippines there are just two big markets, Manila and the Province market. We knew the classic Groupon model won’t work here, so we decided to go the product way. Now more than 80-90% of our revenues are driven by product flash sales. We are totally independent on sourcing, delivery etc. We source product from China, India, US and Europe.
E-commerce in the Philippines is very complicated. There are not many players who can help with supply chain, logistics, payments etc. Everything has to be built from the scratch. It was very challenging for us in the initial days, but in the process we learned a lot which is now a key asset at CashCashPinoy. Our knowledge and our know-how are competitive advantages. This is a challenging market, meaning there are significant barriers to entry
We have 500,000-600,000 unique visitors per month. Last year, we generated 7 million USD in sales, which is quite significant not only for the Philippines but also for the SEA region. We have about 25,000 - 35,000 transactions every month.
E-commerce in the Philippines - a Price driven market
There are some extremely savvy e-commerce buyers in the Philippines, who have shopped with large e-commerce players like Amazon. With these users you have to reassure that you will ensure the same kind of quality while they shop with you. This is a very small sub-set of buyers though. Then there are people who use the internet, are active on social networks, but are not willing to buy online. And then there are the third kind of people who buy online with only one objective - which is to buy a cheaper product. They buy online because products are available at cheaper prices. However, I am sure the market is emerging, and people will increasingly start buying online for convenience.
You need to guarantee quality of service. Because most people are doing their first online transaction with you, hence ensuring you give them superior quality of customer service is critical. You also need to guarantee that the products you are selling are authentic, because in Southeast Asia region selling inauthentic products is a challenge.
A Filipino team
We are a team of 105 Filipinos, and 99% of the team is Filipino. That s critical for me. As of today, everything is done in-house from the sourcing to the logistics to the distribution. The only thing we outsource is road transport/mobility. We set the quality standards for every step when we work with external vendors. That is the only to ensure quality.
Fashion and electronics are the fastest moving categories. Now, travel is also picking up; this has got to do with the emergence of middle class in the Philippines. We are also trying to start a new brand called CashCashTravel just focussing on flash sales in travel sector. We are excited about travel.
We did angel round in 2010 of 330,000 USD. Then we did Series A round in 2011. We raised 1.5 million USD from angels from US, UK and one Filipino family who put money in us.
Plans for growth and scale
It is very hard to establish delivery mechanisms in Province region of the Philippines. Our first priority is to crack Province region of the Philippines, because it is completely untouched by all the e-commerce players in the Philippines. This market has not been correctly addressed so far.
Currently, in product flash sales we are number 1 in the country. In the Philippines, you are number 1 or nothing (the same applies to Southeast Asia). To stay there is my biggest priority!
Advice for starting up in the Philippines
You cannot take a successful model that works in advanced markets and do plug-and-play in the Philippines or in any other area in Southeast Asia region. The idea is great, but execution is totally wrong. Every country in this region is very different, each country has its own characteristic, and its own executional challenges; so, you need to stay here, and figure out your own execution and business models that will work here. You cannot arrive, and plug-and-play in the Philippines.
We wish Frederic Levy all the best as he plans to build the e-commerce infrastructure in the Philippines.