The top 6 eCommerce business challenges in PH, and how a Credit Line solves them

Business Growth
September 14, 2023

Running an eCommerce business in the Philippines can be tough for small and medium enterprises (SMEs) due to rising competition and limited financial resources. However, the good news is that online shopping in the Philippines is growing rapidly, with the eCommerce market size projected to reach $22 billion in 2025 from $12 billion in 2021.

Despite the potential for growth, Philippine SMEs struggle to scale their e-commerce businesses, largely due to financing challenges. An e-commerce business requires continuous capital investments for inventory, website development, and other operational needs. This is where a credit line becomes useful: unlike a business loan, which provides a lump sum of cash payable for years to come, a line of credit provides a pool of working capital for businesses to dip into whenever they need funds. Monthly interest is also only charged on the borrowed amount.

Here are the six top eCommerce business challenges for SMEs, and how a credit line can help solve them.

1. Competition

With the rise of online shopping in the Philippines, small businesses have increasingly faced tough competition from large conglomerates. Matching their pricing, wider product ranges, and larger marketing budgets is impossible.

Instead of lowering prices, analyze your supply chain, operations, and sales data to develop a unique business model that offers more value to customers. A distinct business model takes time to execute, giving you an edge over competitors who cannot quickly match it.

A credit line can help you fund scaling operations, or at the least, in subscribing to data analytics tools that will unlock more insights on your customers.

2. Order fulfillment

Small eCommerce businesses that experience rapid growth may struggle to scale their operations fast enough to keep up with increased order volumes. This can lead to logistical challenges in managing inventory, especially with seasonal or trending products, and can result in out-of-stock orders and backorders. Smaller businesses also often face higher shipping costs due to their lack of negotiating power and shipping volume with logistics providers.

With a credit line, small businesses can better manage their inventory by purchasing stock in advance and taking advantage of bulk discounts. A credit line can also provide the necessary funds for order fulfillment automation technology, or for negotiating better terms with suppliers and delivery partners. Hiring more staff and expanding warehouse space, even if only for seasonal peaks, can also reduce bottlenecks and maintain high customer satisfaction.

Ecommerce businesses can use their credit line to negotiate better terms with suppliers.
A credit line can be used to negotiate better terms with new suppliers and delivery partners.

3. Website maintenance

Small eCommerce businesses often prioritize other essential expenses over website maintenance due to limited financial resources. However, it is crucial to have a modern, user-friendly, and optimized e-commerce website to prevent cart abandonment, encourage trust, and increase conversions. Even simple features like guest checkout can reduce friction for time-crunched buyers.

To avoid losing customers to competitors, it's essential to keep up your website design, features, and performance. Optimizing your website for cybersecurity will also prevent website downtime, eCommerce fraud, and revenue loss. Consider using a credit line to finance website development, maintenance, and cybersecurity — such as hiring a web developer, investing in design and SEO, and staying up-to-date on data security compliance. As your business grows, you may also need to hire a dedicated security analyst to implement more robust cybersecurity measures not just for your business, but for your entire organization.

4. Customer experience

Customers, regardless of the size of the eCommerce business, have high expectations when it comes to order fulfillment. They want fast shipping, accurate orders, and responsive customer service — standards that have been established by bigger businesses like Shopee and Lazada, and thus challenging to meet for smaller operators.

Personalization of customer experience is an edge that smaller businesses have over larger players, and one you must deploy wherever possible. Use your credit line to hire and train customer support staff, especially in responding to returns and refunds. It can also be used to build your customer rewards system and hire a social media person who will create a unique brand voice for your business.

Another influencer for customer satisfaction is the variety of payment options on your website. More payment options can lead to more sales, but smaller eCommerce businesses may struggle to offer them due to pricing and lack of technical knowledge. To get started, take advantage of free trials and onboarding from local payment gateways, and use your credit line to pay for subscriptions once you’re ready to commit.

Personalizing the customer experience whenever possible can lead to better customer satisfaction for smaller eCommerce businesses.
Personalizing the customer experience whenever possible can lead to better customer satisfaction for smaller eCommerce businesses.

5. Marketing and promotions

Bigger companies have larger marketing budgets, allowing them to create strong branding, run extensive ad campaigns, and retain customers. You don’t have to match their efforts, but you need to have a deep understanding of who your target customers are to market to them effectively. Consider hiring a marketer or consultant to help you develop a strategy, which may include improving your SEO, paying for lead-gen ads, redesigning your website, and partnering with other brands.

However you decide to scale, it’s important to match your brand promises with excellent customer experience. A negative review can easily undo the trust you've built with customers.

Another marketing aspect where your credit line can help is customer retention. You may already be re-engaging current customers in some way — such as discount coupons for their next purchases — but investing in a customer relationship management (CRM) software can make these engagements more personalized and intentional. With CRM software, you can automate thank-you emails, review requests, special promotions, and other communications to nurture leads and your current customer base.

6. Agility

Agility is an organization’s ability to quickly adapt to changing market conditions and circumstances. For eCommerce businesses, agility is crucial because they often face seasonal fluctuations in sales, long payment cycles, and unexpected expenses that can disrupt their operations.

Digitalization remains a challenge for Philippine SMEs, as many are slow to adopt financial technology, marketing tools, and other technology that can help them gain a larger market share. This means that small eCommerce operators are more vulnerable to security breaches, copyright infringements, product liability, and other issues.

Digitalization is a challenge for many eCommerce SMEs, making them prone to security breaches and other issues.
Digitalization remains a challenge for many eCommerce SMEs in the Philippines, making them prone to security breaches and other issues.

To become a more agile eCommerce business, organizations need an overhaul, resources, practice, and a willingness to adapt to new technology. A credit line can quickly supply funds to address increased demand, prevent cash flow gaps, and automate fulfillment processes. In the long term, a credit line can help you hire agile-oriented leaders, train teams to adopt new processes, and pay for automated tools and operational systems that will transform the organization.

Philippine SMEs in the eCommerce business face numerous challenges in scaling their businesses, but financing can help alleviate their short-term issues and provide the organizational agility needed to remain competitive. A credit line provides the funds needed to finance various aspects of the business, such as scaling up marketing channels, improving website and operations, and subscribing to paid data analytics tools. It can also help manage inventory, hire and train customer support staff, and improve customer retention.

Consider a credit line to help you grow and succeed in today's competitive marketplace. First Circle’s Revolving Credit Line is a free-to-open, non-collateral SME loan with the following benefits:

  • Up to ₱20 million of re-usable credit
  • No collateral, application fees, or maintenance fees
  • Interest rates as low as 0.99% per month
  • Application processing in 2 business days
  • Dedicated account manager
  • Minimal documentary requirements
  • Pay only for what you use; interest only applies to the amount borrowed

‍First Circle is a multi-awarded lending company supporting SMEs since 2016. To apply for a Revolving Credit Line, click here.

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Apply 100% online, and get a credit line worth up to ₱20M. Use and re-use your credit limit anytime you need a business loan.

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