The convenience economy
If there’s a word that characterizes the changing nature of products and services and the manner by which they are being sold, it just might be convenience. I gathered that from listening to an expert from a company that’s a known authority in feeling the consumer pulse. I spoke in the same forum last week with Patrick Cua, managing director of Nielsen Philippines, and his presentation related closely to what I’ve written in my last two columns pertaining to the young, and trends and patterns in consumer spending.
I wrote previously on the growing prominence of millennials and Gen Zers in both the country’s workforce and consumer base. Then I noted how age demographics and rising incomes (hence spending power), along with its distribution, are also impacting on Filipinos’ spending habits, hence consumer expenditures overall. To these trends, Cua adds two others that together comprise five megatrends now seen to be shaping consumer needs and preferences. The other two are rapid urbanization and the pervasiveness of mobile digital devices, namely, smartphones and tablets. All five megatrends have the effect of putting a premium on convenience, as the attribute that now draws consumer pesos to certain products and services, and particular modes of selling them.
Urbanization is a global trend that has also proceeded quite rapidly in the Philippines. In 1970, urban dwellers comprised only 31.8 percent of our total population; now, our urban population has become the majority (51.2 percent). Erstwhile rural dwellers are flocking to large towns and small cities (the likes of Lipa, Iloilo City and Baguio City), mid-density cities (such as Antipolo, Bacolod, Zamboanga City), “mixed-density” cities (Cebu City, Davao City), and of course, our one megacity of Metro Manila.
Between 2010 and 2015, in-migration pushed populations in these areas to rise by 7 percent (in Metro Manila) to up to 16 percent (in Cebu City and Davao City). From 2015 to 2025, these are projected to further rise by 14 percent and 36 percent, respectively. This move to the cities leads to intensified demands of work and longer commutes, shrinking the time available for personal and domestic needs such as cooking meals, family care, recreation and, yes—shopping.
Meanwhile, smartphone ownership, according to Nielsen surveys, rose rapidly from 56 percent of Filipinos in mid-2017 to 71 percent last year, while daily internet usage closely followed this trajectory, growing from 45 percent to 60 percent. Apps to meet virtually every consumer need are coming up everyday, all designed to save us from having to do legwork: online banking, buying various products ranging from bath soap to your next meal and ordering services ranging from a car ride to a massage.
At the same time, such apps allow us maximum choice with least effort, which is what had led to the rapid rise of supermarkets in the 1970s and ’80s, and subsequently, of fast-food centers. The supermarket revolution energized agriculture in places like Thailand that quickly adapted their farm setups to the large-scale demands for standardized produce, particularly via wide application of contract farming (sadly not the case for us).
Now it’s all about online shopping apps, and the wider the choices a platform offers, the more users it is able to attract. From food parks offering an array of food types from various shops, there are now aggregator food apps like Foodpanda, LalaFood and GrabFood, which allow you to assemble your delivered meal with food coming from different shops.
Even within the more traditional legwork-based economy, convenience is the name of the game. While Nielsen counted supermarkets to have grown by 3 percent in number last year, neighborhood convenience stores have outstripped that growth, at 4 percent (sari-sari store growth is farther behind, at 1 percent). Closer to our homes or our daily commutes, they answer the need for smaller, frequent trips to a one-stop shop.
Cua showed that relative to our neighbors, the Philippines has little more than scratched the surface on the convenience economy. Hold on to your seats, then, as on this, much more change is coming.
