MSMEs prioritize digital adoption to tackle economic challenges — experts

PHILIPPINE MICRO, small, and medium enterprises (MSMEs) demonstrate resilience in addressing economic uncertainties through swift digital adoption, leveraging platforms such as ecommerce and social media, according to industry experts.

Digital transformation is now crucial for MSMEs, arising from the necessity for lean and efficient operational alternatives to recover from crises, Armando “Butz” O. Bartolome, founder and president of GMB Franchise Developers, said in an interview with BusinessWorld.

“MSMEs have started to recover gradually but not really skyrocket,” he said.

“We are not really there yet, but I can see a lot of entrepreneurs are gung ho about how things are going,” he added. “They know the past is past. It’s a hard lesson to accept, but they really have to move forward and adapt.”

“If they’re not online, they’re not going to be in business.”

MSMEs are the backbone of the economy, accounting for 99.59% of all business establishments and employing 65.10% of the workforce, according to the Philippine Statistics Authority. Small businesses created 5,607,748 jobs last year.

“In 2023, it was more of a ‘rebasing era’ for us,” noted Rosemarie B. Ong, chairwoman of the Philippine Retailers Association (PRA), referring to the persistent economic uncertainties marked by price fluctuations, high inflation, and supply chain disruptions from the Russia-Ukraine and Israel-Palestine wars.

Mr. Bartolome said that MSMEs have to stay informed to navigate through such challenges with limited resources. “We are not the decision-makers, but find out how much these situations will affect you.”

“The growth will depend on how you innovate. It’s high time to realign the types of services you can now provide to adapt and consider the investments you can make to lower costs,” he added, emphasizing continuous recalibration as a sign of the times.

In terms of consumer behavior, he observed a stronger ‘sachet mentality,’ with Filipinos increasingly preferring layaways, segmented payment schemes, and installments when accessing products and services.

This also means exploring emerging technologies such as artificial intelligence (AI) and automation to improve efficiency, which Jose Ma. “Joey” A. Concepcion III, founder of the Philippine Center for Entrepreneurship-Go Negosyo, noted as an inclusive opportunity, which entrepreneurs are bound to embrace in the face of risks.

“We tell them that you have to ride. It’s never a straight flight,” he said. “There will be bumps, and that’s part of business.”

E-COMMERCE

The Philippines’ digital economy is projected to grow by 13% this year, reaching $24 billion in gross merchandise value, according to the e-Conomy report by Google, Temasek Holdings, and Bain & Co.

This growth will be primarily driven by e-commerce, expected to expand by 21% annually and reach $24 billion by 2025.

According to the GoDaddy 2023 Data Observatory report, around 95% of Philippine small business have planned investments in online sales and marketing spending this year. It also found that 62% reported generating up to half of their annual revenue from online sales channels.

E-commerce platforms have become an avenue for MSMEs to participate in growing digital opportunities such as shoppertainment, which aims to attract consumers with content to help drive sales. It is projected to expand to a market value of over $1 trillion by 2025, according to the Boston Consulting Group.

Danecia Reverie Fojas, senior account manager at TikTok Shop, noted how MSMEs often find it challenging to compete with established brands in traditional retail spaces, and how a creative digital storefront democratizes the scene and helps entrepreneurs grow.

“There is a fundamental shift in consumer-based brand interactions, and consumers now seek engaging, exciting, educational, and entertaining experiences with brands,” said Life Dawn Cervero, vertical head for food and beverage at TikTok Philippines.

“Advertising their brands is now very inclusive with the shift to social platforms. The dynamics have changed,” Mr. Concepcion said. “We’re teaching them how to become nano-influencers able to market themselves and their product.”

Shopee reported a fiftyfold increase in orders on Shopee Live, an interactive live-streaming feature on the e-commerce platform, during its 12.12 mega sale, which resulted to 12 million items sold across markets in just the first two minutes.

The surge in livestream shopping led to a forty-sixfold increase in new buyers locally, emphasizing the trend’s popularity, it added.

“I’m very bullish and optimistic that the whole digitalization move is helping