Growth through resilience: How e-commerce propels MSMEs through digitalization

By Vincent Lee

THIS YEAR, Shopee marks its 10th year in the Philippines — a milestone that not only celebrates our journey but also reflects the growth of an industry that continues to transform how Filipinos live, work, and do business. A decade ago, e-commerce was a promising frontier. Today, it’s a vital part of our economy, helping businesses adapt, thrive, and connect across islands, borders, and customer expectations.

Filipino shoppers initially drove the e-commerce boom by moving online due to factors such as brand variety, discounts, and convenience. The coronavirus pandemic significantly accelerated this shift, fundamentally reshaping business operations and consumers’ shopping habits. Yet the greater story lies in how digital platforms are unlocking opportunities for micro, small, and medium enterprises (MSMEs).

In a country made up of over 7,000 islands, e-commerce has emerged as a powerful equalizer, removing geographical barriers, opening market access, and creating economic opportunities where they never existed before. According to the e-Conomy SEA 2024 report by Google, Temasek, and Bain & Company, the Philippines stands as the fastest-growing internet economy in Southeast Asia, with e-commerce contributing a 23% year-on-year increase to the country’s digital economy.

Even with all the progress to date, the journey is far from over. While the Philippines’ e-commerce growth remains at a double-digit pace, a report from McKinsey & Company notes only a 15% penetration rate, half the rate seen in Indonesia and Singapore.

This makes the Philippines one of the most exciting, high-potential digital economies in Southeast Asia, presenting a tremendous opportunity to enable more MSMEs to capture the full benefits of digitalization and build a more inclusive ecosystem for long-term growth.

DIGITALIZATION FOR BUSINESS RESILIENCE
In times of economic uncertainties, regulatory changes, and evolving consumer expectations, digital transformation isn’t just an advantage — it’s a lifeline for MSMEs to navigate rapid changes and economic vulnerability.

A strong e-commerce presence enables MSMEs to diversify their sales channels and tap into new customer pools both locally and globally. The pandemic brought this lesson into sharp focus, exposing the vulnerability of businesses that were only previously present in physical locations. As MSMEs shifted their storefronts online, they adopted digital payment options, leveraged social media to connect with existing and new customers, and embraced e-commerce platforms to seamlessly fulfill orders and deliver products to a wider customer base despite logistical limitations.

Even as the economy begins to recover, e-commerce remains a transformative anchor for Philippine businesses. Local artisans and producers can now serve other major cities, bypassing traditional logistical limitations and opening a world of global opportunities for homegrown products.

For example, Don Ricardo Chocolate Shop, a local chocolatier in Sarangani, embraced e-commerce and has become a favorite across the nation, reaching over 30 provinces. Similarly, Rey’s Bakeshop from Marinduque, known for its traditional uraro (arrowroot) cookies, successfully expanded its reach throughout Luzon through online sales.

Such connectivity fosters dynamic local economies and facilitates the vibrant trade of diverse local products, preserving regional craftsmanship and ensuring business continuity even amidst disruptions.

More than just expanding market reach, digital tools are helping MSMEs enhance operational efficiency. Whether it’s streamlining inventory, integrating fulfillment and logistics, or automating customer support, digitalization enables local businesses to reallocate time and resources and accelerate their development by focusing on strategic growth.

This evolution underscores what we’ve always believed in: leveraging technology has become foundational to the success of MSMEs, enabling them to remain competitive, agile, and connected in an economy that’s growing more digitized by the day.

MSME SUPPORT AS A SHARED ENDEAVOR
Unlike larger corporations, MSMEs often lack access to knowledge, tools, and capital to go digital. Bridging this gap demands a unified ecosystem – one where government, platforms, and communities work together to empower small businesses.

Understanding this imperative for collective action, Shopee has worked alongside MSMEs to launch vital educational activities and support over its 10-year journey. As a continuation of this work with local government units (LGUs) and other ecosystem partners, the Tatak Pinoy program, which began in 2022, represents a focused commitment to nationwide outreach, providing entrepreneurs with hands-on training and simplified onboarding.

Programs like these underscore the paramount role of LGUs in ensuring that knowledge and skills transfer reach the entrepreneurs, proving that digital transformation is most effective when anchored in local contexts.

At the national level, MSME participation can be sustained through policy support for digital infrastructure, upskilling, and regulatory clarity. As the government continues to invest in broadband access, e-governance, and trade facilitation, small businesses can benefit from a more enabling environment for digital growth. When local capacity-building is paired with platform expertise, the result is not just broader adoption, but deeper inclusion.

CONTENT, MULTI-TOUCHPOINT SHOPPING IN THE FUTURE
The future looks bright for Philippine e-commerce, with revenues expected to reach $24.57 billion by 2029, according to Anchanto.

In this new landscape, content will become central to the shopping experience. A Kantar study shows that 80% of buyers prefer visual content over text when making shopping decisions. Platforms are evolving from product listings to rich, multimedia environments, built to drive discovery, engagement, and trust.

The coming years will also see the rise of multi-touchpoint shopping, seamlessly connecting social media platforms with e-commerce applications. With 40% of Gen Z shoppers using these channels before completing their purchase, brands and platforms must leverage social media, influencers, and paid ads to drive purchases and build brand-owned social media presence.

Digital tools are foreseen to become more accessible for both shoppers and MSMEs. Shopee implements technology-driven and experience-centered capabilities that empower customers at every stage of their journey: from personalized search results to quick decision-making aided by review summaries and more sophisticated delivery date estimations.

For sellers, artificial intelligence (AI) is revolutionizing operations, with features like AI-powered video creation and AI-hosted livestreams enabling MSMEs to showcase products compellingly while focusing on core business operations. Seller chat assistants manage buyer queries quickly and efficiently, and chatbots are designed to be more humanized.

Lastly, with the growth of e-commerce intertwined with the rising acceptance of digital payments, digital financial services will continue to gain momentum. With 70% of Filipino consumers being highly receptive to installment plans, business owners can enable these payment options to drive sales and affordability.

SUSTAINING E-COMMERCE GROWTH
As the Philippines charts its path forward, a sustained ecosystem is needed to ensure that MSMEs can fully participate in the digital economy. While providing access to digital tools, improving digital literacy, and building capacity are all crucial steps, they aren’t enough on their own. Without the right conditions for scale and profitability, even the most dedicated support systems will eventually hit their limits.

For digital ecosystems to be truly sustainable, MSMEs must also be able to grow and thrive within them. This emphasizes the importance of co-creation. A single actor cannot build a resilient digital economy; rather, it needs to be shaped collectively through co-investment from the public and private sectors, smart policy, and community-based efforts that respond to local needs.

By strengthening the foundations — skills, infrastructure, incentives — we not only empower small businesses but also ensure that digital progress is balanced, inclusive, and built to last. Sustained growth requires shared ownership, and the future of e-commerce in the Philippines will be defined by how well we rise to that challenge, together.

Vincent Lee is head of Shopee Philippines.