Multiply started out as an expansive social network and quickly became a favorite among Philippine users for its ease of use in uploading content and its effective privacy controls.  In those early days, Multiply quickly rapped subscribers who tried to use the network to sell stuff.

How things have changed. Today, Multiply is the largest online marketplace in the Philippines and some parts of Southeast Asia, to the point that its social network component is scheduled for phase out by December.

The site’s country manager Jack Madrid reveals that Filipinos took one look at Multiply and decided to turn it into what it is now: a full-service, easy to set up e-commerce store that can process online orders, payments and inventory management on one’s behalf.

SIM sat down with dotcom veteran Madrid, a corporate man who’s been with such big players as Citibank, Ayala Corp., MTV Philippines and Yahoo, to talk about Filipino shopping habits, uncollected taxes and what it takes to be a successful online merchant.

SIM: How is online shopping different here compared to other e-commerce models, e.g. in the US?

Jack Madrid (JM): We talk about e-commerce and online shopping all the time here, but the reality is that, based on a Nielsen study conducted a year ago, about 97 percent of Filipino Net users have never bought anything online. It may be a bit better now, but it’s still a very small number. There’s no official data, but I did my own back of the envelope computation, and I believe that P4.5 to P5 billion would best describe the total value of goods purchased online excluding airfare that’s probably the biggest component of e-commerce. That might sound big, until you consider that total Philippine retail is upwards of P1trillion, so P4 billion is less than half of one percent of total retail. So that’s why I keep saying it’s looking good (because) there’s no way to go but up.

In the US, the share of e-commerce out of total retail is over 10 percent and it’s even higher in the UK. In the rest of Asia Pacific, it’s 3 percent, in Latin America 2 percent. In the Philippines it’s about 0.5 percent.

Now why is that?

It could be a cultural thing: there’s an inherent reluctance among Filipinos to trade on the Internet. The Internet is an anonymous place; you often don’t know who you’re buying from unless it’s Amazon or another famous site, and that’s a bit of a constraint. People like to know who they’re buying from; they like to have a relationship with the merchant.

The manner of payment is another thing. Payment infrastructure is not yet fully developed here. Not every Filipino has a credit card. Only seven million Filipinos out of the 35 million who spend time online have credit cards, and probably not all of those seven million with credit cards are on the Net. A lot are probably older people and not on the Net.  We’re in early days. It’s not just Multiply; (we) need banks and the government to strengthen e-commerce law.

SIM: What’s your take on the Internal Revenue’s plan to run after online merchants for uncollected taxes?

JM: Many online merchants here in the Philippines are individuals who have no physical store. The volume of their businesses and transactions is relatively small. I just wonder, if this is the only remaining part of the taxpaying population of the Philippines who are not paying taxes properly, then I would be so happy because it would imply that 99.5 percent of Filipinos are actually paying their taxes!  I think everyone should pay their taxes properly, but if I had finite resources, would I really go for the bottom 0.5 percent? That’s my question.

SIM: Why do you think they’re gunning for online merchants then?

JM: I don’t know. I think (BIR Commissioner Kim Jacinto) Henares is doing her job and I’d probably be thinking of the same thing, but aren’t there better ways for tax collectors to spend their time on? This is not my field of expertise, but I believe we should let our entrepreneurs succeed first before we run after them.  We’ve had all these sari-sari stores all over the country, but when did the BIR go after them? Are they paying all their taxes now? They’ve been around much longer than online businesses. I’d rather we allow small businesses to prosper first so there will be more profits to tax after.

SIM: You’ll be shutting down Multiply’s social network aspect by December. Were you expecting the panic it has so far caused?

JM: There will always be a reaction; people will always comment and criticize. But what I took from the reaction of general users was sadness. We’ll be giving detailed instructions soon on how people can migrate their content elsewhere.

SIM: What has been the weirdest thing you’ve seen for sale on Multiply?

JM: I saw a samurai sword once, but I really haven’t come across something unusual. There are a few other weird things, but obviously we’re very strict about what can be sold, we do sweeps and we’re vigilant about anything that might be considered counterfeit now that we’re going headlong into e-commerce.

SIM: Could you share a success story of a Multiply user?

JM: Kim of Kimstore is the most famous one. She started the business when she was sixteen and a student at La Salle, and now her business has thrived, all on Multiply. She represents the generation of young Filipino entrepreneurs and we like to talk about her because we also want more Filipinos to be self-sustaining. I know how hard it is to become an entrepreneur, and I think the Internet presents an opportunity for anybody with some creativity and a good idea.  The site offers success without the constraint of borrowing money to put up a retail store. At Multiply, the cost of having a store is free. All you need is an Internet connection, an idea, a camera, and you have a store. It’s very exciting, I wish more entrepreneurs would take the plunge.

SIM: If you had a Multiply store, what would you want to sell?

JM: Wine. I’d have to change the terms of service first, though (laughs). I would like to be an online wine merchant someday.

SIM: What tips do you have for someone who wants to become an online merchant?

JM: Just like any other business, you have to have an idea and a plan, and it has to describe what your product or service will be, who you think will buy this product or service, and the monetization part: do you think the people who will buy your product or service will actually buy it? If you can answer those questions convincingly, I think those are the components of a business plan. Very simple: What is your product/service? Who will buy it? Will they pay for it?

Do a lot of research—on businesses that have failed or succeeded and learn from their lessons. Don’t put too much in your store and make the user experience simple enough that even your grandmother can complete a transaction.

Leverage the power of social media because most of that is free. Build a great site, make it SEO (search engine optimized)-friendly. That’s pretty much it. Work hard! •