Indonesia presents a large opportunity for ecommerce among other emerging countries in Southeast Asia, reports Tech Crunch.
Current projections are putting the fragmented country’s e-market value at $130 billion by 2020, coming third behind China and India.
With an estimated annual growth rate of 50% and strong mobile-first initiatives, retailers have a unique opportunity in Indonesia to focus on developing truly mobile platforms to help facilitate e-market growth.
Indonesia’s ecommerce landscape
Indonesia’s current ecommerce market is similar to China’s online marketplace beginnings, with a large pool of entrepreneurial sellers providing goods purchased based largely on social media recommendations. The market also shares resemblance with how the US ecommerce market was in the beginning, with untrusting consumers who doubted online payment systems.
Indonesia is truly unique in that it has the potential to create a hybrid of the widest opportunities from America and China’s ecommerce economies.
Mobile first Indonesia
Indonesia has established itself as a mobile first country. In 2015, over 70% of Indonesia’s internet traffic came from mobile devices. Social media has played a key role in this, as Indonesians have the highest mobile Facebook usage rate worldwide, with 63 million in 2015. This number is expected to increase, with projections that it will grow to 99% by 2018.
Indonesia ecommerce highlights
Indonesia’s retail market currently consists of CPGs being sold in retail spaces known as “fragmented trade,” which is primarily made up of independent small business owners. Ecommerce is currently growing at a rate twice as fast as fragmented trade, forcing many of these independents to turn to the ecommerce model.
This means that the nation is prospering with multiple entrants and varied players.
Unlike other Asian nations, Indonesians do not solely rely on mass retailers to guide their purchasing decisions, allowing for these individual sellers to maintain market share. With lots of potential growth in rural and semi-rural areas, ecommerce specifically allows Indonesian consumers to source hard-to-find goods, as opposed to rural areas in other countries.
Indonesia’s truly mobile-first scenario also allows sellers to use smartphones to their advantage, gathering hyper-personalized data to target individual Indonesian consumers as opposed to just specific demographics or groups among Indonesia’s more than 250 million population.
Mobile-first also allows for the easier entry of participants into the Indonesian e-commerce scene, with startups having the flexibility to choose who they want to target and sell to.
In the age of companies developing in-house solutions instead of relying on outsourcing, the untapped logistics market also gives rise to the growth in Indonesian ecommerce. Companies have the ability to develop proprietary, or even simply more efficient, delivery systems as another form of competition in the online marketplace.
Many ecommerce transactions are currently paid through either direct bank transfer or cash-on-delivery, which is greatly limiting ecommerce growth through lost transactions. With Indonesian spend growing nearly 10% annually, cash-on-delivery will soon be unsustainable. Creating a trusted solution to utilize online payments could lead to huge growth.
Indonesia presents a variety of unique opportunities in becoming one of the largest ecommerce spaces. It’s shortcomings, such as payment complications and poor logistics infrastructure leaves room for untapped potential, which if filled, could lead to continuous growth. A growing middle class with increasing spending power, coupled with emerging players from varied sectors such as retail and independent merchants should boost the ecommerce market.
A version of this appeared in Tech Crunch on July 29. Read the full version here.