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Malaysia Ecommerce Landscape

Malaysia may be the second smallest Southeast Asian nation but it doesn’t lack ambition to develop itself into a powerhouse. Prime Minister Najib Razak recently out-hustled neighbour Indonesia to appoint China’s ecommerce tycoon Jack Ma to advise the country’s government on its route to develop a strong digital economy.

These ambitions don’t come out of thin air. In 2015, Malaysia’s ecommerce market was estimated at $1 billion, which constitutes 1.1% of country’s total retail sales (though these numbers may be skewed). Malaysia’s ecommerce market is on a par with Singapore not only in market size, but also in terms of the well-developed infrastructure within the country compared to the rest of Southeast Asia. This might explain why Malaysia is the origin for some of the biggest tech companies in the region such as the taxi hailing app Grab and Catcha’s iProperty Group.

In the next ten years, Malaysia is predicted to increase the online shopping market size eight-fold to $8 billion, but where does the country’s ecommerce stand now? ecommerceIQ shares ECOMScape: Malaysia to provide a quick overview.

1. Surprise, surprise, Lazada emerges as the leading mainstream platform

Lazada, Southeast Asia’s clone of Amazon, has emerged as the leading business-to-consumer (B2C) marketplace in Malaysia with around 20 million visitors per month while closest rival 11street.my, a South Korean marketplace, grew to become the second biggest online marketplace with more than 7 million visitors per month only a year and a half after launching.

Malaysia Ecommerce Landscape

Locally-run Lelong.my, which started as an electronics auction site but now turning itself into a B2C marketplace, gets around 6 million visitors per month.
While these companies are still competitors to Lazada, none of them pose a real threat to Lazada’s leading position, especially after its acquisition by Alibaba earlier this year (deep pockets)

2. Service providers are early online adopters

Malaysia’s online space is filled with service providers who choose to sell services through ecommerce to happy users. A smart move considering 50% of Malaysians in a recent PwC Survey said they shopped online because of convenience.

These early adopters include:

  • KFIT: started its fitness business in Malaysia offering a subscription model for unlimited access to various gyms, and has now expanded to other categories such as selling online spa and beauty procedures.
  • GoCar: car rental by the hour or day through mobile app that offers an alternative to car rental and car ownership in Malaysia’s capital Kuala Lumpur.
  • ServisHero: a mobile marketplace that allows search and booking of home service providers such as a plumber or repairman.

Malaysia Ecommerce Landscape

3. Mobile shopping platforms on the rise

66% of consumers surveyed in the PwC report have used their phones to make purchases. It implies that the majority of 50% of respondents who have started shopping online in Malaysia within the last three years are heading straight to mobile marketplaces.

Among Malaysia’s most popular shopping apps are companies such as local imSOLD, Singapore-based Shopee and Carousell, Japan’s Qoo10 and global players like Taobao and eBay.

Malaysia Ecommerce Landscape

As Malaysians on average spend 3 hours per day on social media, social commerce becomes quite popular – 31% of online shoppers in Malaysia have purchased directly via a social media channel. The most common being Facebook and Instagram, which is preferred by 41% and 22% of Malaysians, respectively.

4. Good banking system means one less problem for ecommerce

Malaysia has well-developed banking infrastructure and as a result, its residents are more accustomed to digital payments than most Southeast Asian nations. 37% of Malaysia’s population uses mobile banking, while nearly 20% made digital payments and used banking cards in 2014.

According to the global payments solution provider Adyen, the preferred payment method of 42% online shoppers is online banking where shoppers are redirected to their online banking environment to complete purchases.

Malaysia Ecommerce Landscape

Source: The Global Ecommerce Payments Guide by Adyen

As a result, there are plenty of payment gateway solution providers in Malaysia, yet few companies offer mobile wallet solutions as they would struggle to change Malaysian habits regarding using online banking.

Malaysia Ecommerce Landscape

5. Newcomers fight to grab a share of logistics

Successful ecommerce in Malaysia has contributed to increased competition among logistics service providers. The country does not have major infrastructure issues such as islands or bad roads like in the Philippines and Indonesia, posing less obstacles for startups to offer straightforward parcel delivery.

Malaysia Ecommerce Landscape

Traditional last mile delivery companies such as POSMalaysia, Nationwide Express and SkyNet have been somewhat lagging behind adopting new technology and are now being challenged by newcomers like Ninja Van, who proudly states it’s “powered by proprietary cloud-based technology”.

And it’s not only rookies in logistics fighting for their share. In Malaysia, the competition is quite tough among fulfillment service providers who focus on serving the needs of online merchants.

Companies such as DHL, SP Ecommerce, aCommerce, theLorry.com and others are battling for clients not only among themselves, but also with the biggest client – Lazada.

Malaysia Ecommerce Landscape

Lazada already pushed its own logistics service, Fulfillment by Lazada (FBL) in Malaysia, Singapore and the Philippines. The online marketplace offers end-to-end fulfillment solution at a fixed cost per item delivered. As the biggest player in the market and scaled operations, Lazada’s price may be hard to beat.

“Increasingly, having an online shopping functionality is becoming the norm, rather than the exception and it is only going to be more widespread,” said Jon-Paul Best, Head of Financial Services for Nielsen Malaysia.

Click here to download the full, high resolution version of ECOMScape: Malaysia and join the ecommerceIQ network to not miss out on ecommerce market trends and insights.

For more information on other ecommerce landscapes, take a look at:

ECOMScape: Indonesia

ECOMScape: Thailand

ECOMScape: Singapore

ECOMScape: Philippines

Philippines ecommerce landscape

The Philippines, although part of Southeast Asia’s growing ecommerce family, is quite the odd cousin. It’s the only market in the region where Lazada totally dominates the competition, getting around 35 million visits per month with no second player in sight. In addition, with over 10 million overseas Filipino workers and 3 million of them in the United States, Philippines’ online shopping behavior has been heavily influenced by the US, paving the way for innovative cross-border logistics businesses.

As the second most populated country in Southeast Asia with around 100 million residents, the Philippines currently has the second smallest ecommerce market. But that’s not surprising when 46% of the population are connected to and browsing the second slowest internet connection in Asia Pacific region. On top of that, the country ranks lowest among its Southeast Asian neighbors in terms of ease of doing business, which doesn’t help to boost its online trade either.

However, there’s a bright side. Ecommerce in the Philippines is on a runway and expected to lift off to reach nearly $10 billion by 2025 outsizing Singapore and Malaysia. How developed is the market now? ecommerceIQ shares ECOMScape: Philippines to provide a quick snapshot.

1. Lazada dominates over local and regional B2C marketplaces

Lazada, Southeast Asia’s heavyweight of marketplaces controlled by the Chinese ecommerce giant Alibaba, is leading online shopping in the Philippines. It currently ranks as the 7th most popular website in the Philippines. More than 60% of Lazada’s sales in the country come from mobile devices. The marketplace has also doubled the number of merchants selling goods on its platform to 4,000 compared to a year ago.

Philippines ecommerce landscape

Other local marketplaces in the Philippines don’t come close to Lazada in terms of visitors so have found other revenue streams offering affiliate marketing or cashback through their platforms. Takatack, calling itself one the biggest discovery platforms in the Philippines, is one such example. It is both an online marketplace offering products and services from local ecommerce shops and at the same time features products from different ecommerce sites such as Zalora and Galleon.

Marketplace verticals also show potential for growth. The usually competitive Fashion & Apparel category is rather thin in the Philippines. Zalora, online fashion shopping destination focused on Southeast Asia, operates in the country. A small number of global brands have local online stores and only a handful of local merchants sell online meaning the space is wide open for new players.

Philippines ecommerce landscape

Other verticals, such as Electronics & Gadgets, Home & Living, Others, also aren’t too crowded indicating there is room for more sellers.

Yet, Phillipines’ online scene might not be too easy for foreigners to conquer as learned by Thailand’s online retailer iTrueMart. At the end of 2015 it opened online store in Philippines as their first point of expansion out of Thailand but eventually closed the shop in September 2016 after less than a year in the country.

2. Retailers test ecommerce waters through Lazada

The Philippines’ ecommerce market in 2015 was estimated at $0.5 billion or 0.5% of retail in the country as many brands and merchants were not yet committed to making the big investment of opening a full-fledged online store.

However, to test market potential, some traditional brick-and-mortar retailers are opening their shop-in-shops on Lazada. For example, popular local department store chain SM Store initially went online through a shop-in-shop on Lazada where it offers more than 4,000 items. It now has also its brand.com store, powered by Lazada.

Consumer electronics retailer Robinsons Appliances also partnered with Lazada in mid-2015 by opening an official shop on the popular marketplace. Even global brands like Samsung are adopting this strategy.

More brands and sellers will likely follow in these steps to tap online shopping opportunity and add to Lazada’s popularity.

3. C2C ecommerce thrives

Similar to other Southeast Asian countries, a consumer-to-consumer (C2C) market makes up a significant part of online shopping in the Philippines, likely at around one third of the ecommerce market as it is Indonesia.  

OLX is the largest platform for classifieds and peer-to-peer sales. Ranking as 17th most popular website in the country it started as Sulit.ph 10 years ago. Currently, it claims to attract 100,000 to 200,000 new sellers every month.

Philippines ecommerce landscape

In 2016, two other well known C2C marketplaces in the region – Shopee, supported by Southeast Asia’s largest gaming company Garena, and Singapore-based Carousell – entered the Philippines to fight for Filipinos’ hearts and wallets. Shopee’s strategy to lure sellers from Instagram and other marketplaces to its platform by offering merchants free shipping and cash on delivery in the Philippines increased the number of sellers by 40% and the number of listings sold on the app – by 60% within three months.

Philippines ecommerce landscape

As 55% Filipinos own a smartphone and 18% have made a purchase online via mobile, it comes as no surprise that Shopee and Carousell are betting on the Philippines as their next stop for growth.

Another driver of the C2C market is the Filipino preference of Western brands combined with limited options to buy them as international brands have started entering the country just recently and there still remains a significant number of underserved market segments. This fuels selling of popular brands on C2C marketplaces, where products usually don’t come directly from manufacturers but are obtained elsewhere.

4. Digital payments pick up

Around 70% of the Philippines’ population are unbanked and less than 3% of Filipinos use a credit card to make payments. Thus, opening an online store without a cash-on-delivery payment is not really an option in Philippines.

In the recent years, several new mobile wallet apps have been introduced first by local telecommunication companies. For example, PayMaya mobile wallet app and GCash app offer a virtual card for shopping online that can be topped up at various offline points throughout the country. Local banks are also launching mobile banking apps.

Philippines ecommerce landscape

Many of country’s fintech startups are attaining to the needs of the unbanked while also serving overseas Filipino workers who send remittances to their relatives. In 2014, two Silicon Valley entrepreneurs Ron Hose and Runar Petursson founded Coins.ph – a mobile blockchain-enabled platform aimed at the unbanked for easy access to financial services. This start-up raised $5 million series A funding just at the end of October, 2016.

Philippines ecomscape landscape

ePeso app allows to create a digital account with an email address, top it up through scratch cards, over the counter facilities and merchants to send and request funds, pay bills. Paylance allows users to pay and transfer money to Philippines through Bitcoin for free. While Payswitch through its web platform allows small enterprises to offer services such as electronic loading, remittances and bill payments.

5. Innovative cross-border solutions and competition among logistics service providers

While ecommerce is not yet in full swing in the Philippines the logistics landscape is dominated by local players like 2GO and LBC while in other Asian countries international players like Kerry Logistics and DHL lead. Several regional players like Thailand-based aCommerce, Singapore-based SP ecommerce and Quantium solutions provide fulfillment services to online sellers.

Philippines ecommerce landscape

Poor infrastructure, difficult geography and high rates of cash-on-delivery make the shipping of online purchased goods complex. While there seem to be plenty of third-party delivery providers, only two companies – 2GO and LBC – offer countrywide shipping. The rest ensure delivery within metro area of Manila. This limits ecommerce growth and leaves many of country’s potential shoppers underserved.

At the same time, overseas Filipino workers have facilitated the development of innovative cross-border shipping solutions for goods purchased overseas. Beyond family members carrying their Amazon orders back in one big “balikbayan” box, several unique cross-border package forwarding services like LBC’s ShippingCart, Johnny Air Plus and POBox.ph have sprung up to take advantage of this phenomenon.

Philippines ecommerce landscape

Click here to download the full, high resolution version of ECOMScape: Philippines and join the ecommerceIQ network for the first look at the next ECOMScape in our series.

For more insights on the region’s ecommerce landscape take a look at:

ECOMScape: Indonesia

ECOMScape: Thailand

ECOMScape: Singapore

Are we missing any key players? Let us know on FacebookTwitterLinkedIn

singapore ecommerce landscape

With 83% of its population connected to the internet, Singapore holds the title as the most mature ecommerce market in Southeast Asia. Despite its small population, Singapore accounted for 25% of Southeast Asia’s 2013 online retail value, larger than the region’s largest market, Indonesia that contributed 20%.

Singapore’s ecommerce market is valued to reach $5 billion in 2025, making up 6.7% of retail sales in the country. What else can we see from the Lion City’s ecommerce scene? ECOMScape: Singapore will provide a quick overview.

1. Cross-border ecommerce is (still) preferred by the population

Around 55% of ecommerce in Singapore consists of cross-border transactions. Their developed infrastructure, liberal regulations on customs and tax, and large population of expats in the country opens the gate for foreign companies to flourish without having to establish local ecommerce operations in the country.

Singapore ecommerce landscape

The US and China are the top two destinations for shoppers from Singapore, putting Amazon and Alibaba’s Taobao on the top five most visited ecommerce websites in the country.singapore ecommerce landscape
As a result, there aren’t many home-grown players opting for a marketplace business model. Lazada and Qoo10 are the only mainstream B2C marketplaces in Singapore, unlike in Indonesia and Thailand where the space is a battlefield for deep-pocketed companies.

Its strategic location also attracts global companies to use Singapore as an ecommerce hub for their Brand.com presence to serve online customers in nearby markets such as Indonesia and Malaysia. Adidas used to fulfill regional orders from Singapore before opening an online store in Indonesia this October while Charles & Keith, a brand native to Singapore, offers free shipping to most countries with minimum purchase conditions.

2. Grocery shopping becomes more convenient

As the popularity of online shopping in Singapore increases, more Singaporean are turning online to fulfill their basic needs, including groceries. According to Ipsos and Paypal, online grocery shopping in Singapore is predicted to increase 21% in 2016.

This space seems to be very attractive for investors as seen by funding news of pure-play online grocers like Redmart and honestbee and transition of Singapore’s traditional grocers like Giants and Fairprice jumping on the online bandwagon. In fact, the majority of the etailer in Singapore are traditional grocers.

singapore ecommerce landscape

Food delivery services like Foodpanda and Deliveroo are also thriving in Singapore, the latter boasting 25% week on week growth, while Foodpanda claims Singapore to be one of its key markets in Southeast Asia after closing down operations in Indonesia and Vietnam.

singapore ecommerce landscape

3. Daily deals sites are still popular among Singaporeans

As news of daily deals companies shutting down across Southeast Asia grows, the business model may have overstayed its visit in the region but seems to be stable in Singapore. Groupon, which closed operations in Philippines and Thailand last year and sold its Indonesia operations, remains in Singapore’s top 5 most downloaded shopping apps and top 15 most visited website in Similar Web’s ‘shopping category’. Although Ensogo shut down earlier this year, many more deals sites still continue to operate.

singapore ecommerce landscape

4. Payments opportunity in Singapore attracting global players

Singapore’s established infrastructure and internet maturity makes an appealing testing ground for global players wanting to expand their reach in Asia, especially online payments players. The country’s credit card penetration is 38%, while most of the Southeast Asian countries are still below 5%, and the amount of cards circulating in the country averages 3.9 cards per person.

As a result, the Cards and Payments market in Singapore has become one of the most attractive and competitive markets in Asia Pacific. Adyen, a payment platform unicorn from Europe, recently opened its office in Singapore following the company’s plan to focus in Asia Pacific.

singapore-ecommerce-landscape-mobile-wallet

Singapore’s cashless habit has also made Singapore the perfect place for NFC payments solutions like Apple Pay, Android Pay and Samsung Pay to launch in Asia and the heavy traffic to Alibaba’s ecommerce platforms ensure the adoption of Alipay is well on its way.

5. C2C is driven through mobile apps

singapore ecommerce landscape

According to PwC, 38% of online shoppers in Singapore are making purchases on their smartphone, this number is higher than the global average of 28%. 57% of the shoppers in the republic also turn to social media to read product reviews. As an early adopter of internet culture in the region, Singaporeans are apt at using their mobile to access the internet.

Home-grown C2C platforms like ImSold, Shopee and Duriana have focused on their mobile platforms in order to appeal to customers who want the convenience of buying and selling their things on the go. More mobile-only players are expected to emerge.

Click here to download the full, high resolution version of ECOMScape: Singapore version and join the ecommerceIQ network for the first look at the next ECOMScape in our series.

You can also find ECOMScape: Indonesia and ECOMScape: Thailand.

Thailand Ecommerce Landscape

Thailand, while not the most populous nor richest of the Southeast Asian nations, is currently the fourth largest ecommerce market in the region, valued at $900 million and is expected to increase its ecommerce business 12-fold to a value of $11.1 billion by 2025.

What does the attractive Thai ecommerce market looks like now and what can be expected in the coming years? ecommerceIQ shares ECOMScape: Thailand to provide a quick snapshot.

1. Lazada is the dominating marketplace, while others compete in niches

What differentiates Thailand from other markets in Southeast Asia is that one online marketplace – Lazada – has significantly advanced over its local ecommerce rivals. The traffic of Lazada’s two closest competitors WeLoveShopping.com and Wemall.com combined makes only around a quarter of Lazada’s monthly traffic.

Yet, that and the fact Lazada now has the support of Chinese ecommerce giant Alibaba, is not scaring off competitors. Korean ecommerce marketplace 11street is expected to launch in Thailand in time for campaign season, 11/11, in hopes to replicate its success in Indonesia and Malaysia. The group’s claimed annual gross merchandise value of $7 billion is 7 times bigger than that of Lazada Group, but will it manage to challenge Lazada in Thailand?

Deep pocketed conglomerates are also moving in to steal market share, such as Thai CP Group, which belongs to the richest family in Thailand – brothers Chearavanont, owns Tesco Lotus, Shopat24 and 24Catalog. The second richest man in the country, Charoen Sirivadhanabhakdi, this year bought BigC and Cmart (formerly Cdiscount). While Central Group, the operator of Central department stores and distributor of several tens of foreign brands in Thailand behind which stands the third richest – Chirathivat – family, owns online marketplaces Central.co.th, Robinson and Tops. All of the above mentioned retailers have both – offline and online stores.

Thailand Ecommerce Landscape

Despite Lazada’s dominance, competitors are not easily scared off, especially deep pocketed Thai conglomerates who want their share of etailer online market.

Fashion & Apparel is one of the most competitive online market segments. In Thailand, this category represents a healthy mix of local players like Pomelo and WearYouWant, regional players like Zalora, Reebonz and global brands such as Adidas and Uniqlo.

Thailand Ecommerce Landscape

The competitive Fashion & Apparel online market in Thailand represents a healthy mix of local, regional and global players.

Brand.com webstores are also gaining traction in Thailand, which is best observed in the beauty category. Brands such as Maybelline, L’OccitaneEstée Lauder and Kiehl’s in Southeast Asia embrace the ecommerce market boom and use the opportunity to sell on their brand web stores, marketplaces or through distributors to capture the widest possible audience.

Thailand Ecommerce Landscape

Beauty brands go all-in in Thailand selling their products online on their own webstores, marketplaces or through distributors.

2. Old school vs new kids on the block compete in C2C

Classifieds and consumer-to-consumer (C2C) marketplaces were the first ‘ecommerce’ businesses to operate and remain an important part of the online journey in Thailand. Three of the most popular C2C marketplaces – WeLoveShopping, Tarad, Pramool – were created around the millennium and are run by local companies. However, newer market entrants like Shopee, supported by Southeast Asia’s largest gaming company Garena, are on their heels.

Tarad and Pramool ecommerce sites can be accessed on desktops, while the newest competitors – Shopee, Blisby, as well as WeloveShopping – all have mobile apps, which rank among the top 10 most popular C2C ecommerce apps in Thailand. Since approximately 85% of online shopping outside the major metro areas in Thailand takes place through mobile, it is easy to see that the new kids on the block are disrupting traditional, desktop-first marketplaces.

3. Social commerce is driven by Facebook, Instagram and LINE

An ecommerce business model specific to Thailand is social commerce – merchants set up ‘shops’ on Facebook and Instagram where they post images and details of their products so online browsers can inquire about the product and other details to further facilitate the deal.

Thailand Ecommerce Landscape

Thailand is the leading country where half of online shoppers buy directly from merchants through social networks.

According to a PwC report, Thailand is the biggest social commerce market and around 50% of online shoppers purchase products through social networks. Therefore it was no surprise when this June, Facebook started testing social commerce payments in Thailand and later in August launched Facebook Shop, the first in the world.

Companies like Shopee are looking to lure merchants selling on social networks to its online marketplace with aggressive marketing by offering easy integration of their Instagram shops and reimbursing shipping, cash on delivery fees to sellers. Other players like LINE also have eyed this market segment. LINE Shop was created to utilize the wide audience of LINE messaging app and tap the social commerce market. Yet technical issues such as a requirement to upload merchant product catalogues on the app through mobile phones, as well as limited payment options through LINE Pay, has hindered the success of LINE Shop.

4. Cash is still king

Thailand is still a cash driven society and cash on delivery (COD) is the preferred payment method for 70% of ecommerce shoppers, making payments a bottleneck for faster ecommerce growth as many sellers cannot offer COD. There are various mobile wallets offered by telecom companies, banks as well as independent players but so far, none of them have quite caught on.

Thailand Ecommerce Landscape

Despite various mobile wallet providers, cash is still the most preferred payment method.

The large unbanked population and low trust in the security of personal financial details does not make the task of Thais adopting digital payments any easier. And though there has been a surge in fintech players, none really address the core issue. For example, LINE Pay accounts can only be linked with a credit card in Thailand, where just  3.7% use one to make payments. Mobile wallets and banks offering a top-up through either ATMs or special kiosks, defeats the purpose of an mwallet. Good news is that there is an opportunity for a player to provide a convenient and easy digital payment solution for those without a bank account and/or credit and debit cards.

5. Fierce competition in logistics leads to price war

The ecommerce gold rush across all Southeast Asia has facilitated growth of startups who hope to solve logistics problems like next-day delivery and live tracking, and Thailand is no exception. The success of ride-hailing apps Uber and Grab has encouraged several startups to offer on-demand delivery services.

Thailand Ecommerce Landscape

The success of ride-hailing apps has driven several start-ups to offer on-demand delivery.

There are numerous companies who provide 3PL services and ensure a smooth last mile delivery. This means companies engage in price wars and suffer lower margins, if any at all.  

The packed logistics market is beneficial for marketplaces and merchants as they have plenty of delivery service providers with whom to negotiate a lower price.

Thailand Ecommerce Landscape

Numerous companies offer 3PL services and ensure last mile delivery driving down delivery costs for the benefit of marketplaces.

Click here to download the full, high-resolution version of ECOMScape: Thailand and join the ecommerceIQ network for first look at the next ECOMScape in our series.

Check out also ECOMScape: Indonesia

Are we missing any players? Let us know on FacebookTwitterLinkedIn

Indonesia Ecommerce Landscape

Mapping Southeast Asia’s Dynamic But Fragmented Ecommerce Market

In order to ‘win a market’, some online publications will say: ‘define your brand’, define your competitive advantage, ensure product-market fit, create a customer database, and/or market to the world. And while your business should encompass all these strategies, the very first step any company, old or new, should take is to identify the key players already in the field.

Southeast Asia has become a hotspot for saturation thanks to booming growth – the online sector is expected to reach more than $87 billion by 2025 and many global players such as Alibaba and Amazon are scrambling to get their own slice of ecommerce pie.

However, what new entrants often overlook or find out too late when entering the region is its fragmented nature. Every country brings with it a different set of strengths and challenges.

For any player looking to grab Southeast Asia market share, the key to unlocking its potential is knowledge. Different players exist in several market segments, and some dominate certain niche segments all hoping to solve problems or capture an untapped opportunity but the ecommerce bottlenecks vary across borders.

The ECOMScape Series by ecommerceIQ aims to bring you a complete picture of the ecommerce ecosystem in individual Southeast Asian countries from the businesses selling, to the specialists providing their online solutions, all the way to the end customer. We hope it will help you navigate the competitive space. Let’s start first with the region’s biggest and most promising market, Indonesia.

Indonesia Ecommerce Landscape: 6 Key Takeaways from Current Market Conditions

The country is on track to become one of the biggest markets in Asia with the potential to comprise 52% of Southeast Asia’s entire ecommerce value by 2025.

Despite the country’s attractive $46 billion ecommerce valuation that keeps foreign investors and companies pouring in, local players are not intimidated by the influx of global ones. What else can we tell from the bird’s eye view of Indonesia’s ecommerce ecosystem?

1. Local players are dominating the market, especially in niche sectors

Indonesian run companies are seen selling in every sector of ecommerce in Indonesia, especially C2C, Lifestyle & Travel and smaller niches that fall under the ‘Other’ category. These include marketplaces like Cipika, Qlapa, and KuKa that sell local and handcrafted products and Limakilo, a marketplace targeted at farmers.

Indonesia Ecommerce Landscape

‘Others’ category under B2C sector is filled with niche players.

Some locally owned companies such as Shoot Your Dream and AkuLaku also better understand the country’s payment pain points and allow customers to buy products via installments through their website without a credit card.

Targeting a smaller consumer segment for local players is one way to empower local SMEs to go online. It also means less competition as foreign and big players usually try to compete over a more ‘mainstream’ audience such as Lazada, Elevenia and MatahariMall.

A reason for the success of Indonesian owned companies is due to familiarity of local trends and behavior. These companies, such as Bukalapak, customize marketing campaigns to match cultural preferences and identify better with the customer.

Indonesia Ecommerce Landscape

Bukalapak’s viral video campaign for Online Shopping Day 12-12 last year, starred their CEO creating a small-budget, home-made marketing initiative while ‘apologizing’ to the executives everywhere for distracting and decreasing their employees’ productivity with big discounts offered.

Among the top 20 websites in the archipelago under SimilarWeb’s ‘Shopping’ category, more than half are native Indonesian run companies.

Indonesia Ecommerce Landscape

Even OLX and iProperty, who have the advantage of vast resources to be at the top of their respective niches as seen in the ‘Classifieds’ section, were once local companies acquired by regional players.

2. Brand.com and the rise of omni-channel

Indonesia’s most popular ecommerce model is presently the marketplace like Tokopedia and Lazada. Even in the vertical sectors like Fashion & Apparel, Electronics & Gadgets and Local & Handcrafted products, the dominant choice is still a marketplace.

This model is popular to accommodate the growing interest of SMEs and brands that want to bring their business online but lack the capital or are unwilling to take a risk jumping online with both feet.

Indonesia Ecommerce Landscape

However, as the industry matures and brands realize the importance of having an online channel, more adopt a brand.com strategy to directly reach customers.

HP and Kiehl’s are some of the big brand names in their field that recognize the potential of going online. And it isn’t restricted only to brands because offline retailers are also joining the ecommerce bandwagon.

MatahariMall and MAPEmall are just two examples of retailers with deep pockets that recently joined the online space and it’s paying off. MAP, the parent company of MAPEmall, has stated 78% year on year profit growth in August and credit their online venture as one of the main drivers.

As more customers demand convenience to shop anywhere and at anytime, it is vital that retailers complement their offline networks with an online strategy to create an omni-channel experience.

3. B2B sector is slowly gaining momentum

B2C is not the only sector that has seen an increase in online adoption. The country’s biggest industrial retailer, Kawan Lama, is among the early players making the jump to ecommerce in this sector.

The company launched a shoppable website to cater to both a B2B and B2C audience after seeing steady traffic from consumers browsing its catalogs, indicating a change in customer behavior. Another big offline retailer that followed suit is Electronic City.

Indonesia Ecommerce Landscape

However, despite the push for B2B ecommerce in Indonesia with the establishment of Indonetwork, an online directory and marketplace for SMEs catering to B2B and B2C alike, the sector is still very scarce. Bizzy and Lippo-backed Mbiz are the only significant B2B marketplaces that launched in the past year.

Indonesia Ecommerce Landscape

4. Market research is urgently needed

Due to the infancy of the industry in Southeast Asia, there is only a handful of resources that exist to help businesses make informed decisions. Even established research firms like Nielsen are having difficulty obtaining enough market data to create a comprehensive report.

Indonesia Ecommerce Landscape

The lack of knowledge and insight affects the growth of ecommerce as executives are forced to make strategic decisions based on gut thus the reservation of conservative brands going online.

ecommerceIQ aims to bridge the gap of knowledge in Southeast Asia by providing market research to executives in the form of summits, reports, insights and data.

5. More payment options to tap into the unbanked

With more than half of the population in Indonesia still unbanked and credit card penetration at only 1.4%, payment has become one of the biggest bottlenecks to ecommerce growth in the country.

Telco companies in Indonesia are one of the key contributors that help build the ecommerce ecosystem by launching their own versions of mobile wallets, a popular payments method. And it’s not surprising, considering that each telco company has their own ecommerce website.

Other popular payments gateway include Adyen, a payments unicorn used by both Uber and most recently, Grab and aCommerce. The payment gateway offers both online and familiar offline options that locals trust, such as ATM transfers.

6. Diversifying delivery services

Infrastructure is often acknowledged as one of the top barriers for ecommerce in the region, especially Indonesia where lack of public transportation, tricky island geography and under-developed roads pose serious problems.  

Ride-hailing apps are expanding their offerings to include courier services to cater to growing demands. Gojek, for example, a traditional transportation startup has become the preferred delivery method for C2C merchants and buyers as it offers same-day delivery services and a built-in tracking system at an affordable price.

Indonesia Ecommerce Landscape

The third party logistics (3PL) category is also very saturated in Indonesia. Brands are provided with so many options that it becomes a time-consuming task to find one that suits the needs of their business and consumers. Multi-shipping tech from aCommerce or Alibaba’s Cainiao aim to save time by aggregating the best options based on the price and destination.

The potential of ecommerce in Indonesia has already tempted many players, both foreign and local, to enter the market. However, it’s still a long time before a clear winner emerges from the battlefield.

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