Indonesian consumers became more discerning in 2014 and looked for more ways to shop and engage with brands online, according to an ecommerce report conducted by Singapore-based global logistics firm SingPost.
Last year, Indonesia clocked in at 74.8 million internet users. Now, SingPost says the archipelago’s internet user base is slated to have a 20 percent year-on-year growth until 2016, which will lead to 102.8 million Indonesians online by then. This is largely due to the increasing spending power of the middle class. Fierce competition between mobile companies is also driving mobile phone and subscription plan prices down, making them increasingly affordable to Indonesians on modest wages.
With the words “ecommerce” and “Indonesia” increasingly going together like peas and carrots, Tech in Asia thinks it’s time to shed some much needed light onto the local landscape for those who may still be in the dark. Below is everything you need to know about Indonesian ecommerce as of 2014.
Indonesians use social media to sell stuff
SingPost says that between January and March 2014, Twitter users in Jakarta posted 2.4 percent of the global total of 10.6 billion tweets during that time period, maintaining the city’s reign as the Twitter capital of the world. However, the nation’s most popular social media channel continues to be Facebook, with 69 million active users. As of September, Indonesia has 30 million Line users. Remarkably, nearly 27 percent of all the country’s ecommerce transactions occurred via social media in 2014.
The use of social media to facilitate ecommerce is a huge opportunity for any consumer-driven business to think about before coming to Indonesia. The birth of local startups like LakuBgt and Onigi, which assist businesses selling on these social platforms, is another indicator that the archipelago’s social commerce sector is growing rapidly.
Who is the Indonesian shopper?
Last year, Indonesia had 4.6 million online shoppers. This year, it has 5.9 million. By 2016, SingPost estimates the country will have 8.7 million local shoppers on the internet. 20 percent of Indonesian online shoppers prefer conventional shopping sites like Lazada or Zalora, while 26.4 percent prefer social media like Facebook or Instagram. 26.6 percent prefer online forums or classified sites like Kaskus or OLX, and surprisingly, the highest percentage of online shoppers in Indonesia would rather buy from messaging apps like Blackberry Messenger or Line.
Indonesians are risk-averse and late adopters of new products and technology, according to McKinsey and Co. Their preference for channels like forums and social networking sites, which allow for interaction with sellers and other customers, is apparently so that they can ask questions and receive recommendations from a real human before committing to a purchase.
While Indonesians shop across multiple categories, the most popular one is by far clothing and apparel, with 61.7 percent of the nation’s online shoppers making a purchase in that category last year. Females reign supreme in the archipelago’s ecommerce space, with women having higher purchase rates, and the highest spending amount on clothing, mobile devices, travel items, laptops, and accessories.
See: 18 popular online shopping sites in Indonesia (2014 edition)
Decentralized consumption
Last year, of Indonesia’s US$363.42 billion spent in the retail sector, only US$1.8 billion was online. This year, of the nation’s US$411.29 billion in retail spending, Indonesia saw an uptick to US$2.6 billion spent in ecommerce. By 2016, SingPost projects Indonesians will spend US$543.07 billion on retail and US$4.49 billion on ecommerce – still less than one percent of the total.
Despite Jakarta initially being the driver of ecommerce growth, both Rakuten and Zalora say that as of 2014, 70 percent of their Indonesian orders come from the nation’s rural areas. Some of these areas still lack shopping malls, which presents a largely untouched segment and an opportunity for online companies to reach customers looking for more convenient shopping solutions where brick-and-mortar stores are not easily accessible.
Getting to know the big boys
In 2013, Amazon was the most popular business-to-consumer site in Indonesia. Despite having no local presence, pricing or logistics support, their breadth of products drew the highest amount of visitors. However, Lazada Indonesia, Rocket Internet’s answer to Amazon, made the jump to the top spot in 2014. SingPost reasons that Lazada took the lead because it made a shift away from consumer electronics and focused more on lifestyle goods. Lazada’s marketing campaigns in Bahasa Indonesia were also key wins for Rocket.
Catching onto the potential of Indonesia, Japan entered the market with Rakuten Belanja Online, a subsidiary of the Japanese giant Rakuten, which now operates locally. In a culture with such distinct characteristics and low levels of risk-taking, a localized strategy such as adding an Indonesian word “belanja” (which means shopping) to a company name increases the site’s approachability for risk-averse Indonesians.
As of May 2014, Kaskus reported to have over 6.8 million registered users that create 4,000 new threads every day. The site also sees more than 750 million page views and 25 million unique visitors every month. A visitor typically spends about 29 minutes on Kaskus every day. The site’s biggest competitor is OLX (formerly known as TokoBagus). It is the largest ecommerce community and Indonesia’s third largest local website.
Consumer-to-consumer marketplace Tokopedia claims to be drawing 10 million monthly visitors with shoppers buying an average of 2 million products per month in 2014. While the site can still be considered to be in the early stages of development, SoftBank and Sequoia Capital recently invested US$100 million in Tokopedia, catapulting the young firm into direct competition with the likes of Lazada Indonesia and Kaskus.
See: Ahead of Rocket Internet IPO, here are the numbers on its Southeast Asian ecommerce stores
Unique pain points
Once an ecommerce site is live in Indonesia, the biggest challenge for brands new to the market is convincing the consumer that their online store is trustworthy, according to SingPost. On top of this, Indonesians remain hesitant about online payments. The most current data from Vela Indonesia shows that bank transfers are the most popular way to pay for online transactions, followed by cash on delivery, and finally credit cards. Less than five percent of Indonesia’s population own credit cards, and credit card payments still account for less than 10 percent of all online transactions in the archipelago.
Several local players are creatively addressing the epayments space, including Doku, Veritrans, iPaymu, and Indomog.
Increased traffic congestion and rising internet penetration drives people to shop online. The growing demand for more sophisticated logistics solutions for ecommerce businesses will lead to further investments into global and regional logistics players in the archipelago.
SingPost’s report sums up the situation in Indonesia by saying that for any business looking to venture into the nation’s ecommerce space, it’s of the utmost importance to consider localization and multiple payment and delivery options so as to best gel with Indonesia as one of Asia’s future economic powerhouses.
See: PayPal coming to Indonesia could speed up natural selection
Editing by Paul Bischoff and Steven Millward; lead image from Muhammad Rasyid Prabowo; image of village from Fadil Basymeleh; image of Jakarta traffic from Charles Wiriawan
This post Everything an outsider needs to know about Indonesian ecommerce in 2014 appeared first on Tech in Asia.
Everything an outsider needs to know about Indonesian ecommerce in 2014
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