In recent years, Indonesia’s eCommerce market has experienced exponential growth and has swiftly established itself as a thriving industry with immense potential. With a sizeable population and increasing internet usage, eCommerce in Indonesia provides a tremendous opportunity for businesses to connect with their customers like never before.
To better understand the expanding eCommerce industry in Indonesia, Standard Insights conducted a survey of the local population to gauge their thoughts and opinions on online shopping. Below, you can find the results and our analysis.
The Growth of eCommerce in Indonesia
Indonesia’s eCommerce market has undergone substantial growth and is expected to sustain its upward trajectory in the years to come. As of 2021, the market was valued at US$43 billion, ranking it as the world’s ninth largest. In addition, the country’s thriving eCommerce industry experienced a 23% surge in online transactions and attracted around 63 million new users during that year.
Standard Insights’ latest Consumer Report Indonesia 2023, which surveyed over 1,000 Indonesian respondents, highlights the country’s growing affinity for online shopping. The report reveals that 24.1% of Indonesians make online purchases once a month, while a further 45.4% of them reported shopping online more than once a month.
On the other hand, when asked which product category they like to buy online, the majority of respondents (70.13%) picked fashion products such as apparel and footwear. This is true for all gender, ages, and geographic groups surveyed. Beauty & personal care goods (49.7%) ranked second, followed by food & beverage (40.8%).
Why is eCommerce Booming in Indonesia?
The eCommerce industry has already become an important part of the economy in Indonesia, providing a platform for entrepreneurs to start businesses with minimal capital expenditure. COVID-19 restrictions, including lockdowns, as well as increasing internet access and smartphone penetration are key drivers behind eCommerce’s rapid expansion in Indonesia, as more people gain online access, eCommerce will be able to take advantage of economies of scale and offer more products and services.
1. Large Population and Rising Internet Usage
Indonesia is home to a large population of over 270 million people and has seen an impressive rise in internet usage in the past few years. In fact, according to recent figures, Indonesia had 204.7 million internet users in January 2022, with an internet penetration rate of 73.7% at the start of 2022.
This growing online presence has been instrumental in driving eCommerce growth in Indonesia, as businesses have been able to reach out to more customers with eCommerce solutions that are tailored to their needs.
According to the same Standard Insights report, 64.5% of Indonesians find social media sites such as Facebook, Instagram, and TikTok as the most powerful sources of information impacting their online purchase decisions. Website reviews (61.9%) and the brand’s official website (40.6%) are also important information sources for Indonesians.
2. Wide Range of eCommerce Payment Options and Digital Wallets
Indonesia also offers a wide range of eCommerce payment options, making it easier for businesses to do business with Indonesian customers. These include bank transfers and e-wallets like GoPay, OVO, DANA, LinkAja, and Jenius, which are typically associated with specific e-commerce platforms as non-cash payment mechanisms.
These e-wallets are increasingly popular in eCommerce and provide customers with an easy, secure, and convenient way to make payments for eCommerce purchases. This proliferation of eCommerce payment options and digital wallets has been a major contributor to the eCommerce boom in Indonesia, as it has enabled businesses to reach out to a larger customer base and make eCommerce purchases more accessible for customers.
3. Increasing Competition Among Businesses and Investment and Innovation in eCommerce Solutions
Businesses in Indonesia are increasingly looking to eCommerce solutions as a means of staying ahead of the competition. Platforms like Shopify, Amazon, and Tokopedia have made it easier for businesses to create eCommerce websites that enable customers to make purchases online. What’s more, these eCommerce platforms serve as all-in-one solutions for businesses, providing a range of tools and resources to manage and optimize their online stores. With these all-in-one solutions, businesses can improve their online sales processes, enhance their customer experiences, and unlock new revenue opportunities.
4 Potential Risks & Challenges Associated with eCommerce in Indonesia
1. Poor Infrastructure
One of the primary challenges of eCommerce in Indonesia is the country’s poor infrastructure, especially in remote areas. This poses a significant hurdle to eCommerce players, as it affects the speed and quality of delivery, which directly impacts the customer experience. The government has made efforts to improve infrastructure, but eCommerce companies may have to invest in their own logistics network to ensure timely delivery.
2. Lack of eCommerce Expertise
eCommerce businesses in Indonesia may struggle to find eCommerce experts who can help them develop the right eCommerce strategies and solutions for their business. It is therefore important for eCommerce businesses to invest in training resources and technologies that will help them stay up to date with eCommerce trends and develop eCommerce strategies that will help them remain competitive in the eCommerce market.
3. Fraudulent Activities
eCommerce businesses in Indonesia may be vulnerable to fraudulent activities such as credit card fraud, online scams, identity theft, and other cybercrimes. To mitigate these risks, eCommerce businesses may want to prioritize investing in secure payment methods and establish robust customer service initiatives, such as providing customer support and product guarantees.
These concerns are reflected in the same Standard Insights report, which listed safety and security issues (31.4%) and personal data breaches (9.8%) as two of the most significant challenges faced by Indonesian internet buyers.
Consequently, when asked about their feelings about sharing personal data when shopping online, 43.2% of Indonesians indicated they are comfortable with giving only the most basic information about themselves so that the item/s may be delivered successfully. Meanwhile, 30.5% of them want to be informed and have control over the personal information they gather and store.
4. Competition
eCommerce businesses in Indonesia face stiff competition from eCommerce giants like Amazon and Tokopedia, which can make it difficult for eCommerce businesses to stand out from the crowd.
One key aspect for eCommerce businesses is to prioritize the development of unique eCommerce solutions that can offer their customers a distinctive shopping experience. Along with that, it’s also important to devise effective marketing strategies that can foster brand recognition and customer loyalty.
The Future of E-Commerce in Indonesia
Overall, eCommerce in Indonesia is poised for continued growth thanks to an increasing number of eCommerce businesses and investments being made into eCommerce solutions. eCommerce businesses in Indonesia should focus on developing eCommerce strategies that will help them stand out from the competition, as well as ensure that their eCommerce solutions are secure and tailored for the Indonesian market. With eCommerce companies continuing to invest in innovative eCommerce solutions, the eCommerce industry in Indonesia is well positioned for continued growth.
