E-Commerce in Indonesia: Many Consumers Look Offline, Buy Online
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Based on a new survey, conducted by ShopBack Indonesia, two out of every five Indonesians buy a product online after having seen the product in an offline store. The survey mentions that 42.2 percent of women and 40.7 percent of men indicate that they have seen the goods directly in the physical store (offline) first and then decide to buy the goods online. Indra Yonathan, Country General Manager of ShopBack Indonesia, said many Indonesian consumers prefer to purchase goods or products online because e-commerce platforms often offer discounts (while delivery is sometimes free of charge).
Earlier this year, Indonesia became the world’s fastest-growing mobile-commerce market (m-commerce) on the back of rising purchasing power of Indonesia’s middle class as well as rapidly expanding Internet and smartphone penetration across Southeast Asia’s largest economy. Indonesia is now the world’s third-largest m-commerce market after China and India.
Meanwhile, joint research conducted by Google Inc and Temasek Holdings Pte says Southeast Asia’s digital economy (which includes a variety of segments including e-commerce, online games, and online advertising) will have surged to USD $200 billion by 2025. Indonesia’s digital market is estimated to account for 40.5 percent – or USD $81 billion – of the total market in this region. With an estimated USD $46 billion, Indonesia’s e-commerce sector will contribute most to the total.
What explains the rapid development of Indonesia’s e-commerce industry?
- Indonesia contains a huge population numbering more than 260 million people. In combination with rising per capita GDP and purchasing power, this population forms a huge consumer force.
- Indonesia’s middle-class segment continues to expand. To determine the exact number of middle-class consumers in Indonesia is a matter of definition. Using a low bar (as used by Boston Consulting Group or McKinsey) Indonesia has 45-75 million middle class and affluent consumers. Institutions that set a higher bar say Indonesia has less than 20 million middle-class consumers. However, all institutions expect the number of middle-class consumers to rise rapidly in the years and decades to come.
- Smartphone penetration is rising in Indonesia. Based on data from research institute eMarketer there were 69.4 million smartphone users in Indonesia at the end of 2016. Moreover, this figure is expected to grow to 103 million by 2018, which would make Indonesia the fourth-largest smartphone market worldwide after China, India and the United States.
- Internet penetration is rising in Indonesia. According to the Indonesian Internet Service Providers Association (in Indonesian: Asosiasi Penyelenggara Jasa Internet Indonesia, abbreviated APJII) there are currently 132.7 million Internet users in Indonesia. With the government’s Palapa Ring project under construction this figure will rise steeply in the years ahead.
- Online shopping – as well as other online activities (such as social media or gaming) – is a popular activity among the Indonesian population because Indonesia has a young population (hence more interested in digital technology and more able to adapt it into their lives). Moreover, a characteristic of Indonesia’s young population is that it likes to purchase the newest “trending” products.
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