Home Blog Exploring the Promising Future of E-Commerce in Indonesia Indonesia | Legal Consultation | Tax Reporting Exploring the Promising Future of E-Commerce in Indonesia InCorp Editorial Team 4 September 2024 6 minute reading time Table of Contents Indonesia's E-Commerce Landscape Indonesia E-Commerce Market Leaders Factors Contributing to E-Commerce Growth The Future and Potential for E-Commerce Growth Overcoming Challenges Stay Compliant with InCorp Indonesia Indonesia offers a huge opportunity for online shopping. It’s predicted that in 2029, the industry will be worth USD 95.84 billion. This means that Indonesia could be a leader in digital business in Southeast Asia. However, there are challenges that need to be overcome, and it’s important to take advantage of the unique opportunities available to make this happen. Indonesia’s E-Commerce Landscape The estimated value of the Indonesian e-commerce market in 2024 is USD 58.43 billion. This figure is expected to soar to USD 95.84 billion by 2029, representing a remarkable compound annual growth rate (CAGR) of 10.40% throughout the forecast period (2024-2029). In 2023, Indonesia’s e-commerce sector saw transactions totaling IDR 453.75 trillion (USD 29 billion). Although the 2022 figure of IDR 475.3 trillion decreased slightly by 4.73%, the sector demonstrated strong growth in transaction volume, reaching 3.71 billion transactions compared to 3.49 billion in 2022. Digital banking services also showed positive momentum, experiencing a 13.48% year-on-year increase in transaction value, reaching IDR 58,478.24 trillion in 2023. Projections for this year suggest that digital banking transactions are expected to reach IDR 63,803.77 trillion. Digital payment platform transactions surged 43.45% year-on-year, totaling IDR 835.84 trillion in 2023. Reflecting the government’s emphasis on digitalization, the use of QR codes in domestic and cross-border transactions increased by 130% yearly, reaching IDR 229.96 trillion. Indonesia E-Commerce Market Leaders Indonesia’s e-commerce market is growing rapidly, and many companies compete to be the top players. Simply put, e-commerce is when you buy and sell things online, like websites or apps. Indonesia has well-known e-commerce companies such as Tokopedia, Shopee, and Lazada. These companies provide a broad selection of products ranging from fashion to electronics, making it convenient for people to purchase what they need from the comfort of their own homes. 1. Tokopedia Tokopedia reigns supreme, boasting a market share of 33.5% as of Q3 2023. Its user-friendly interface, diverse product offerings, and focus on local sellers have made it the go-to platform for millions of Indonesians. 2. Shopee Closing the gap with impressive growth, Shopee holds a 28.7% market share. Its strategic partnerships, aggressive marketing campaigns, and focus on mobile shopping have propelled it to become a significant force in the market. 3. Lazada Backed by Alibaba, Lazada holds a 16.1% market share. Its focus on premium brands and established retailers cater to a different segment than Tokopedia and Shopee. 4. Blibli Blibli occupies a niche with a 10.2% market share. It focuses on curated products from reputable brands, catering to a more discerning customer seeking quality and authenticity. 5. Bukalapak With a 7.2% market share, Bukalapak holds a strong position in the Indonesian market. Its focus on local sellers and community-driven features has resonated with a loyal customer base. Factors Contributing to E-Commerce Growth The e-commerce market in Indonesia is experiencing significant growth, which can be attributed to several factors. One such factor is the surge in the penetration rate of smartphones and the internet, which has increased from 64% in 2020 to 73.7% in the past year. This upward trend aligns with the government’s support, especially for micro-SMEs through B2B channels. This reflects President Joko Widodo’s vision for a seamless transition to a digital economy. Global interest in Indonesia’s e-commerce landscape is apparent, as evidenced by significant investments from companies like Amazon. In October 2021, Amazon injected USD 87 billion into Southeast Asia’s e-commerce sector, with a notable focus on the Indonesian startup Ula. Indonesia’s e-commerce market is regulated by several laws, which include No. 7/2014 on Trade, Government Regulation No. 71/2019, Government Regulation No. 80/2019, and Minister of Trade Regulation No. 50/2020. If an e-commerce platform outside of Indonesia carries out more than 1,000 transactions per year, it is required to set up a Representative Office in the country. The COVID-19 pandemic has caused a significant rise in e-commerce in Indonesia. Due to social distancing measures, people turn to online platforms for food delivery and consumer electronics services. The Ministry of Cooperatives and SMEs has reported that the number of SMEs using online platforms has increased to 10.2 million during the pandemic. READ MORE:Opening An E-Commerce Company In Indonesia2024 Economic Outlook For IndonesiaUnderstanding The New Data Protection Regulations In Indonesia The Future and Potential for E-Commerce Growth For those interested in setting up online businesses in Indonesia, there are some important things to remember. These include various aspects related to e-commerce business that need to be considered. 1. The Potential of D2C In e-commerce, leading companies such as Shopee, Tokopedia, and Lazada dominate the broad marketplace category. However, there is growing interest in segments like B2B marketplaces, e-commerce facilitators, and specialized direct-to-consumer (D2C) commerce. Indonesia holds vast potential for D2C, thanks to its rapidly growing young and productive population. This demographic ensures a continuously expanding market with increasing consumer demands. 2. Growth in Beauty Brands Investor attention has turned toward select beauty brands, including Rose All Day Cosmetics (RADC), supported by AC Ventures, and From This Island, reportedly receiving investment from Alpha JWC Ventures recently. Local beauty brands are intriguing due to their diverse pricing and product categories. Each boasts a standout product. Many companies are venturing into private labels within this sector, where they can achieve higher profit margins. 3. The Outlook for Social Commerce According to investors, social commerce, which leverages community networks and social media platforms for product and service sales, holds promising potential. The Indonesian social commerce market is anticipated to reach nearly USD 90 billion by 2028. Notable startups like Evermos and Super focus on tier-2 and tier-3 cities in Indonesia, which have substantial untapped markets for online shopping. These cities attract businesses and investors as they represent the country’s mass markets. However, companies that want to expand into these regions must adapt their strategies and business models to suit the unique characteristics of these areas. Overcoming Challenges In November 2019, the Indonesian government introduced Government Regulation 80 of 2019 (GR 80, 2019) to enhance the oversight of internet-based and electronic trading activities in the e-commerce sector and ensure tax compliance. A recent implementing regulation, a revision of Minister Trade Regulation No. 50/2020 (MR 50/2020), now bans e-commerce platforms from selling certain foreign goods valued under USD 100. These products must meet Indonesian standards, such as the Indonesian National Standard (SNI) and Food and Drug Supervisory Agency (BPOM) requirements, which mirror offline market standards. In addition, Minister Trade Regulation No 31/2023, released on September 26, 2023, prohibits the sale of goods on social media platforms. Social commerce platforms have been given a one-week deadline to comply with new regulations to prevent competition between large platforms and small businesses. While advertising on social media is permitted, direct sales transactions are not. Non-compliance may result in warnings and, eventually, the revocation of the Indonesian business license. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Stay Compliant with InCorp Indonesia E-commerce in Indonesia demonstrates significant potential, prompting the government to introduce various efforts to fortify its regulatory landscape. Recognizing the complexities of legal aspects in this dynamic sector, InCorp Indonesia provides valuable support through legal compliance and tax consulting services. Our expert team will ensure you can navigate the complexities effortlessly while remaining compliant with the relevant laws. Read Full Bio Pandu Biasramadhan Senior Consulting Manager at InCorp Indonesia An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.