Over the recent years, President Jokowi and his administration have been relentlessly pushing the growth of the e-commerce market in Indonesia.
This can be seen through major developments in the country that include the surging internet penetration. It is undeniable that technology advancement and the emergence of e-commerce have paved the way for convenient transactions, mobility and connection.
With the unceasing research and development in the field of e-commerce and technology, the economy, businesses and industries have also transformed and presented themselves with tons of opportunities.
As one of the fastest-growing economies in the world, Indonesia is known as the top in the Southeast Asia region, with a massive GDP worth of US$1.02 trillion in 2018.
Thanks to the rapid development of infrastructure, the internet penetration in Indonesia has grown almost 50% in just mere 4 years. Especially for the e-commerce sector, this sector contributes to 50% of the digital industry’s value in 2019; and it will continue to take the lead towards 2025, dominating 60% of the digital industry.
We will dive further into Indonesia’s e-commerce sector in this article.
Motivators of E-commerce Growth in Indonesia
Indonesia has been the main force of the whopping e-commerce and digital industry growth for Southeast Asia.
The motivators of the growth are mainly the huge population, younger demographic, increasing purchasing power, governmental support and large investment value pouring into the country.
Huge and Growing Population
Indonesia has a gigantic population and is known as the most populated country in Southeast Asia and the world’s fourth most populated country.
The country’s population is growing at a rate of 1.1% annually, with the current population of over 260 million.
It is estimated that Indonesia’s population will grow to 296 million by 2030.
Improving Digital Infrastructure
Approximately US$29 billion were allocated in 2018 by the Indonesian government to develop the infrastructure including the IT infrastructure in the country. This budget allocation aims to bridge the gap between Indonesia and the modern world.
Expanding Digital and E-commerce Penetration
Improving IT infrastructure also means the growing internet penetration particularly in the e-commerce sector. The internet users in Indonesia grew from 143 million to 171 million between 2017 and 2018.
Apart from the generous budget allocation for the development of infrastructure in Indonesia, the Indonesian government also carries out beneficial initiatives for the digital economy development.
For example, 100% foreign ownership is allowed for e-commerce companies with more US$ 7.1 million of investment size.
Challenges and Opportunities in E-Commerce Sector in Indonesia
Of course, an accelerating digital economy does not come without its own challenges and opportunities. Here are some of them:
Inadequate logistics still remain a hindrance in the e-commerce sector. The poor logistics in Indonesia is mainly due to the lack of competencies of logistic service providers and the mediocre infrastructure in certain parts of the country.
A Competitive Market
Both new and existing e-commerce players have to face the high competition in the market. Large and established e-commerce giants such as Bukalapak and Tokopedia have already had strong footholds, making the customer acquisition costs higher for new and smaller e-commerce businesses.
The unbanked population in Indonesia contributes to the challenges for e-commerce players as well. Payment issues arise in e-commerce businesses when they have to offer other payment solutions for this unbanked crowd.
The Future of E-commerce in Indonesia
Though many challenges exist, it is undeniable that the future of e-commerce in Indonesia is bright and profitable. E-commerce players and enablers have now come up with omnichannel strategy, improve customer experience and differentiate their offerings to drive e-commerce growth.
How Cekindo can Help
Are you thinking of starting a business in the booming e-commerce industry in Indonesia, but do not know how to go about doing it?
In other words, you have a product or a service that is suitable for the e-commerce market and you want to promote it, but you are not sure what are the most effective and strategic tools to execute your ideas.
This is why Cekindo exists. Cekindo offers professional business and e-commerce consultancy to help you seize profits from this flourishing e-commerce scene. We also provide business setup and business license services, among others.
In addition, we assist you in effectively differentiating your business from competitors and conquering the challenges that await you.
Check us out to see how we can help you succeed. Fill in the form below.