The e-commerce penetration rate in Indonesia has reached 20%, already surpassing the levels of advanced countries such as Japan and the United States.
In fiscal year 2020, Indonesia's e-commerce market accounted for approximately 20% of total retail sales for the year, a significant increase from just 2% in 2016, reaching its highest level. This surpasses Japan, which accounts for less than 7%, as well as the approximately 10% in the United States, and is higher compared to advanced countries such as France and Spain. The digitalization spurred by the COVID-19 pandemic is now a global trend, and Indonesia is no exception, serving as a catalyst for rapid digital expansion.
According to the "E-conomy SEA 2020" survey on the Southeast Asian e-commerce market published by Google, Temasek, and Bain & Company, the total gross merchandise value (GMV) of e-commerce in Indonesia reached $32 billion (approximately ¥3.2 trillion) in 2020.
The trend of 'diversification' among players, alongside market growth, is driven by strong local e-commerce.
In Indonesia's e-commerce sector, domestic marketplaces such as Tokopedia and Sea Group's Shopee continue to lead the market. Both companies boast higher market penetration rates compared to other competing firms like Lazada (Singapore) and JD.com Indonesia (China).
Alongside market growth, the trend of player diversification is also noteworthy. Tokopedia, through its merger with the super app Gojek, is expected to differentiate itself from competitors by leveraging Gojek's platform to build an ecosystem for economic activities. On the other hand, Bukalapak, another local Indonesian company, focuses on mom-and-pop shops across Indonesia. Although Bukalapak has raised funds from Microsoft, Temasek, and others, its privately valued at over $1 billion and is reported by Reuters to be planning an IPO soon.
The strength of local companies and the trend of diversification are unique characteristics of the Indonesian market, unparalleled in other ASEAN countries.
Consumer channels/touchpoints are "mobile-first"
In Indonesia, the most commonly used devices for conducting B2C e-commerce transactions are mobile devices (smartphones, tablets, wearable tech devices, etc.), with approximately 80% of respondents using mobile devices to make online purchases in the third quarter of 2019. This share is the highest among the six major ASEAN countries.
Despite having the lowest smartphone penetration rate in the region (56.5% in 2018), one of the reasons for the widespread adoption of online purchases using mobile devices is the rapid expansion of mobile devices, particularly smartphones, without waiting for the general adoption of PCs (desktop/laptop). This has led to a market characteristic known as "mobile-first," where mobile devices become the de facto consumer channels/touchpoints.
The Indonesian government is working to improve digital infrastructure and logistics to support the domestic e-commerce industry.
Indonesia is an archipelagic country, and its geographical conditions have been a hindrance to the development of transportation infrastructure. However, the lack of transportation infrastructure can be seen as both a logistical challenge and a factor that promotes internet sales. According to CNN, Jakarta ranked fourth in terms of the worst rush hour traffic in 2017, which encourages consumers to transition from physical stores to online shops.
In 2021, the Indonesian government allocated 413.8 trillion IDR (15.0% of the proposed total government expenditure for 2021) for infrastructure development, compared to 281.0 trillion IDR in 2020 (an increase of 47.3% from the previous year). This budget is said to be directed towards improving digital infrastructure and enhancing logistics and connectivity. Such improvements in digital infrastructure, logistics, and connectivity are expected to stimulate market growth in the e-commerce industry, and future developments are eagerly anticipated.
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