Latest news:

You are currently not logged in

Log in

SUBSCRIBE
FREE NEWS BRIEFS
Get breaking news delivered

Opinion

Unlocking Indonesia’s digital commerce opportunity

When thinking about expansion into Asia, China might seem like the obvious choice — yet Indonesia’s proximity and its emerging global market economy present notable opportunities for Australian companies.

Just a stone’s throw from Australia, Indonesia is the world’s fourth-largest country by population with over 266 million people. With a median age of less than 30, this remarkably young nation is smartphone-enabled and embracing the digital world quicker than ever — over 85 percent of the population have a mobile phone and 43 percent carry smartphones. Perhaps Indonesia, then, is the logical next-step for Southeast Asian expansion — particularly for consumer digital-commerce startups.

While the barriers (including a geographically-fragmented population and ambiguous regulations) for Australian companies to break into the Indonesian market might be high, when done properly, expansion into this relatively untapped market can competitively position your business for high growth.

Mobile-first Indonesia is ripe for digital commerce

Among other emerging Asian economies, this archipelago nation presents much opportunity for digital commerce growth. Driven by high rates of internet-capable mobile phone usage, Indonesia’s e-market is expected to hit $130 billion by 2020. Much is at stake in Southeast Asia, and Indonesia is key to the region.

The large demographic of young, connected Indonesians — primarily accessing the internet through mobile devices — has shaped the development of the country’s online shopping market to achieve the second highest retail e-commerce growth among the 36 countries studied in our 2018 Marketplace Expansion Index. In fact, the vast geographical spread of Indonesia helps — not hinders — the growth potential of e-commerce and m-commerce: given the high mobile penetration rates seen even in rural and semi-rural areas, e-commerce provides an avenue through which people outside of major cities like Jakarta can source hard-to-find goods.

Overseas companies looking to gain a stronger foothold in Southeast Asia are vying for a place in this quickly maturing, mobile-optimised and consumer-driven nation. Chinese e-commerce giant Alibaba has continued its push into the region by becoming a key shareholder in two of the strongest local online retailers, Tokopedia and Lazada. As more foreign retailers, including Amazon, set their sights on the archipelago, they must display superior understanding of market localisation and market conditions to amp up their appeal to Indonesian shoppers.

The sharing economy and rise of freelancers

Southeast Asian consumers are particularly partial to the sharing community, and Indonesians are among the highest to embrace sharing economy services. According to a survey conducted by Nielsen in 2014, 87 percent of Indonesians are likely to use products or services from others in a share economy, compared to 66 percent of the global population. However, the emergence of sharing platforms in Indonesia had been met with hurdles, including regulatory issues and meeting local payment method needs.

Rideshare in particular is a highly-utilised service among Southeast Asian consumers. With Indonesians being among the highest to embrace rideshare providers, the success of Indonesian rideshare startup Go-JEK and even the Uber-Grab merger underscore the necessity of understanding the local market and its needs. Go-JEK has recognised that in Indonesia, as in many emerging economies, most people are unable to afford a car. Scooters, then, become the alternative. Go-JEK grasped this and focused its fleet on scooters, not cars, which allowed them to scale up quicker than Uber. So far, Go-JEK has been able to dominate the market by rolling out a hyper-localised strategy — but it remains to be seen how much of the local market share they can retain in the wake of Grab’s dominant position following the acquisition of Uber’s operations.

With mobile penetration and connectivity so high, Indonesia is seeing an uptick in the sharing economy as the local population becomes increasingly aware of sharing economy platforms like Go-JEK and Grab.

According to the 2018 Marketplace Expansion Index, Indonesia has the third-highest number of freelancers. It also boasts a less saturated startup ecosystem than China and Singapore. Yet unifying such a widespread nation with several cultures and languages presents a challenge to overseas companies looking to establish a local presence. It is critical, then, to tap locals who are in tune with workplace norms to head operations.

Developing payments infrastructure creates fintech opportunities

Unlike developed markets, most of Indonesia’s population remains unbanked or underbanked and the country’s economy is primarily cash-driven. Indonesian consumers remain wary of online payments and prefer a cash-on-delivery model or direct bank transfer. Sharing economy startups must take this into consideration and offer localised approaches to processing outbound payments for locals. Spotify, for example, allows its Indonesian customers to pay through bank transfers or by cash at local convenience stores.

It’s precisely these inefficiencies in the country’s payments infrastructure that make this a fintech ecosystem to watch. As spend continues to grow, the cash-on-delivery model will become unsustainable. Given the increasing prevalence of mobile devices in Indonesia, mobile wallets and other mobile application-driven payment innovation will be paramount in this market. Any startups that can offer a smart but trusted solution for online payments and financial inclusion will find themselves in a strong position.

Closing thoughts

Our northern neighbour will continue to emerge as a key player in Asia, and Australian companies will need to overcome country-specific barriers geographical, historical, linguistic, cultural, religious and economic. As the sharing economy continues to take hold, many aspects of Indonesia’s society and economy will modernise to become more conducive to business and foreign investment. Digital commerce companies that are willing to take the leap into Indonesia stand to benefit from potentially higher return on investments than may be seen in China or Singapore.

Indonesia’s vibrant e-commerce and m-commerce markets have developed rapidly in recent years and, coupled with the country’s 100 million-plus internet users, present significant potential for Australian businesses looking to unlock new export opportunities.

Simon Banks is Hyperwallet’s managing director and SVP of Asia-Pacific.

No Comments | Be the first to comment
+-

Comment Manually

I have read and agree to the Terms and Conditions and Privacy Policy.

No comments

SUBSCRIBE
FREE NEWS BRIEFS
Get breaking news delivered