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Indonesia’s e-commerce big-bang

Indonesia is an upcoming online market that can’t be ignored. A recently published McKinsey report highlights the country is on track to becoming the world’s seventh biggest economy, placing it ahead of more developed countries like the UK and Germany.

By 2020, there will be roughly 141 million middle-class and affluent consumers (MAC). A report from BCG perspectives argues “at that point, the island of Java alone will have more MACs than the entire population of Thailand and Sumatra will have more than the populations of Malaysia and Singapore combined.” Indonesia has had a relatively low penetration rate of internet subscribers, reportedly below 30% in 2013. However, by 2016 the number of internet users is projected to top 100 million, with ecommerce also increasing at a fast pace.

Traditional shopping verses e-commerce.

Indonesian consumers are slowly moving away from traditional methods of shopping with more and more seeing cyberspace as the best alternative.  Earlier this year, the Jakarta Post reported that Indonesia’s internet users enjoyed the highest level of satisfaction in online shopping out of 14 countries in the Asia-Pacific region in 2013. A survey conducted by MasterCard showed that 96% of almost 1,000 respondents across the country were satisfied with the new method of shopping. Results of a further study showed online shoppers spent an average of US$500 annually on travel and about $194 per year on fashion products and cosmetics. Convenience and a wider range of product choices are the main reasons for Indonesian consumers making their way to the internet as their main marketplace. In fact, more Indonesians are taking advantage of platforms such as Shopify.co.id, Bostoko.com and Jualan.com to set up their own boutiques and stores and tap in to this growing and lucrative e-commerce market.

The online future for Indonesia.

In 2014 alone, Indonesia is projected to gain 39.8 million new smartphone users – creating a segment of new online consumers larger than the entire population of Canada.  To capitalise on this growth e-commerce giants such as eBay, Rakuten and Rocket Internet have all invested heavily in Indonesia this year.

Awareness and engagement with brands on social media could be a deciding factor for a lot of Indonesian consumers when it comes to choosing an e-commerce provider. While the appetite for social media among the population is well documented, not many e-commerce providers have exploited the power of social media and messenger apps to connect with this growing online consumer group. One exception is Rakuten, which recently acquired Viber – a smartphone app for $900 million, with the intent of using it as a distribution channel for digital products. World-renowned brands like Facebook has also enjoyed considerable success, a 2012 study found it was among the most popular ‘e-commerce’ sites for Indonesian consumers.

Indonesia has the fourth-largest population in the world and according to the World Bank, 45% are aged 24 or under. On top of this, figures from Japanese bank Nomur suggest Indonesia’s middle class could reach almost 150 million this year, way above neighbouring countries such as the Philippines, Thailand, Vietnam and Malaysia.

With a population of 246.9m, Indonesia is creating a wave of new opportunities for e-commerce providers.  Is this the year of the anticipated ‘big-bang’ that will make Indonesia one of Asia’s biggest online shopping markets?