Investors riding e-commerce wave in Indonesia

Investors riding e-commerce wave in Indonesia

In the past two years, the 38-year-old Jakarta housewife has bought online a jacket for her son, dozens of small toys for birthday party giveaways and even cakes.

As internet use expands in Southeast Asia’s largest economy, the e-commerce landscape in Indonesia is witnessing a boom, helped by the fact that it costs less to shop online and cuts travelling time to boot.

“It is easier to find certain goods online. In Jakarta’s traffic hell, buying one thing that is a bit particular could require a total of two hours’ travelling time at least. Why go out when you can stay home and make the purchase with a few clicks of a button?” Rina said.

Such sentiment is driving the e-commerce boom that in recent weeks has been attracting global investors with deep pockets.

Last month, e-commerce site Tokopedia.com received US$100 million  in funding from investors led by Japan’s SoftBank and United States-based Sequoia Capital. Classifieds-dominated local e-tailer Tokobagus.com, which boasts more than one billion page views a month, was recently acquired by global e-commerce company OLX.

Rival berniaga.com, controlled by media giants Singapore Press Holdings and Scandinavia’s Schibsted, has seen a spike in traffic.

These developments have been matched by the emergence of several financial news portals. Among these is Bareksa.com which, apart from providing market news and data, also offers users a platform to buy mutual funds.

Investors’ bullishness about Indonesia’s e-commerce sector is fuelled by the expected spike in the number of internet users in this country of 250 million people.

Nearly half or 120 million of the population are forecast to be internet users in 2016, up from 71 million and 63 million last year and 2012 respectively.

“The number of internet users in Indonesia has convincingly been rising, both on the social media and e-commerce sides in the past years. It is easy to predict that it will still be the case in 2015, 2016 and 2017. The number of internet users won’t exceed 80 per cent yet, while buying power is there,” said Sapto Anggoro, secretary-general of Indonesian Internet Users’ Association.

Indeed, another cause for optimism is the economy, which has been growing at above 5 per cent and is expected to further accelerate in the coming years, after president Joko Widodo slashed fuel subsidies this month and pledged to spend the freed-up funds on programmes such as irrigation for farmlands that would help boost welfare and buying power.

Internet commercial activity, from shopping to share trading, has created business opportunities for online payment portals such as Kartuku and Moneta.co.id.

However, the level of trust in the online payment system is still very low in Indonesia. Online shoppers in the country prefer to make payment for purchases through means such as cash on delivery and bank transfers, rather than use e-commerce payment systems such as credit cards and e-money, which are more commonly used elsewhere.

Rina is a typical online shopper in Indonesia. She pays for her purchases through bank transfers and has not experienced any problems, such as not receiving the merchandise after paying.
“I don’t have any credit card or cash card. I’m fine with bank transfers,” she said.

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