24 Oct 2016
Mobile Sees Indonesia Emerge as Prime ASEAN E-commerce Market
Despite its relatively low level of internet penetration, Indonesia's vast population and widespread smartphone ownership has seen the country firmly established as one of the most potentially lucrative e-commerce markets in the ASEAN bloc.
By ASEAN standards, Indonesia has been a slow developer in terms of internet penetration. Out of the country's 259 million-strong population, only 34% are active internet users, according to the latest Digital Yearbook, an annual publication produced by We Are Social, a London-headquartered specialist digital agency.
While this compares poorly to the 47.3% reported for Vietnam and the Philippines' 47.1%, the figure still equates to 88 million users in Indonesia. This makes it – after China – the largest national online market in the region in absolute terms, as well as one that is catching up fast on its neighbours in terms of penetration percentage. This year, the country's number of online users has grown by 15%, making it second only to Thailand within the ASEAN bloc in terms of rate of digital uptake.
While a penetration of just 34% may seem low, Indonesian internet users are very active. On average, they spend about 3.5 hours per day online and, significantly, mobile is their primary route to access. With 70% of web pages being viewed via smartphones or tablets, the country is way ahead of the other major countries in the region in this regard.
In Thailand, for instance, mobile access accounts for only 45% of page views, followed by China (40%), Philippines (29%) and Vietnam (24%). Given that Indonesia is the region's undisputed leader in this sector, this gifts online retailers a vast amount of detailed user information, allowing them to tailor and implement highly-focussed e-commerce marketing strategies. Even more appealing is the fact that Indonesian mobile users seem only too keen to buy.
According to the Indonesian Information and Communications Technology Ministry, the country's 2015 online sales volume was valued at US$18 billion. The same ministry, however, is now predicting that the value of the market will double every year over the near team, reaching a staggering $130 billion by 2020.
This is not the only good news, though, for those smaller companies looking to build and hold market share against competition from the global brands. Unlike a number of other countries in the region, Indonesia's social media landscape is relatively uncluttered and unfragmented. Overall, Indonesia has the highest mobile Facebook usage level in the world – some 63 million users in 2015. According to Techcrunch, up to 99% of the country's population could be Facebook users by the end of 2018.
For the typical Indonesian consumer, peer recommendations via social media have a huge influence, a factor that helps the smaller brands compete effectively with the global giants. The country has a large and fast-growing population resident outside of the major urban centres, areas in which there is often little brand awareness. In line with this, BliBl, a domestic e-commerce platform, reports that more than 33% of its 2.5 million customers live in rural areas, with smartphones being the sole means of internet access for many of these users.
In addition to Facebook, many Indonesians are also keen users of Twitter. According to the Global Web Index, a UK-based metrics company, Indonesia ties with Mexico in terms of Twitter usage, with 74% of both counties' internet users signed up to the service. In line with this, back in 2012, Jakarta was the world's most active city in terms of posted tweets, even outstripping New York, London and Tokyo. This, though, may have marked a high point for the service.
According a report by Reuters in February of this year, the overuse of Twitter for marketing purposes has now dented its allure for many Indonesians, particularly younger users. Most notably, its heavy usage by political parties during the last presidential election and 'buzzing' – the practice of paying people to send out a high volume of tweets in praise of a particular product – has seriously undermined its credibility.
As well as the challenges now facing Twitter, there are a number of other problems the country's e-commerce sector has to contend with. At present, there is still limited access to efficient mobile technology and the country's ICT infrastructure remains weak. While online access is clearly affordable, the average internet bandwidth and the connection speed is still notably poor when compared to other ASEAN countries. As a consequence of this, far less video content is accessed in Indonesia in comparison to more basic forms of content, such as text or low-resolution images. As many brands now favour the use of video in their marketing initiatives, this has hampered their activities in Indonesia.
There also remains a number of payment problems. Comparatively few Indonesians who shop online have credit cards, while cyber security remains a common – and highly valid – concern among many digital shoppers. As a result, the development of alternative online payment options – such as bank transfers and cash-on-delivery – has been essential for the health of the sector. As an extension of this, a number of sites have even started offering finance plans, allowing more expensive items to be paid for in installments.
Geoff de Freitas, Special Correspondent, Jakarta