Indonesia to emulate China’s e-commerce boom

Source:Global Times Published: 2019/7/7 19:13:39

Fajrin Rasyid Photo: Li Qiaoyi/GT

Indonesia, which shares multiple similarities with China in e-commerce, is still lagging behind by roughly five years, but it has the potential to become the next giant market in the e-commerce world. 

Aspiring to learn from China's stellar success in the online marketplace while striving to carve out its own path, the Southeast Asian economy has high hopes for its fast-growing e-commerce market. 

Illustration: Luo Xuan/GT

In less than a decade, China has established itself as the world leader in e-commerce. And Chinese e-commerce giants such as Alibaba and have extended their reach far beyond internet retailing. 

China is a source of inspiration for many hoping to become an e-commerce power. Nonetheless, not every country can follow the Chinese model, given that there are two preconditions in the Chinese story: widely used digital payments and a multitude of small and medium-sized businesses.

For example, in the US and some other developed countries, credit card penetration is high, delaying their transition toward becoming digital payment societies. Also, big corporations play a dominant role in some developed economies, making it hard for smaller firms to thrive. While major e-commerce platforms in China employ a large number of smaller businesses, in the case of the US, the e-commerce behemoth Amazon is focused on creating its own retailing prowess and developing its own ecosystem. 

In Indonesia, however, the growing popularity of mobile payment shows the nation's enormous potential for shifting toward a cashless society. Also, local online marketplaces enable millions of local merchants to enjoy the digital prosperity.

Although Indonesia's e-commerce market might be similar to China's five years ago, it could be poised to grow quickly.

In an August 2018 report, McKinsey projected that Indonesia's e-commerce market would grow by nearly eightfold between 2017 and 2022, from $8 billion in online shopping spending in 2017 to $55-$65 billion by 2022. That would be "similar to the trajectory experienced in China between 2010 and 2015," the report said. It also forecast average individual spending in Indonesia would rise from $260 per year to $620 per year in 2022, citing an improvement in consumer trust in the ecosystem and a greater number of micro, small, and medium-sized enterprises going online.

In another sign, Indonesia is likely to outpace India in terms of e-commerce sales, Singaporean financial publication The Business Times said in a report in September 2018, citing CLSA estimates. E-commerce transactions in Indonesia hit almost $13 billion in 2017, compared with $17.8 billion in India, according to the report.

Another factor is that Chinese investment in the Indonesian e-commerce market lends strength to the nation's meteoric rise in the online commerce arena. Chinese internet companies including Alibaba and Tencent hold large stakes, and in some cases controlling stakes, in some of Indonesia's biggest e-commerce companies. For instance, Ant Financial is one of the Chinese investors with a minority stake in Indonesian e-commerce unicorn Bukalapak.

Chinese investment provides a gateway to partnerships that enable Indonesian firms to leverage their advantages while learning from Chinese expertise.  

The integration of emerging technologies including artificial intelligence (AI) and big data into online retailing in China might also boost Indonesia's e-commerce evolution. For instance, Bukalapak began applying AI last year, hoping to equip its marketplace with better personalization and recommendation features as well as adding financing functionality and the availability of credit scoring and loans to merchants and buyers. The company is also researching a virtual fitting room function - a feature Alibaba's Taobao and Tmall marketplaces have pioneered - to allow buyers to try on clothes via 3D modeling technology.

Certainly, it's not all about following the Chinese path. Indonesia is the world's fourth most populous nation and has the world's largest Muslim population, and it might be carving its own path to e-commerce success.

There is a plan Bukalapak is still considering that might help it emulate Alibaba in the Muslim world. The vision focuses on sales of Halal food and Muslim fashion products, and this could set it apart from other online retailers. Indonesia seems to be a bit more creative compared with the rest of the Muslim world, in that Islamic fashion in Indonesia is usually more colorful, trendy and stylish, allowing a unique advantage for Indonesia's products. 

The nation's growth as an e-commerce powerhouse will certainly give a boost to its economy, both in terms of vitality and job creation. What used to be a one-man job - being an online vendor - has now evolved into small and micro-sized businesses creating many jobs. This has probably already created hundreds of thousands of direct jobs. And that is without the increasing number of people in connected jobs such as delivery.

The article was compiled by Global Times reporter Li Qiaoyi based on an exclusive interview with Fajrin Rasyid, co-founder and president of Indonesian e-commerce unicorn Bukalapak, at the just-concluded World Economic Forum's Summer Davos in Dalian, Northeast China's Liaoning Province.

Posted in: INSIDER'S EYE

blog comments powered by Disqus