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MINT: The New Emerging Markets: Indonesia (2015)

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Presentation about the e-commerce market in Indonesia including economic analysis, conversion rate comparisons to developed markets and other Southeast Asian markets, market-entry strategies, and localization options for cross-border e-commerce sellers to Indonesia.

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MINT: The New Emerging Markets: Indonesia (2015)

  1. 1. MINT- The New Emerging Markets: Indonesia CBS 2015 Barcelona October 29, 2015 www.intersticeconsulting.com
  2. 2. Agenda I. Prospects for e-commerce in Indonesia II. Comparing the relative opportunity III. Advice on entering the Indonesian e-commerce market
  3. 3. I. Prospects for e-commerce in Indonesia
  4. 4. Indonesia’s place in the world
  5. 5. Some key facts Source: populationpyramid.net World’s 4th most populous country Archipelago > 18K islands Largest Muslim country Dutch colony from 1800-1945 Median age of 28 Population growth rate of 1% annually 44% of the population already live in cities
  6. 6. Major population centres 9.8 million 2.8 million 2.1 million 1.5 million 1.6 million 2.4 million Bandung .
  7. 7. One of the largest economies Source: IMF
  8. 8. Some images of Jakarta
  9. 9. Some images of Jakarta
  10. 10. Some images of Jakarta
  11. 11. Retail sales Source: AT Kearney Retail sales declined slightly from $337 billion in 2013 to $326 billion last year Total retail sales area grew 14.5% as retailers continue to be drawn to Indonesia’s large population and growing middle class The government recently announced plans to invest a record $22 billion in infrastructure projects, which will help improve retail infrastructure $326 billion in 2014 3.5% CAGR 2011-2014
  12. 12. Major foreign retailers have arrived Major foreign retailers such as The Body Shop, Uniqlo and Galeries Lafayette are drawn by the immense size of the Indonesian market However, AT Kearney research ranks Indonesia only 12th out of 30 emerging markets for retail friendliness Constraining factors include inefficient import processes, weak transport infrastructure, and
  13. 13. Indonesian and ASEAN Internet users Source: UBS (2014) Calculations of Internet users and penetration
  14. 14. State of online retail Sources: SingPost, idEA, UBS Of the roughly 75 million Internet users in Indonesia last year, around 5.9 million had shopped online UBS Research on Indonesian e-commerce (2014) E-commerce conversion rate of 0.3% Average order value of US$23.31 The Indonesia E-commerce Association (idEA) estimates that e- commerce will triple from $8 billion in 2014 to $25 billion by 2016.
  15. 15. Factors underpinning e-commerce “Leapfrogging”of bricks & mortar retailers in the regions Youthful population Mobile and smartphone penetration Intensive users of social media Growing spending power
  16. 16. Indonesian market characteristics Language Popular social media platforms Mobile C2C e-commerce Investment restrictions
  17. 17. State of online retail Source: MarkPlus Insight
  18. 18. Indonesia’s“Cyber Monday”
  19. 19. OLX
  20. 20. Kaskus
  21. 21. Tokopedia
  22. 22. Blanja
  23. 23. Lazada
  24. 24. Rakuten
  25. 25. Zalora
  26. 26. JD
  27. 27. II. Comparing the relative opportunity
  28. 28. Indonesia vs. the West Source: populationpyramid.net
  29. 29. Indonesia within MINT GDP per capita in US$ at PPP (2014) $16,950 $10,517 $5,911 $19,226 GDP per capita in current US$ (2014) $10,230 $3,492 $3,203 $10,530 Total GDP in current US$ (2014) $1,282.7 billion $888.5 billion $568.5 billion $799.5 billion Average GDP growth (2011-2014) 2.9% 5.7% 5.2% 4.5% Sources:World Bank, populationpyramid.net
  30. 30. Indonesia within MINT Source:World Bank Household final consumption expenditure (annual % growth)
  31. 31. Indonesia within MINT Source:World Bank Household final consumption expenditure per capita (constant 2005 US$)
  32. 32. Indonesia and the wider ASEAN region E-commerce market size ($ billion, 2013)
  33. 33. Indonesia and the wider ASEAN region Source: UBS (2014) Estimates of ASEAN market potential
  34. 34. Why Indonesia? Indonesia has the most immature online market in ASEAN, with only 31% internet penetration, but also has by far the largest population, leading shopping websites achieve 121m traffic hits per month currently, the largest in the region
  35. 35. Some more local competitors Source: idEA
  36. 36. III. Advice on entering the Indonesian e-commerce market
  37. 37. Adjust expectations to an emerging market mindset Source: Presta E-Commerce, UBS Typical e-commerce conversion rates: USA => 3% ASEAN => 0.3% - 1.6%
  38. 38. Marketplaces for customer acquisition Work with established marketplaces to build brand recognition and leverage online consumers As business grows, additional options to improve profitability and efficiency become feasible Optimizing local storage and fulfillment Direct marketing to existing customers
  39. 39. Adapt to Indonesian consumers Risk-averse and brand-loyal: 63% of Indonesian consumers only buy products from brands they already know (McKinsey). Acutely price sensitive, driven by promotions and discounts Value social and personal approach
  40. 40. Leighton Peter Prabhu Managing Partner lsp.prabhu@intersticeconsulting.com Twitter: lsp_prabhu Mob +65 8447 0069 (Singapore) Contact information Interstice Consulting provides market entry support to foreign enterprises expanding to Southeast Asia. Typical services include: company registration and administration, search for business partners, digital marketing strategy. Through our associated co-working project in Singapore,“The OutPost”, we also offer flexible office facilities to our clients.

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