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A SPECIAL REPORT HANDBOOK :
DISSECTING INDONESIA MARKET AND
IT’S E-COMMERCE OPPORTUNITIES IN 2016
TABLE OF CONTENT
Introduction
Dissecting Indonesia Market
Key Drivers and Main Obstacle to
E-Commerce Growth
E-Commerce Logistics
and Delivery
E-Commerce Now
Conclusion
Introduction	
We all appreciate the future growth prospects of
Indonesia ecommerce market and how this industry is
becoming center of attraction for some global brand
retailers to expand their market channel. As CLSA 2015
reported, Indonesia e-commerce sales in 2016; expected
to have US$ 25 billion.
Online retailing in Indonesia is poised for an e-liftoff. As
has already happened in China, this major structural
theme will have sizeable ramifications for offline retail.
Online shopping in Indonesia will be huge, rising to almost
11% of total retail sales by 19CL.
Indonesia has the best online retail growth prospects
among Asean countries. Key drivers will be a mix of its
huge, young population; an extremely under penetrated
offline sector; relatively high levels of mobile-internet
penetration and large and accelerating levels of private
and direct-equity investment into the sector.
This handbook released by 8Commerce based on
credible reports from CLSA, wearesocial, e-marketer,
Nielsen, Kadence 2015 and Macquarie Research 2016.
Source:	wearesocial.com	
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A Special Report Handbook 2016 |
Dissecting Indonesia Market
Facts and Findings
•  Online retail spending/capita in the USA is 63x higher than Indonesia.
•  Indonesia is the world’s fourth most populated country, 256 million.
Online retail sales to reach 10.7% by 2019. The Indonesian eCommerce
Association expects the total online market to treble between 2014 and
2016, to Rp 283tn (US$24bn in 2016) and to reach US$130bn by 2020.
•  As survey by CLSA 2015, indicates that 83% of online shoppers in
Indonesia only made their first domestic online purchase in 2015, and
predicted will re-purchase more in 2016 and next.
•  Globally, B2C online retail sales/capita has tended to take off when
mobile-internet penetration hits 35%.
•  Average mobile data speeds in Indonesia are only 1.7 mbps, while in China
is 4. mbps and South Korea is 8.8 mbps.
•  Only 2 of Indonesian adults have credit card, while figures for bank
accounts are 36%.
•  In Indonesia, less than one-third of the top-30, best selling apparel brand
across all channels are local. While in India and China, the share is two-
thirds.
•  C2C currently dominates in Indonesia and Thailand but this should change
over the next five years. Industry experts believe Indonesia’s B2C e-
commerce market is the fastest growing in Southeast Asia, even though
C2C classifieds players are the first-movers; even the top two local C2C
marketplaces, Tokopedia and Bukalapak, are beginning to shift to the B2C
model.
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A Special Report Handbook 2016 |
Dissecting Indonesia Market
Social Media Well Connected
There are more Facebook users in a seen than in the USA.
Jakarta is in second place with 7.4m users. Indonesia as a
whole, is a relative laggard, but is still Facebook’s fourth
largest market globally by users. (wearesocial, 2016)
	
Source:	wearesocial.com	
Growth of Online Retail
Indonesian are also becoming more familiar with online
shopping. For instance, Zalora used to get an average of two
phone calls/messages per order two years ago, but this has
fallen to one per order (vs.. European fashion websites which
get customer queries on only 5% of orders). Online retail is
attractive for big city dwellers who prefer to avoid traffic
jams and for those who live in areas far from shopping malls.
The Indonesia E-commerce Association (idEA) believes that
the number of shoppers will grow from 15mn to about 75mn
by 2020 in Indonesia, which is about 30% of the entire
population. (Macquarie, 2016)
	
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A Special Report Handbook 2016 |
Dissecting Indonesia Market
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A Special Report Handbook 2016 |
More Favourable Environment
for E-Commerce Growth
Based on our discussions with the ICT Minister, as part of stimulus package #10, the
government has removed e-commerce from the negative investment list, and now allows
foreign investment for e-commerce marketplaces such as Tokopedia which are valued above
Rp100bn. The government expects the new rule will provide wider funding opportunities for
start-ups willing to expand their businesses. Several foreign investors have showed their
eagerness to invest in e-commerce to grab a piece of Indonesia’s large market. (Macquarie,
2016)
The Indonesian government has finally completed the e-commerce roadmap draft, which will
form the basis for future guidelines regulating the sector.
The roadmap will cover critical aspects of the industry such as funding, taxation,
communication infrastructure, conference that these are the seven points the government
will work on in order to achieve an e-commerce transaction values of $130 bn by 2020.
The finance ministry is currently drafting a tax mechanism for e-commerce
companies and transactions
Dissecting Indonesia Market
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Faster network speed :
The government’s initiative to reform 1800MHz spectrum to
make spectrum assignments more efficient (contiguous
blocks vs previously fragmented blocks) was completed as
planned in Nov 2015 and incumbent operators followerd
quickly with commercial LTE services. While coverage is
limited to key city centres and LTE device penetration is still
low, the improved user experience has spurred accelerating
demand for LTE service, which has already led to telcos
planning accelerated rollouts in key population centers.
Though smartphone penetration is still low at 35%, The
smartphone market is grew
The smartphone market grew 55% YoY in 1Q16 and accounts for
more than half of the total handset shipments. The $50-$100
price range represents nearly half of the total smartphone sales.
As LTE devices enter this price range we expect the 5% LTE device
penetration to hit an inflexion point and drive a further change in
user online habits including towards e-commerce.
	
Availability of cheaper mobile phones :
The cheapest smartphone available today is a niche product
from smartfren and costs Rp 499.000 (US$35). Entry level 4G
LTE smartphones from Sony, Lenovo, Xiaomi are available in
Indonesia and range between Rp 1 – 3mn (US$76 to Rp230).
The locally made Bolt Powerphone is priced at about Rp 2mn
(US$150), and local brand Polytron has been able to build a 4G
LTE smartphone in a similiar price bracket that is compatible with
several carriers.
(Macquarie, 2016)
Dissecting Indonesia Market
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(Macquarie, 2016)
Increased Fibre Broadband
Availability
Incumbent fixed line operator PT Telkom
has been aggressively rolling out its fibre
network, and as at Dec 15 10mn homes
were passed out of Indonesia’s 61mn
households, with 1mn subscribers on fibre
of copper / fibre hybrid (VDSL)
connections.
Despite the low GDP per capita levels (US
$3,500/month) demand remains very
strong with the key limitation currently,
typical of early fibre rollouts in all
countries, a lack of skilled technicians to
handle fibre installations. From an e-
commerce standpoint, improved fibre
connectivity also introduces new channles
for content owners to monetise their
content.
Logistics Enablers:	
Since the Go-jek motorcycle service app
launched in January 2015, the company has
gone from 1,000 registered drivers on its
platform to 200,000 across five locations
in Indonesia, including Jakarta and Bali. The
Go-jek motorcycle services is an app, and
delivers more efficient and cheaper last
mile logistics. According to several news
articles, Go-jek has seen a dramatic
increase in users due to infrastructure
issues in Jakarta, and we think that it still
has significant growth potential.
This has improved the logistics issues
surrounding e-commerce. As this reporting
on the making, there is an updated news
that MatahariMall.com officially engages
Grab to be one of their partner in last mile
delivery.
Enabling Ease of E-Payment Still
An Ongoing Process:	
While the majority of electronic
payments are still done through ATMs,
we are seeing a higher proportion of
mobile banking transactions, at 18% of
total electronic transactions in 2015
(vs. 15% in 2014). However, the total
transacted value remains flat.
We think that the landscape remains
fragmented, with around 20 official
players, and expect consolidation in this
space to help ease online payments.
Dissecting Indonesia Market
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“
According to Kenneth Bishop, Managing Director of Facebook
SEA :
“Mobile News Feeds are the new storefront for retailers looking to reach
Southeast Asia’s mobile first consumers. For Indonesians, mobile devices
are where they discover products and make purchases.
We know that on Facebook, 44% of Indonesian online shoppers search for
product information, leading them to make purchases based on
recommendations and feedback from their personal connections.
Southeast Asia is home to some of the fastest growing countries for
Facebook and Instagram. Indonesia is driving this growth with 82 million
people on Facebook, and 94% of them connecting through mobile
devices. We’re committed to building solutions and products to help
ecommerce companies in Indonesia build and grow their business.
Indonesia already has the highest
number of internet users in Southeast
Asia at 75m and this should continue to
grow over the next few years.
Indonesia’s internet penetration is
already the lowest at 30%, but we
estimate this could double by 2020 to
about the same level as Malaysia
currently
Improving Internet and Smartphone Penetration
At the heart of e-commerce and online growth is improving internet and smartphone penetration. According
to tech minister Rudiantara, consumers will pay only Rp 400.000 for 4G smartphones. 4G technology is
beginning to enter Indonesia on a large scale, and all three major operators are currently engaged in country-
wide 4G infrastructure upgrades. While Indonesia has a mobile phone penetration of over 100%, as little as
33% are smartphones and only about 5% 4G capable devices.
Most of the growth in internet users will be coming fom mobile rather than fixed broadband. While efforts to
expand fixed broadband coverage is progressing, its large geographical expanse and being and archipelago
does mean that it will be a long time before all Indonesians will have access to wired high-speed broadband,
and untill then mobile will be the primary conduit for most Indonesians to access the internet.
Dissecting Indonesia Market
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Payment and Trust Issues
A study conducted by Kadence, part of Starcom
Mediavest Group, indicated that the biggest concern
customers have for online shopping is product quality,
followed by payment security.
80%
60%
Nielsen reported that 80% of Indonesia
shoppers read reviews on social media and
do research online before they make their
purchases offline. 	
The same source also found that
60% of Indonesian shoppers are not
confident in providing their credit
card information onlne.	
The reasons for the lack of trust include:
missmatch between listed products and
actual purchases,lapses in last mile delivery,
scams involving money transfer and phising
websites.
Lack of customer trust was also encountered in the US in the early stages of ecommerce
development and that did not stop the rapid growth in the sector. We think Indonesia will likely
slowly overcome the barrier of lack of customer trust, slowly transitioning from COD payments
once the trust is built and follow the same path as the US in the next few years
	
(Macquarie, 2016)
Dissecting Indonesia Market
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A Special Report Handbook 2016 |
6%
8%
10%
10%
14%
17%
20%
51%
73%
Purchase price in foreign currency
Tendency to overspend
Efficiency of customer service
Late in delivery
Personal information being tracked and shared
Lack of physical touch and feel of the item to buy
Complicated return of goods policies
Payment security
Product quality (eg counterfeit)
Concerns about Online Shopping
319
400
473
565
770
1100
1064
271
514
833
1243
1233
1606
1996
2009 2010 2011 2012 2013 2014 2015
Electronic Transaction Volume BreakdownInternet transaction
M-banking transaction
ATM transaction
Dissecting Indonesia Market
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Customer Shopping Behaviour
The survey below, dated 2015, was conducted by Kadence,
which is part of Starcom Mediavest Group, which attempts
to assess Indonesian’s online shopping behaviour.
Women will be the main demographic driving ecommerce,
they influence directly and indirectly 75% of the online
purchases. Women spend more time online and buy more.
Being able to offer them inspiration and the products they
are looking for will be key to win the market. (Macquarie,
2016)
1%
13%
32% 33%
12%
9%
0%
10%
20%
30%
40%
15-19 20-24 25-29 30-34 35-39 40-45
Respondent Profile by Age Group
37%
31% 31%
28%
30%
32%
34%
36%
38%
Senior High
School
Academy /
College
Bachelor degree
Respondent Profile by Educating Level
Dissecting Indonesia Market
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A Special Report Handbook 2016 |
22%
41%
37%
0%
10%
20%
30%
40%
50%
SES A SES B SES C1
Respondent Profile by Social Economic Status
20%
44%
24%
0%
10%
20%
30%
40%
50%
Upper	1	 Upper	2	 Middle	
Respondent Profile by Social Economic Class
Macquarie, 2016
According to the survey, SES A has started to
purchase online since this year, while future online
shopping will be driven by consumers in older age
groups, those from SES B and C1 (Macquarie, 2016).
Dissecting Indonesia Market
A Special Report Handbook 2016 |
51%
16%
2%
7% 5%
1%
5% 4% 4%
0%
10%
20%
30%
40%
50%
60%
Fashion Gadget Computer
software or
hardware
Beauty care Air ticket / tour Baggage and
luggage
Healthcare Food and
beverage
Household
electronics and
furnishing
Most Often Purchase
Macquarie, 2016
Fashion	
Top 3 Purchases	
Gadget	 Beauty Care	
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Dissecting Indonesia Market
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Most Popular Payment Methods
by Purchase Category
Beauty Healthcare Software/Hardware Gadget
Transfer
Internet Banking
Using debit card
Using credit card
Cash on delivery
Fashion Baggage & Luggage Air Ticket & Tour Booking
Transfer
Internet Banking
Using debit card
Using credit card
Cash on delivery
65%
16%
10%
4%
4%
22%
4%
6%
12%
56%
63%
26%
6%
1%
4%
21%
13%
5%
12%
50%
61%
2%
23%
9%
5%
75%
2%
14%
3%
6%
26%
43%
7%
18%
6%
Macquarie, 2016
Dissecting Indonesia Market
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A Special Report Handbook 2016 |
Macquarie, 2016
Easier to browse
No time to buy offline
Online price cheaper
Only available online
Flexible transaction
Membership benefits
42%
37%
30%
21%
7%
2%
60%
26%
26%
10%
20%
2%
77%
24%
72%
8%
6%
0%
64%
27%
74%
8%
16%
1%
Beauty Healthcare Software/Hardware Gadget
Easier to browse
No time to buy offline
Online price cheaper
Only available online
Flexible transaction
Membership benefits
54%
41%
30%
27%
18%
2%
46%
35%
64%
9%
7%
8%
55%
57%
35%
4%
42%
1%
Fashion Baggage & Luggage Air Ticket & Tour Booking
Most Common Reasons
to Purchase Online
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Key Drivers and Main Obstacle to
E-Commerce Growth
Key Drivers to E-Commerce Growth
Indonesia is a Large Addressable Market.
There are 256 million people, with 51% are young – below 31 years old. Indonesia in
particular has an extremely large, potential addressable e-commerce market, which in
turn is likely to attract more players, both domestic and foreign, and more capital than
other ASEAN markets. Indonesia is a market that global and regional e-commerce
leaders such as Amazon, Alibaba and Flipkart cannot ignore and we see a strong
likelihood that some of these will become directly involved in the market over the next
few years.
Larger addressable market = more players, more online SKUs and more capital. Too
big for global and regional e-commerce majors to ignore. Indonesia population is
nearly four times that of Thailand.
Currently Indonesia has large penetration on Customer to Customer (C2C) that
still dominate in online player, and that is the basic reason why OLX and other
same focus e-commerce platform are still popular among others.  This
condition also happened in Thailand, but most e-commerce experts believe it
will change over the next 5 years.
CLSA, 2015
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Interesting fact is within Indonesia,
66% of non-Java online shoppers
spend more than US$20 on e-
commerce per month versus 44% in
Java, ex-Jakarta and only 37% in
Jakarta itself. We think this reflects the
relative lack of offline merchandise
choice outside Java and especially
outside Jakarta. (CLSA, 2015)
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The Rise of The Young.
A young population tends to hinder current e-commerce growth, but acts as a driver for future growth.
Indonesia has a much younger population than the USA and China. Some 51% of Indonesia’s
population is under the age of 30 (CLSA, 2015).
Indonesia’s relatively young population may partly explain why per-capita online-shopping expenditure
at an estimated US$15 is still low in both absolute terms and relative to the likes of Thailand (US$53).
Young consumers tend to be more tech-savvy and internet literate than their older counterparts and as
this former demographic moves into higher disposable income brackets, they should be an important
driver of online retail growth.
Key Drivers to E-Commerce Growth
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A Special Report Handbook 2016 |
E-commerce Extremely Nascent.
Another factor explaining the low per capita online shopping spend, but which also
demonstrates the growth potential is that many online shoppers in Indonesia are new to
e-commerce.
CLSA (2015) survey results of online shoppers show that 97% of online shoppers in
Indonesia have only begun shopping online since 2014 and outside of java, this
percentage rises to 99%. Indeed, 83% of Indonesian online shoppers have only begun
doing so in 2015. This makes online retailing far more nascent than in the other large
Asean markets, with only 37% of Thai and Malaysian and 51% of Philippine online
shoppers having purchased online for the first time since 2014. Indonesia have only just
started shopping online. 97% of Indonesian online shoppers have only started to do so in
the past two years.
Key Drivers to E-Commerce Growth
A Special Report Handbook 2016 |
Although nascent, online-shopping frequency is relatively high
Key Drivers to E-Commerce Growth
	
Although Indonesians are the newest to online shopping within the big-four Asean markets, they are already shopping
online more frequently than their Malaysian and Philippines counterparts: 25% of our survey panel of Indonesia online
shoppers are now shopping more than five times a year versus 28% for our Malaysian and 25% for our Philippines
respondents. Only the relatively more mature Thai market has a higher level of online-shopping frequency with 48% of
respondents shopping more than five times a year.
The Indonesian figures rise to 42% in Jakarta but logically fall away to 31% outside of Java.
21© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
CLSA, 2015
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Key Drivers to E-Commerce Growth
	
High Share of Shopping Budget Allocated to Online
Retail Already.
What	%	of	your	overall	non-food,	shopping	budget	was	spent		
online	in	the	past	year?	
The population who spend non food shopping budget more than 10%
Java non Jakarta Jakarta Non Java
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57%
57%	of	Indonesia	online	shoppers	already	allocate	more	than	5%of	their	total,	non-food,	shopping	budget	
to	online	shopping.	Although nearly all Indonesian online shoppers are new to this form of shopping, they
already allocate a higher share of their non-food, shopping budget to online purchases than their Asean
counterparts.
Within Indonesia, the allocation is interestingly higher outside o Jakarta which hints at stronger future online-
shopping growth outside of the capital.
	
CLSA, 2015
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Indonesia’s 10 largest retail groups by revenue have a total of 18,987
stores, easliy the largest store count in Asean and even more than
the top-10 chains in China (6,415) – although this reflects the much
more fragmented composition of China’s offline retail industry.
However, Indonesia’s top chains by revenue are dominated by small-
scale supermarkets and convenience stores. If these two format are
stripped out – and the main reason for doing this is that we do not
see these formats as especially vulnerable to e-commerce – then
the Indonesian store count drops to only 2,178 and the retail GFA
falls from 7.51 m2 to 4.00 m2.
Offline Retail Extremely
Underpenetrated
Key Drivers to E-Commerce Growth
	
When it comes to popular e-commerce merchandise, there is limited offline competition. The lack of offline
penetration means that there is a huge potential void for the online channel to fill and once consumers get
accustomed to online shopping, there tends to be no going back. It is rare that there is an abrupt change and
consumers revert back to the offline retail channel.
The lack of offline retail penetration will be especially pronounced outside Jakarta and it is no surprise that leading
e-commerce companies now drive an average of 44% of their sales on average outside of Jakarta and amost
one-fifth outside Java.
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CLSA, 2015
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A Special Report Handbook 2016 |
Key Drivers to E-Commerce Growth
	
With only 6% fixed line broadband penetration, the
lowest among the big-four Asean markets, Indonesian
consumers will be increasingly reliant on mobile
devices for their online-shopping requirements. The
good news is that mobile internet penetration is
already decent and mobile tariffs low even though
average mobile data speeds are still extremely slow.
The findings from e-commerce company interviews
indicate that an average of
Online Shopping
Driven by Mobile
of all online-shopping
traffic is already on
mobile devices48%
of transactions all
online-shopping on
mobile devices17%
Although poor mobile internet connections and slow mobille data
speeds are major hurdles, it is also noteworthy that a greater share
of Indonesian online shoppers have high numbers of online-
shopping apps on their mobile devices versus their counterparts in
the large Asean markets :
of Indonesian online shoppers have
more than three online-shopping apps
on their phones.
45%
CLSA, 2015
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Key Drivers to E-Commerce Growth
	
With no Indonesian e-commerce or internet companies of any size
yet to be listed, the level and the pace of private-equity and direct
industry funding into the sector are good barometers of how the
sector is developing and, importantly, the growth potential that
professional investors and industry attach to the sector.
Increased levels of funding allow both existing and new companies
to expand in the crucial areas of SKU and staff count as well as
marketing, logistics, IT and mobile-related spending. All of this
helps propel industry growth.
Large Relative Private-Equity
Funding Rising Rapidly
The two big deals have been the US$100m
from Softbank and Sequoia and the US$500m
investment into the establishment of
MatahariMall,
although private-equity deal with most of the funding
coming from the controlling shareholder group (Lippo).
These funds are only a commitment and have not been
invested yet.
CLSA, 2015
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Key Drivers to E-Commerce Growth
	
CLSA, 2015
The growth in online retail spending is reflected in similar large online advertising growth. In the four
years to 2014, online advertising grew at a Cagr of 323%, admittedly from a very low base Online
Advertising now accounts for 4% of total advertising spending, up from almost 0% in 2010. Growth
has been at the expense of print advertising spending , up from almost 0% in 2010.
Growth has been at the expense of print advertising. Given our expectations that online retail sales
will reach almost 11% of total retail sales by 2019. It is likely that online advertising can reach at least
a low-teen percentage by that year. While we expect most of the gains to continue to be at the
expense of print media advertising, we also believe that beyond a three-year timeframe, that there is
potentially some risk to TV advertising especially in the free-to-air segment.
Online Advertising Rising
Sharply Off a Low Base
58.38%
1.38%
32.34%
0.03%
3.98% 3.89%
TV Radio
Print Cinema
Outdoor Online
Online Advertising Spending Breakdown 2014
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CLSA, 2015
Few Strong Local Consumer
Brands
One of the obstacles in expanding merchandise assortment and the
SKU count in Indonesia is that there are few local consumer brands,
especially in the popular online categories.
If we look at the 30 best-selling apparel brands in
Indonesia in all channels (offline and online), only
around a quarter of these are local brands.
A lack of local brands hampers online SKU acceleratiion, makes it
harder to offer low prices and may stiflele online seller margins
Roughly only one quarter of the top 30 best selling
apparel brands across all channels are local ones in
Indonesia and local apparel brands among the top
30 bestsellers, only have a combined market share
of only 2%.
Main Obstacle to E-Commerce Growth
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Main Obstacle to E-Commerce Growth
	
High Levels of Import Duties and
Taxes
Although there has been an Asean-China free trade agreement in place for
several years. and with the official schedule reducing import duties to zero on many
consumer goods, several key consumer categories especially in apparel and footwear,
still attract duties and these duties vary within the Asean markets. In addition, the
various Asean markets have different levels of VAT and GST and these vary from
product to product.
Indonesia has an additional “import income tax” for unregiestered importers
which is calculated as 7% of the customs, freight and insurance value. However, since we
have chosen to ignore freight and insurance charges, this tax is calculated off the
product value at the port plus the import duty. In other names The Asean-China free
trade agreement, appears to be in name only.
With the exception of some consumer electronics items such as mobile phones, there are stilll
import duties on goods manufactured in China on almost all consumer goods imported from china.
When the import income tax and VAT is added, Indonesia has consistently high mark-ups
stemming from import duties and other taxes.
Duties and taxes lead to a 35% mark-up in Indonesia on cotton
dress imports from China but for mobile phone imports from
China attract no duties across Asean . CLSA, 2015
© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 28
© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 29
A Special Report Handbook 2016 |
Main Obstacle to E-Commerce Growth
	
Slow Mobile Data Speeds and Poor
Internet Connections
Although Indonesia has decent levels of mobile internet penetration
and mobile e-commerce usage, higher levels of adoption are being
hampered by slow data speeds and general poor internet connectivity,
average mobile data speeds are 2.7 times faster in
China than Indonesia. In Indonesia average mobile
data connection speeds are at 1.7Mbps, 32%
slower than in Thailand.
Online shoppers view poor internet connections as a greater problem
Jakarta Non JavaJava non Jakarta
45% 52% 36%
We heard many complaints that customers regularly experience internet
disconnections during the shopping and payment process, especially on mobile
devices.
A Special Report Handbook 2016 |
Main Obstacle to E-Commerce Growth
	
Low Fixed Broadband Penetration
and Connection Speeds
It will always be easier to get someone to shop on mobile
devices if they have already had online retail experience on a PC,
where the screen and keyboard size is much bigger and
connectivity speeds tend to be higher. Fixed-line broadband
penetration/household is just 6% in Indonesia, easliy the lowest
among large Asean markets.
CLSA, 2015
Average fixed-line broadband
connection speeds in
Indonesia
Thai speeds faster
than Indonesia.
3.4Mbps
© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 30
2.2Mbps
At almost every meeting that we had in Indonesia with online
retailers, management spoke about shortages of staff talent,
especially for hadrware and software engineers and for digital
marketing talent.
Talent Shortages
© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 31
A Special Report Handbook 2016 |
Main Obstacle to E-Commerce Growth
	
Salaries in these areas are being bid up aggresively and staff poaching is
common with targeted staff often offered 5—100% increases in
remuneration packages to leave.
CLSA, 2015
E-Commerce Logistics & Delivery
Infrastructure is important for the success of e-commerce companies, especially
those with no bricks and mortar presence, and particulary with issues such as free
delivery, order rescheduling, cancellation, returns and cash-on-delivery. Minimizing turn
around times is also key, as this often leads to word-of-mouth publicity, feedback and
customer retention for the online retailer.
Lazada for example, will deliver goods in 1-3 days for Jakarta and the Greater Jakarta
are and 4-9 days outside Jakarta. It still takes more than double the time to ship
goods outside of Jakarta, which is a big growth impediment, given the demand for
online products is typically from second or third tier cities.
Logistics players in Indonesia are evolving rapidly, while some retailers are adapting to
the logistical challenges thorugh ‘online to offline’ offerings, as customers can pick up
in store, while mataharimall.com for example, is setting up pick up location points at
post offices to eease delivery and customer collection.
32
Logistics / Delivery Issues
A Special Report Handbook 2016 |
CLSA, 2015
© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
33
A Special Report Handbook 2016 |
E-Commerce Logistics & Delivery
© 8Commerce.com All Rights Reserved. 2016 | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
Indonesia marketplace players mostly have logistics
infrastructure of its own but still most of the players use a third
party for last mile delivery (see our table for more details).
As a famous choice of package deliveries JNE has developed
their own e-commerce IT that is integrated with e-commerce
operational from one of their biggest client -Lazada, in order to
run seamless order process connected with seamless last mile
delivery.
Company Logistics Delivery
Berrybenka Owned Outsource
Bilna Owned Outsource
Blibli Owned Owned & External
Bobobo Owned Outsourced
Mataharimall Owned Outsourced
Zalora Owned Owned
Tokopedia Not used Outsourced
Indonesia
Marketplace with
Logistics and
Delivery
CLSA, 2015
34
A Special Report Handbook 2016 |
E-Commerce Logistics & Delivery
© 8Commerce.com All Rights Reserved. 2016 | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
Indonesia average delivery time in Jakarta are the fastest of any
of capital cities among the big four Asean markets
21 HOURS
2 DAYS
However deliveries outside Jakarta is among the slowest which
also reach most expensive cost than other Asean countries,
especially in east Indonesia.
Here’s shipping
simulation delivery cost
around Indonesia
comparison according
to JNE.
Delivery Area Price
Jakarta IDR 9.000
Aceh IDR 51.000
Surabaya IDR 19.000
Medan IDR 30.000
Pontianak IDR 30.000
Makassar IDR 36.000
Sorong IDR 88.000
*weight 1kg, shipment from jakarta
CLSA, 2015
35
A Special Report Handbook 2016 |
E-Commerce Logistics & Delivery
© 8Commerce.com All Rights Reserved. 2016 | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
DELIVERYLOGISTICSORDER
e-Commerce Enabler Function on Logistics –
Delivery Integration
INTEGRATION
BENEFITS
Internal External
Boost operational efficiency Real time order status
Brings clearer operational views Best online shopping experience
As what happened in United States, e-Commerce market has been very
common and turned into basic needs for most consumer there.
Consumer convenience shopping experience both online and offline store is
what most matters in USA, and most online players try to work best in
presenting these two channels supporting each other to reach bigger sales.
As what we defined it as integrated omni channel, we might assume that it
would be the future e-commerce for the nearly upcoming year.
This condition seems doesn’t happen yet in varies countries including Indonesia.
Online retail has had some impact on traditional retail which present more of a
threat, where traditional bricks and mortar retailers incorporate online strategies
into their overall strategies.
A Special Report Handbook 2016 |
E-Commerce Now
We assume that e-Commerce presents a threat to
traditional retailers, as the convenience and
affordability factor is appealing to customers.
36© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
A Special Report Handbook 2016 |
E-Commerce Now
The potential price competition over FMCG items. Consumer tend to check the price in
physical stores, and then go online to shop for the same item at a lower price. This has
happened in consumer electronics, and it is highly possible that it will happen in the
FMCG industry due to more and more e-commerce players emerging selling FMCG
products.
There are 3 (three) matters that
potentially described as a threat:
1
Sizeable product offering. Given unlimited visual shelf space, the e-grocery can offer
many more product SKUs compared to bricks and mortar platforms.
2
Price parity. Being online for manufacturers, means opportunity cutting some supply
chain cost, from production to end consumer. It also means consumer can get lower
price of every single product that sold via online.
3
37© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
We believe that online to offline retailing is one of the ways that Indonesian
retailers are positioning themselves ahead of the e-commerce race. Shoppers
tend to browse company websites at home or in the office product information
before visiting the stores to purchase. In Indonesia, consumer are also likely to
connect with their social networks to exchange opinions and get
recommendations on the merchandise under consideration.
Hence, online retailing may in fact be an advantage rather than a disadvantage to
bricks and mortar retailers due to the access it provides for customers who live in
regions that have few malls, resulting in additional sales.
Potential opportunity:
offline to online/omni channel retailing
A Special Report Handbook 2016 |
E-Commerce Now
What is Omni Channel
Omni channel is defined as a customer oriented approach in term of advance multichannel sales utilizing by
providing integrated seamless shopping experience. Through omni channel feature, customer can do shopping both
online or offline which all inventory, stock, price, promotion, product information are integrated.
Even though, there are difference meaning among omni channel user experience and a multi channel user
experience. All omni channel experiences will use multiple channels, but not all multi channel experience are omni
channel.
Customers now and then only see The Brand as one brand. They don’t have enough mindset to deal with the brand
in website is different from the brand in mall. You can have amazing mobile marketing, engaging social media
campaigns, and well-designed website. But if they don’t work together, it’s not omni channel.
38© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
39
A Special Report Handbook 2016 |
Conclusion
© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
Create one now. Try to focus on your e-commerce business as your ticket surviving your business
in the near future. Being focus in e-commerce means you have well implemented of all end to end
e-commerce operation, from having the e-commerce site which has user interface and user
experience combined best into creating convenience online shopping experience; until when the
order is received and get great feedback or review from customer
If you don’t have
any
e-Commerce, yet
There must be something wrong in setting your digital marketing strategies and
activation. It’s used to be what most happened in company because of lack of talented
digital people to optimize digital marketing that converts into sales. There are several
inbound marketing and sales platforms, optimized e-commerce analytics and
retargeting platforms. There are also organic, paid marketing and social media strategic
to grow your visitors and followers. But, what you must know is, you know how to wisely
spend the budget and choose what best digital strategy to implement. If you still not
sure to run digital marketing by yourself, you can go to proven digital agency or e-
commerce enabler that their KPI is sales conversion.
You have Online Store
but don’t Sell
Every company must develop its own unique omni-channel infrastructure, and work closely with
several departments to develop this strong strategy. While building your own program, engage
person in charge in IT, Marketing, Customer Service and sales agent or representative that
involved in the experience. Set the goal and initiative together.
After that, make sure your ecommerce is scalable using omni channel platform. It’s really
important to collaborate with ecommerce enabler that understand this multi channel and omni
channel needs. Once you get the wrong one, you will have to pay more expense, time, and
complexities. And we know it’s not good for your business.
You have Offline and
Online Channels –
Consider to Set Omni
Channel Initiatives to
Make Bigger Sales
We are and end-to-end eCommerce enabler and e fulfillment services; specializing in ecommerce
development, warehouse and last mile fulfillment, store operations, multichannel management, and
performance marketing. We emphasize omni-channel capabilities which unite a digital commerce strategy
with traditional retailer and manufacturer to create reliable branded shopping experience.
With our competitive price, experienced professionals, and experienced in supply chain, we aim to be your
strategic partner for global and rising brands aiming to win eCommerce market in Indonesia.
About 8commerce

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DISSECTING INDONESIA MARKET AND IT’S E-COMMERCE OPPORTUNITIES IN 2016

  • 1. A SPECIAL REPORT HANDBOOK : DISSECTING INDONESIA MARKET AND IT’S E-COMMERCE OPPORTUNITIES IN 2016
  • 2. TABLE OF CONTENT Introduction Dissecting Indonesia Market Key Drivers and Main Obstacle to E-Commerce Growth E-Commerce Logistics and Delivery E-Commerce Now Conclusion
  • 3. Introduction We all appreciate the future growth prospects of Indonesia ecommerce market and how this industry is becoming center of attraction for some global brand retailers to expand their market channel. As CLSA 2015 reported, Indonesia e-commerce sales in 2016; expected to have US$ 25 billion. Online retailing in Indonesia is poised for an e-liftoff. As has already happened in China, this major structural theme will have sizeable ramifications for offline retail. Online shopping in Indonesia will be huge, rising to almost 11% of total retail sales by 19CL. Indonesia has the best online retail growth prospects among Asean countries. Key drivers will be a mix of its huge, young population; an extremely under penetrated offline sector; relatively high levels of mobile-internet penetration and large and accelerating levels of private and direct-equity investment into the sector. This handbook released by 8Commerce based on credible reports from CLSA, wearesocial, e-marketer, Nielsen, Kadence 2015 and Macquarie Research 2016. Source: wearesocial.com © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 03 A Special Report Handbook 2016 |
  • 4. Dissecting Indonesia Market Facts and Findings •  Online retail spending/capita in the USA is 63x higher than Indonesia. •  Indonesia is the world’s fourth most populated country, 256 million. Online retail sales to reach 10.7% by 2019. The Indonesian eCommerce Association expects the total online market to treble between 2014 and 2016, to Rp 283tn (US$24bn in 2016) and to reach US$130bn by 2020. •  As survey by CLSA 2015, indicates that 83% of online shoppers in Indonesia only made their first domestic online purchase in 2015, and predicted will re-purchase more in 2016 and next. •  Globally, B2C online retail sales/capita has tended to take off when mobile-internet penetration hits 35%. •  Average mobile data speeds in Indonesia are only 1.7 mbps, while in China is 4. mbps and South Korea is 8.8 mbps. •  Only 2 of Indonesian adults have credit card, while figures for bank accounts are 36%. •  In Indonesia, less than one-third of the top-30, best selling apparel brand across all channels are local. While in India and China, the share is two- thirds. •  C2C currently dominates in Indonesia and Thailand but this should change over the next five years. Industry experts believe Indonesia’s B2C e- commerce market is the fastest growing in Southeast Asia, even though C2C classifieds players are the first-movers; even the top two local C2C marketplaces, Tokopedia and Bukalapak, are beginning to shift to the B2C model. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 04 A Special Report Handbook 2016 |
  • 5. Dissecting Indonesia Market Social Media Well Connected There are more Facebook users in a seen than in the USA. Jakarta is in second place with 7.4m users. Indonesia as a whole, is a relative laggard, but is still Facebook’s fourth largest market globally by users. (wearesocial, 2016) Source: wearesocial.com Growth of Online Retail Indonesian are also becoming more familiar with online shopping. For instance, Zalora used to get an average of two phone calls/messages per order two years ago, but this has fallen to one per order (vs.. European fashion websites which get customer queries on only 5% of orders). Online retail is attractive for big city dwellers who prefer to avoid traffic jams and for those who live in areas far from shopping malls. The Indonesia E-commerce Association (idEA) believes that the number of shoppers will grow from 15mn to about 75mn by 2020 in Indonesia, which is about 30% of the entire population. (Macquarie, 2016) © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 05 A Special Report Handbook 2016 |
  • 6. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 06 A Special Report Handbook 2016 | More Favourable Environment for E-Commerce Growth Based on our discussions with the ICT Minister, as part of stimulus package #10, the government has removed e-commerce from the negative investment list, and now allows foreign investment for e-commerce marketplaces such as Tokopedia which are valued above Rp100bn. The government expects the new rule will provide wider funding opportunities for start-ups willing to expand their businesses. Several foreign investors have showed their eagerness to invest in e-commerce to grab a piece of Indonesia’s large market. (Macquarie, 2016) The Indonesian government has finally completed the e-commerce roadmap draft, which will form the basis for future guidelines regulating the sector. The roadmap will cover critical aspects of the industry such as funding, taxation, communication infrastructure, conference that these are the seven points the government will work on in order to achieve an e-commerce transaction values of $130 bn by 2020. The finance ministry is currently drafting a tax mechanism for e-commerce companies and transactions
  • 7. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 07 A Special Report Handbook 2016 | Faster network speed : The government’s initiative to reform 1800MHz spectrum to make spectrum assignments more efficient (contiguous blocks vs previously fragmented blocks) was completed as planned in Nov 2015 and incumbent operators followerd quickly with commercial LTE services. While coverage is limited to key city centres and LTE device penetration is still low, the improved user experience has spurred accelerating demand for LTE service, which has already led to telcos planning accelerated rollouts in key population centers. Though smartphone penetration is still low at 35%, The smartphone market is grew The smartphone market grew 55% YoY in 1Q16 and accounts for more than half of the total handset shipments. The $50-$100 price range represents nearly half of the total smartphone sales. As LTE devices enter this price range we expect the 5% LTE device penetration to hit an inflexion point and drive a further change in user online habits including towards e-commerce. Availability of cheaper mobile phones : The cheapest smartphone available today is a niche product from smartfren and costs Rp 499.000 (US$35). Entry level 4G LTE smartphones from Sony, Lenovo, Xiaomi are available in Indonesia and range between Rp 1 – 3mn (US$76 to Rp230). The locally made Bolt Powerphone is priced at about Rp 2mn (US$150), and local brand Polytron has been able to build a 4G LTE smartphone in a similiar price bracket that is compatible with several carriers. (Macquarie, 2016)
  • 8. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 08 A Special Report Handbook 2016 | (Macquarie, 2016) Increased Fibre Broadband Availability Incumbent fixed line operator PT Telkom has been aggressively rolling out its fibre network, and as at Dec 15 10mn homes were passed out of Indonesia’s 61mn households, with 1mn subscribers on fibre of copper / fibre hybrid (VDSL) connections. Despite the low GDP per capita levels (US $3,500/month) demand remains very strong with the key limitation currently, typical of early fibre rollouts in all countries, a lack of skilled technicians to handle fibre installations. From an e- commerce standpoint, improved fibre connectivity also introduces new channles for content owners to monetise their content. Logistics Enablers: Since the Go-jek motorcycle service app launched in January 2015, the company has gone from 1,000 registered drivers on its platform to 200,000 across five locations in Indonesia, including Jakarta and Bali. The Go-jek motorcycle services is an app, and delivers more efficient and cheaper last mile logistics. According to several news articles, Go-jek has seen a dramatic increase in users due to infrastructure issues in Jakarta, and we think that it still has significant growth potential. This has improved the logistics issues surrounding e-commerce. As this reporting on the making, there is an updated news that MatahariMall.com officially engages Grab to be one of their partner in last mile delivery. Enabling Ease of E-Payment Still An Ongoing Process: While the majority of electronic payments are still done through ATMs, we are seeing a higher proportion of mobile banking transactions, at 18% of total electronic transactions in 2015 (vs. 15% in 2014). However, the total transacted value remains flat. We think that the landscape remains fragmented, with around 20 official players, and expect consolidation in this space to help ease online payments.
  • 9. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 09 A Special Report Handbook 2016 | “ According to Kenneth Bishop, Managing Director of Facebook SEA : “Mobile News Feeds are the new storefront for retailers looking to reach Southeast Asia’s mobile first consumers. For Indonesians, mobile devices are where they discover products and make purchases. We know that on Facebook, 44% of Indonesian online shoppers search for product information, leading them to make purchases based on recommendations and feedback from their personal connections. Southeast Asia is home to some of the fastest growing countries for Facebook and Instagram. Indonesia is driving this growth with 82 million people on Facebook, and 94% of them connecting through mobile devices. We’re committed to building solutions and products to help ecommerce companies in Indonesia build and grow their business. Indonesia already has the highest number of internet users in Southeast Asia at 75m and this should continue to grow over the next few years. Indonesia’s internet penetration is already the lowest at 30%, but we estimate this could double by 2020 to about the same level as Malaysia currently Improving Internet and Smartphone Penetration At the heart of e-commerce and online growth is improving internet and smartphone penetration. According to tech minister Rudiantara, consumers will pay only Rp 400.000 for 4G smartphones. 4G technology is beginning to enter Indonesia on a large scale, and all three major operators are currently engaged in country- wide 4G infrastructure upgrades. While Indonesia has a mobile phone penetration of over 100%, as little as 33% are smartphones and only about 5% 4G capable devices. Most of the growth in internet users will be coming fom mobile rather than fixed broadband. While efforts to expand fixed broadband coverage is progressing, its large geographical expanse and being and archipelago does mean that it will be a long time before all Indonesians will have access to wired high-speed broadband, and untill then mobile will be the primary conduit for most Indonesians to access the internet.
  • 10. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 10 A Special Report Handbook 2016 | Payment and Trust Issues A study conducted by Kadence, part of Starcom Mediavest Group, indicated that the biggest concern customers have for online shopping is product quality, followed by payment security. 80% 60% Nielsen reported that 80% of Indonesia shoppers read reviews on social media and do research online before they make their purchases offline. The same source also found that 60% of Indonesian shoppers are not confident in providing their credit card information onlne. The reasons for the lack of trust include: missmatch between listed products and actual purchases,lapses in last mile delivery, scams involving money transfer and phising websites. Lack of customer trust was also encountered in the US in the early stages of ecommerce development and that did not stop the rapid growth in the sector. We think Indonesia will likely slowly overcome the barrier of lack of customer trust, slowly transitioning from COD payments once the trust is built and follow the same path as the US in the next few years (Macquarie, 2016)
  • 11. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 11 A Special Report Handbook 2016 | 6% 8% 10% 10% 14% 17% 20% 51% 73% Purchase price in foreign currency Tendency to overspend Efficiency of customer service Late in delivery Personal information being tracked and shared Lack of physical touch and feel of the item to buy Complicated return of goods policies Payment security Product quality (eg counterfeit) Concerns about Online Shopping 319 400 473 565 770 1100 1064 271 514 833 1243 1233 1606 1996 2009 2010 2011 2012 2013 2014 2015 Electronic Transaction Volume BreakdownInternet transaction M-banking transaction ATM transaction
  • 12. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 12 A Special Report Handbook 2016 | Customer Shopping Behaviour The survey below, dated 2015, was conducted by Kadence, which is part of Starcom Mediavest Group, which attempts to assess Indonesian’s online shopping behaviour. Women will be the main demographic driving ecommerce, they influence directly and indirectly 75% of the online purchases. Women spend more time online and buy more. Being able to offer them inspiration and the products they are looking for will be key to win the market. (Macquarie, 2016) 1% 13% 32% 33% 12% 9% 0% 10% 20% 30% 40% 15-19 20-24 25-29 30-34 35-39 40-45 Respondent Profile by Age Group 37% 31% 31% 28% 30% 32% 34% 36% 38% Senior High School Academy / College Bachelor degree Respondent Profile by Educating Level
  • 13. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 13 A Special Report Handbook 2016 | 22% 41% 37% 0% 10% 20% 30% 40% 50% SES A SES B SES C1 Respondent Profile by Social Economic Status 20% 44% 24% 0% 10% 20% 30% 40% 50% Upper 1 Upper 2 Middle Respondent Profile by Social Economic Class Macquarie, 2016 According to the survey, SES A has started to purchase online since this year, while future online shopping will be driven by consumers in older age groups, those from SES B and C1 (Macquarie, 2016).
  • 14. Dissecting Indonesia Market A Special Report Handbook 2016 | 51% 16% 2% 7% 5% 1% 5% 4% 4% 0% 10% 20% 30% 40% 50% 60% Fashion Gadget Computer software or hardware Beauty care Air ticket / tour Baggage and luggage Healthcare Food and beverage Household electronics and furnishing Most Often Purchase Macquarie, 2016 Fashion Top 3 Purchases Gadget Beauty Care © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 14
  • 15. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 15 A Special Report Handbook 2016 | Most Popular Payment Methods by Purchase Category Beauty Healthcare Software/Hardware Gadget Transfer Internet Banking Using debit card Using credit card Cash on delivery Fashion Baggage & Luggage Air Ticket & Tour Booking Transfer Internet Banking Using debit card Using credit card Cash on delivery 65% 16% 10% 4% 4% 22% 4% 6% 12% 56% 63% 26% 6% 1% 4% 21% 13% 5% 12% 50% 61% 2% 23% 9% 5% 75% 2% 14% 3% 6% 26% 43% 7% 18% 6% Macquarie, 2016
  • 16. Dissecting Indonesia Market © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 16 A Special Report Handbook 2016 | Macquarie, 2016 Easier to browse No time to buy offline Online price cheaper Only available online Flexible transaction Membership benefits 42% 37% 30% 21% 7% 2% 60% 26% 26% 10% 20% 2% 77% 24% 72% 8% 6% 0% 64% 27% 74% 8% 16% 1% Beauty Healthcare Software/Hardware Gadget Easier to browse No time to buy offline Online price cheaper Only available online Flexible transaction Membership benefits 54% 41% 30% 27% 18% 2% 46% 35% 64% 9% 7% 8% 55% 57% 35% 4% 42% 1% Fashion Baggage & Luggage Air Ticket & Tour Booking Most Common Reasons to Purchase Online
  • 17. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 17 A Special Report Handbook 2016 | Key Drivers and Main Obstacle to E-Commerce Growth Key Drivers to E-Commerce Growth Indonesia is a Large Addressable Market. There are 256 million people, with 51% are young – below 31 years old. Indonesia in particular has an extremely large, potential addressable e-commerce market, which in turn is likely to attract more players, both domestic and foreign, and more capital than other ASEAN markets. Indonesia is a market that global and regional e-commerce leaders such as Amazon, Alibaba and Flipkart cannot ignore and we see a strong likelihood that some of these will become directly involved in the market over the next few years. Larger addressable market = more players, more online SKUs and more capital. Too big for global and regional e-commerce majors to ignore. Indonesia population is nearly four times that of Thailand. Currently Indonesia has large penetration on Customer to Customer (C2C) that still dominate in online player, and that is the basic reason why OLX and other same focus e-commerce platform are still popular among others.  This condition also happened in Thailand, but most e-commerce experts believe it will change over the next 5 years. CLSA, 2015
  • 18. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 18 A Special Report Handbook 2016 | Interesting fact is within Indonesia, 66% of non-Java online shoppers spend more than US$20 on e- commerce per month versus 44% in Java, ex-Jakarta and only 37% in Jakarta itself. We think this reflects the relative lack of offline merchandise choice outside Java and especially outside Jakarta. (CLSA, 2015)
  • 19. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 19 A Special Report Handbook 2016 | The Rise of The Young. A young population tends to hinder current e-commerce growth, but acts as a driver for future growth. Indonesia has a much younger population than the USA and China. Some 51% of Indonesia’s population is under the age of 30 (CLSA, 2015). Indonesia’s relatively young population may partly explain why per-capita online-shopping expenditure at an estimated US$15 is still low in both absolute terms and relative to the likes of Thailand (US$53). Young consumers tend to be more tech-savvy and internet literate than their older counterparts and as this former demographic moves into higher disposable income brackets, they should be an important driver of online retail growth. Key Drivers to E-Commerce Growth
  • 20. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 20 A Special Report Handbook 2016 | E-commerce Extremely Nascent. Another factor explaining the low per capita online shopping spend, but which also demonstrates the growth potential is that many online shoppers in Indonesia are new to e-commerce. CLSA (2015) survey results of online shoppers show that 97% of online shoppers in Indonesia have only begun shopping online since 2014 and outside of java, this percentage rises to 99%. Indeed, 83% of Indonesian online shoppers have only begun doing so in 2015. This makes online retailing far more nascent than in the other large Asean markets, with only 37% of Thai and Malaysian and 51% of Philippine online shoppers having purchased online for the first time since 2014. Indonesia have only just started shopping online. 97% of Indonesian online shoppers have only started to do so in the past two years. Key Drivers to E-Commerce Growth
  • 21. A Special Report Handbook 2016 | Although nascent, online-shopping frequency is relatively high Key Drivers to E-Commerce Growth Although Indonesians are the newest to online shopping within the big-four Asean markets, they are already shopping online more frequently than their Malaysian and Philippines counterparts: 25% of our survey panel of Indonesia online shoppers are now shopping more than five times a year versus 28% for our Malaysian and 25% for our Philippines respondents. Only the relatively more mature Thai market has a higher level of online-shopping frequency with 48% of respondents shopping more than five times a year. The Indonesian figures rise to 42% in Jakarta but logically fall away to 31% outside of Java. 21© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | CLSA, 2015
  • 22. A Special Report Handbook 2016 | Key Drivers to E-Commerce Growth High Share of Shopping Budget Allocated to Online Retail Already. What % of your overall non-food, shopping budget was spent online in the past year? The population who spend non food shopping budget more than 10% Java non Jakarta Jakarta Non Java © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 22 57% 57% of Indonesia online shoppers already allocate more than 5%of their total, non-food, shopping budget to online shopping. Although nearly all Indonesian online shoppers are new to this form of shopping, they already allocate a higher share of their non-food, shopping budget to online purchases than their Asean counterparts. Within Indonesia, the allocation is interestingly higher outside o Jakarta which hints at stronger future online- shopping growth outside of the capital. CLSA, 2015
  • 23. A Special Report Handbook 2016 | Indonesia’s 10 largest retail groups by revenue have a total of 18,987 stores, easliy the largest store count in Asean and even more than the top-10 chains in China (6,415) – although this reflects the much more fragmented composition of China’s offline retail industry. However, Indonesia’s top chains by revenue are dominated by small- scale supermarkets and convenience stores. If these two format are stripped out – and the main reason for doing this is that we do not see these formats as especially vulnerable to e-commerce – then the Indonesian store count drops to only 2,178 and the retail GFA falls from 7.51 m2 to 4.00 m2. Offline Retail Extremely Underpenetrated Key Drivers to E-Commerce Growth When it comes to popular e-commerce merchandise, there is limited offline competition. The lack of offline penetration means that there is a huge potential void for the online channel to fill and once consumers get accustomed to online shopping, there tends to be no going back. It is rare that there is an abrupt change and consumers revert back to the offline retail channel. The lack of offline retail penetration will be especially pronounced outside Jakarta and it is no surprise that leading e-commerce companies now drive an average of 44% of their sales on average outside of Jakarta and amost one-fifth outside Java. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 23 CLSA, 2015
  • 24. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 24 A Special Report Handbook 2016 | Key Drivers to E-Commerce Growth With only 6% fixed line broadband penetration, the lowest among the big-four Asean markets, Indonesian consumers will be increasingly reliant on mobile devices for their online-shopping requirements. The good news is that mobile internet penetration is already decent and mobile tariffs low even though average mobile data speeds are still extremely slow. The findings from e-commerce company interviews indicate that an average of Online Shopping Driven by Mobile of all online-shopping traffic is already on mobile devices48% of transactions all online-shopping on mobile devices17% Although poor mobile internet connections and slow mobille data speeds are major hurdles, it is also noteworthy that a greater share of Indonesian online shoppers have high numbers of online- shopping apps on their mobile devices versus their counterparts in the large Asean markets : of Indonesian online shoppers have more than three online-shopping apps on their phones. 45% CLSA, 2015
  • 25. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 25 A Special Report Handbook 2016 | Key Drivers to E-Commerce Growth With no Indonesian e-commerce or internet companies of any size yet to be listed, the level and the pace of private-equity and direct industry funding into the sector are good barometers of how the sector is developing and, importantly, the growth potential that professional investors and industry attach to the sector. Increased levels of funding allow both existing and new companies to expand in the crucial areas of SKU and staff count as well as marketing, logistics, IT and mobile-related spending. All of this helps propel industry growth. Large Relative Private-Equity Funding Rising Rapidly The two big deals have been the US$100m from Softbank and Sequoia and the US$500m investment into the establishment of MatahariMall, although private-equity deal with most of the funding coming from the controlling shareholder group (Lippo). These funds are only a commitment and have not been invested yet. CLSA, 2015
  • 26. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 26 A Special Report Handbook 2016 | Key Drivers to E-Commerce Growth CLSA, 2015 The growth in online retail spending is reflected in similar large online advertising growth. In the four years to 2014, online advertising grew at a Cagr of 323%, admittedly from a very low base Online Advertising now accounts for 4% of total advertising spending, up from almost 0% in 2010. Growth has been at the expense of print advertising spending , up from almost 0% in 2010. Growth has been at the expense of print advertising. Given our expectations that online retail sales will reach almost 11% of total retail sales by 2019. It is likely that online advertising can reach at least a low-teen percentage by that year. While we expect most of the gains to continue to be at the expense of print media advertising, we also believe that beyond a three-year timeframe, that there is potentially some risk to TV advertising especially in the free-to-air segment. Online Advertising Rising Sharply Off a Low Base 58.38% 1.38% 32.34% 0.03% 3.98% 3.89% TV Radio Print Cinema Outdoor Online Online Advertising Spending Breakdown 2014
  • 27. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 27 A Special Report Handbook 2016 | CLSA, 2015 Few Strong Local Consumer Brands One of the obstacles in expanding merchandise assortment and the SKU count in Indonesia is that there are few local consumer brands, especially in the popular online categories. If we look at the 30 best-selling apparel brands in Indonesia in all channels (offline and online), only around a quarter of these are local brands. A lack of local brands hampers online SKU acceleratiion, makes it harder to offer low prices and may stiflele online seller margins Roughly only one quarter of the top 30 best selling apparel brands across all channels are local ones in Indonesia and local apparel brands among the top 30 bestsellers, only have a combined market share of only 2%. Main Obstacle to E-Commerce Growth
  • 28. A Special Report Handbook 2016 | Main Obstacle to E-Commerce Growth High Levels of Import Duties and Taxes Although there has been an Asean-China free trade agreement in place for several years. and with the official schedule reducing import duties to zero on many consumer goods, several key consumer categories especially in apparel and footwear, still attract duties and these duties vary within the Asean markets. In addition, the various Asean markets have different levels of VAT and GST and these vary from product to product. Indonesia has an additional “import income tax” for unregiestered importers which is calculated as 7% of the customs, freight and insurance value. However, since we have chosen to ignore freight and insurance charges, this tax is calculated off the product value at the port plus the import duty. In other names The Asean-China free trade agreement, appears to be in name only. With the exception of some consumer electronics items such as mobile phones, there are stilll import duties on goods manufactured in China on almost all consumer goods imported from china. When the import income tax and VAT is added, Indonesia has consistently high mark-ups stemming from import duties and other taxes. Duties and taxes lead to a 35% mark-up in Indonesia on cotton dress imports from China but for mobile phone imports from China attract no duties across Asean . CLSA, 2015 © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 28
  • 29. © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 29 A Special Report Handbook 2016 | Main Obstacle to E-Commerce Growth Slow Mobile Data Speeds and Poor Internet Connections Although Indonesia has decent levels of mobile internet penetration and mobile e-commerce usage, higher levels of adoption are being hampered by slow data speeds and general poor internet connectivity, average mobile data speeds are 2.7 times faster in China than Indonesia. In Indonesia average mobile data connection speeds are at 1.7Mbps, 32% slower than in Thailand. Online shoppers view poor internet connections as a greater problem Jakarta Non JavaJava non Jakarta 45% 52% 36% We heard many complaints that customers regularly experience internet disconnections during the shopping and payment process, especially on mobile devices.
  • 30. A Special Report Handbook 2016 | Main Obstacle to E-Commerce Growth Low Fixed Broadband Penetration and Connection Speeds It will always be easier to get someone to shop on mobile devices if they have already had online retail experience on a PC, where the screen and keyboard size is much bigger and connectivity speeds tend to be higher. Fixed-line broadband penetration/household is just 6% in Indonesia, easliy the lowest among large Asean markets. CLSA, 2015 Average fixed-line broadband connection speeds in Indonesia Thai speeds faster than Indonesia. 3.4Mbps © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 30 2.2Mbps
  • 31. At almost every meeting that we had in Indonesia with online retailers, management spoke about shortages of staff talent, especially for hadrware and software engineers and for digital marketing talent. Talent Shortages © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | 31 A Special Report Handbook 2016 | Main Obstacle to E-Commerce Growth Salaries in these areas are being bid up aggresively and staff poaching is common with targeted staff often offered 5—100% increases in remuneration packages to leave. CLSA, 2015
  • 32. E-Commerce Logistics & Delivery Infrastructure is important for the success of e-commerce companies, especially those with no bricks and mortar presence, and particulary with issues such as free delivery, order rescheduling, cancellation, returns and cash-on-delivery. Minimizing turn around times is also key, as this often leads to word-of-mouth publicity, feedback and customer retention for the online retailer. Lazada for example, will deliver goods in 1-3 days for Jakarta and the Greater Jakarta are and 4-9 days outside Jakarta. It still takes more than double the time to ship goods outside of Jakarta, which is a big growth impediment, given the demand for online products is typically from second or third tier cities. Logistics players in Indonesia are evolving rapidly, while some retailers are adapting to the logistical challenges thorugh ‘online to offline’ offerings, as customers can pick up in store, while mataharimall.com for example, is setting up pick up location points at post offices to eease delivery and customer collection. 32 Logistics / Delivery Issues A Special Report Handbook 2016 | CLSA, 2015 © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
  • 33. 33 A Special Report Handbook 2016 | E-Commerce Logistics & Delivery © 8Commerce.com All Rights Reserved. 2016 | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | Indonesia marketplace players mostly have logistics infrastructure of its own but still most of the players use a third party for last mile delivery (see our table for more details). As a famous choice of package deliveries JNE has developed their own e-commerce IT that is integrated with e-commerce operational from one of their biggest client -Lazada, in order to run seamless order process connected with seamless last mile delivery. Company Logistics Delivery Berrybenka Owned Outsource Bilna Owned Outsource Blibli Owned Owned & External Bobobo Owned Outsourced Mataharimall Owned Outsourced Zalora Owned Owned Tokopedia Not used Outsourced Indonesia Marketplace with Logistics and Delivery CLSA, 2015
  • 34. 34 A Special Report Handbook 2016 | E-Commerce Logistics & Delivery © 8Commerce.com All Rights Reserved. 2016 | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | Indonesia average delivery time in Jakarta are the fastest of any of capital cities among the big four Asean markets 21 HOURS 2 DAYS However deliveries outside Jakarta is among the slowest which also reach most expensive cost than other Asean countries, especially in east Indonesia. Here’s shipping simulation delivery cost around Indonesia comparison according to JNE. Delivery Area Price Jakarta IDR 9.000 Aceh IDR 51.000 Surabaya IDR 19.000 Medan IDR 30.000 Pontianak IDR 30.000 Makassar IDR 36.000 Sorong IDR 88.000 *weight 1kg, shipment from jakarta CLSA, 2015
  • 35. 35 A Special Report Handbook 2016 | E-Commerce Logistics & Delivery © 8Commerce.com All Rights Reserved. 2016 | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | DELIVERYLOGISTICSORDER e-Commerce Enabler Function on Logistics – Delivery Integration INTEGRATION BENEFITS Internal External Boost operational efficiency Real time order status Brings clearer operational views Best online shopping experience
  • 36. As what happened in United States, e-Commerce market has been very common and turned into basic needs for most consumer there. Consumer convenience shopping experience both online and offline store is what most matters in USA, and most online players try to work best in presenting these two channels supporting each other to reach bigger sales. As what we defined it as integrated omni channel, we might assume that it would be the future e-commerce for the nearly upcoming year. This condition seems doesn’t happen yet in varies countries including Indonesia. Online retail has had some impact on traditional retail which present more of a threat, where traditional bricks and mortar retailers incorporate online strategies into their overall strategies. A Special Report Handbook 2016 | E-Commerce Now We assume that e-Commerce presents a threat to traditional retailers, as the convenience and affordability factor is appealing to customers. 36© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
  • 37. A Special Report Handbook 2016 | E-Commerce Now The potential price competition over FMCG items. Consumer tend to check the price in physical stores, and then go online to shop for the same item at a lower price. This has happened in consumer electronics, and it is highly possible that it will happen in the FMCG industry due to more and more e-commerce players emerging selling FMCG products. There are 3 (three) matters that potentially described as a threat: 1 Sizeable product offering. Given unlimited visual shelf space, the e-grocery can offer many more product SKUs compared to bricks and mortar platforms. 2 Price parity. Being online for manufacturers, means opportunity cutting some supply chain cost, from production to end consumer. It also means consumer can get lower price of every single product that sold via online. 3 37© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
  • 38. We believe that online to offline retailing is one of the ways that Indonesian retailers are positioning themselves ahead of the e-commerce race. Shoppers tend to browse company websites at home or in the office product information before visiting the stores to purchase. In Indonesia, consumer are also likely to connect with their social networks to exchange opinions and get recommendations on the merchandise under consideration. Hence, online retailing may in fact be an advantage rather than a disadvantage to bricks and mortar retailers due to the access it provides for customers who live in regions that have few malls, resulting in additional sales. Potential opportunity: offline to online/omni channel retailing A Special Report Handbook 2016 | E-Commerce Now What is Omni Channel Omni channel is defined as a customer oriented approach in term of advance multichannel sales utilizing by providing integrated seamless shopping experience. Through omni channel feature, customer can do shopping both online or offline which all inventory, stock, price, promotion, product information are integrated. Even though, there are difference meaning among omni channel user experience and a multi channel user experience. All omni channel experiences will use multiple channels, but not all multi channel experience are omni channel. Customers now and then only see The Brand as one brand. They don’t have enough mindset to deal with the brand in website is different from the brand in mall. You can have amazing mobile marketing, engaging social media campaigns, and well-designed website. But if they don’t work together, it’s not omni channel. 38© 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market |
  • 39. 39 A Special Report Handbook 2016 | Conclusion © 2016 8Commerce. All Rights Reserved. | 8commerce.com | A scalable end to end e-commerce enabler and fulfillment for Indonesia coverage and market | Create one now. Try to focus on your e-commerce business as your ticket surviving your business in the near future. Being focus in e-commerce means you have well implemented of all end to end e-commerce operation, from having the e-commerce site which has user interface and user experience combined best into creating convenience online shopping experience; until when the order is received and get great feedback or review from customer If you don’t have any e-Commerce, yet There must be something wrong in setting your digital marketing strategies and activation. It’s used to be what most happened in company because of lack of talented digital people to optimize digital marketing that converts into sales. There are several inbound marketing and sales platforms, optimized e-commerce analytics and retargeting platforms. There are also organic, paid marketing and social media strategic to grow your visitors and followers. But, what you must know is, you know how to wisely spend the budget and choose what best digital strategy to implement. If you still not sure to run digital marketing by yourself, you can go to proven digital agency or e- commerce enabler that their KPI is sales conversion. You have Online Store but don’t Sell Every company must develop its own unique omni-channel infrastructure, and work closely with several departments to develop this strong strategy. While building your own program, engage person in charge in IT, Marketing, Customer Service and sales agent or representative that involved in the experience. Set the goal and initiative together. After that, make sure your ecommerce is scalable using omni channel platform. It’s really important to collaborate with ecommerce enabler that understand this multi channel and omni channel needs. Once you get the wrong one, you will have to pay more expense, time, and complexities. And we know it’s not good for your business. You have Offline and Online Channels – Consider to Set Omni Channel Initiatives to Make Bigger Sales
  • 40. We are and end-to-end eCommerce enabler and e fulfillment services; specializing in ecommerce development, warehouse and last mile fulfillment, store operations, multichannel management, and performance marketing. We emphasize omni-channel capabilities which unite a digital commerce strategy with traditional retailer and manufacturer to create reliable branded shopping experience. With our competitive price, experienced professionals, and experienced in supply chain, we aim to be your strategic partner for global and rising brands aiming to win eCommerce market in Indonesia. About 8commerce