Author: Anisya Rahel Kristiana
Online channel is an interesting option for a producer anywhere in the world to enter the market abroad. It offers a simplicity in market penetration process and a huge opportunity for the country with a big population.
Indonesia, with a population of more than 276 million, the fourth most populous country in the world and 42% of ASEAN’s population, presents a huge opportunity for global companies that are looking to expand their business. Moreover, Indonesians have a substantial number of the youth who are tech-savvy and love to be digital all around in their lifestyle.
Indonesia e-commerce market size was USD 51.9 billion in 2022. This is 52.2% of ASEAN e-commerce business. Indonesia is one of the fastest-growing markets in the world, with a projected market size of USD 124 billion by 2025. The International Monetary Fund (IMF) also reported that Indonesia was one of the countries with the highest increase in e-commerce during the pandemic COVID-19, boasting a 50–60% growth rate.
Entering the Indonesian market through e-commerce presents several advantages for global companies. First, it is a cost-effective way of entering the market, as it does not require setting up physical stores or offices. Second, it allows companies to reach a large audience, as Indonesia has a large and growing population. Third, it allows companies to test the market before investing in physical stores or offices.
The Indonesian e-commerce market has several key players, with Shopee and Tokopedia being the most popular for the B2C platform. These two platforms combined receive more than double the traffic compared to other e-commerce sites such as Lazada, Bukalapak, and TikTok Shop. The last platform is a newcomer in the top 5, replacing Bibli that ranked fifth in the previous years. In terms of transaction value, the domination of the Top 2 is incredible. Together, they held 74% of the total of the top 5.
While in terms of product category, the top 5 are credit and voucher, fashion and accessories, beauty and healthcare, home appliances and food. These categories held 72.2% of the total e-commerce transactions in 2022, or a value of USD 37.5 Billion.
B2B e-commerce has also experienced significant growth in recent years with Ralali and Bhinneka as the top players. The other key B2B e-commerce players are Mbiz and AXIQoe. These platforms offer products for not only large corporations but also SMEs. Almost all common products in FMCG can be found on the B2B e-commerce platform. This means there are not many differences between product variants offered in B2B and B2C e-commerce. The differences only lie in the minimum amount of order quantity and the packaging size available, which large-sized packaging is commonly found in B2B e-commerce.
E-wallet is the most popular payment method in e-commerce and used by 29% of total transactions. This method grew fast in recent years, as 3 years before, it was only used by 14% of transactions. On the contrary, credit card usage declined sharply from 35% within 3 years to 7% in 2022. It is interesting to see that COD payment method increased from 13% to 21% in the same period. It seems that massive COD payment method promotions by key platforms are causing this phenomenon.
Regulation
There are several regulatory considerations that global companies need to be aware of when entering the Indonesian market through e-commerce. The products have to be registered per the government institutions to obtain the products’ licenses. Foods, beverages, personal care, supplements, herbs and medicines products need to be registered to BPOM (Food and Drug Agency), and health devices to the Ministry of Health.
In Indonesia, the products also have to hold a Halal label which is released by the Halal Product Guarantee Agency. The regulation on Halal certification is mandatory with an enforcement law that will start on the 17th October 2024 for products registered to BPOM and 3 years later for other products.
Global companies need to ensure that they comply with these regulations to avoid any legal issues. The importers might help the product owner abroad to manage the products’ registration and certification.
Profound Opportunity
Indonesia presents a huge opportunity for global companies looking to expand their business. The future outlook for e-commerce in Indonesia is bright; by 2045, Indonesia is estimated to be the 4th largest economy with USD 9.1 trillion of GDP.
