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Indonesian e-commerce set for take-off

News, 29 February 2016

JAKARTA: E-commerce is on the brink of a major break-through in Indonesia, according to observers who note that several necessary trends are converging.

"Six concurrent factors are creating the perfect storm that we're in right now," according to Adrian Vanzly, chief executive of venture capital firm Ardent Capital.

"It's smartphone penetration, mobile broadband, GDP and disposable income, and fulfillment and logistics," he told the Jakarta Globe. "The moment you have all this, you can start making commerce transactions online."

A recent report from global logistics firm Singpost indicated that almost 6m Indonesians shopped online in 2015, spending $3.5bn, and forecast that in 2016 some 8.7m people would be spending $4.5bn – a 47% increase in shopper numbers and a 29% increase in expenditure.

And with around 75m internet users in a country of 250m people, there is plenty of scope for growth.

Mobile is proving the real game-changer as it opens up internet access to a far greater number of people than was previously possible.

One local "techpreneur" said that e-commerce was "heating up super-fast … We can already see it with all the different start-ups that are coming in".

That view was echoed by the venture capitalist. "We know what's coming – the competitive landscape is relatively immature, capital is plentiful and the growth rates are staggering," said Vanzly.

The Jakarta Globe noted that investment in the sector was growing, following the example of early entrant Rocket Internet, the German business which has backed online retailers such as Lazada and Zalora.

For example, the Lippo Group, an Indonesian conglomerate, has invested in MatahariMall, an online version of one of Indonesia's biggest mid-range department stores, while global venture capital firm Sequoia has put money into Tokopedia, a C2C marketplace.

Tokopedia has also been spending heavily on advertising. Nielsen data shows that advertising expenditure by e-commerce companies jumped 50% in the first nine months of 2015, but that by Tokopedia was up nearly 17 times.

Data sourced from Jakarta Globe; additional content by Warc staff