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A new study conducted by the Better Than Cash Alliance, a partnership consisting of governments, companies, and international organizations, shows Indonesia has now become the world's fastest-growing mobile-commerce market (m-commerce). Growth of online shopping in Southeast Asia's largest economy is attributed to the rising spending power of Indonesia's middle class as well as expanding Internet and smartphone penetration. According to the study, Indonesia's m-commerce market surged 155 percent in 2016.
Due to sharp growth Indonesia is now the world's third-largest m-commerce market after China and India. The report notes that growth of Indonesia's m-commerce market was given a boost by the release of a popular e-wallet service by BlackBerry, called BBM Pay's Instant Mobile Payments, two years ago. This chat app, which allows users to pay for goods and services with participating merchants, is already used by more than 55 million consumers in Indonesia.
Indonesian hyperlocal transport, logistics and payments startup Go-Jek, which is active in 25 Indonesian cities, recently became Indonesia's first "unicorn" (a startup company that is valued at more than USD $1 billion). This startup is now even valued at USD $3 billion (reported by TechCrunch).
Its success is known around the world and therefore foreign players are increasingly interested to tap the potential of the Indonesian market. Reportedly, two global e-commerce giants - Alibaba and Amazon - are planning to launch in Indonesia. Last year China's Alibaba Group Holding Ltd had already acquired Southeast Asia-based e-commerce platform Lazada Group SA for USD $1 billion, hence giving the Chinese giant a firmer grip on the online retail business in Southeast Asia, including Indonesia.
What explains the rapid development of Indonesia's e-commerce industry?
- Indonesia has a huge population numbering more than 255 million people. In combination with rising GDP per capita this population forms a huge consumer force
- Indonesia's middle class segment continues to expand. To determine the exact number of middle class consumers in Indonesia is a matter of definition. Using a low bar (as used by Boston Consulting Group or McKinsey) Indonesia has 45-75 million middle class and affluent consumers. Institutions that set a higher bar say Indonesia has less than 20 million middle class consumers. However, all institutions expect the number of middle class consumers to rise rapidly in the years and decades to come
- Smartphone penetration is rising in Indonesia. Based on data from research institute eMarketer there were 69.4 million smartphone users in Indonesia at the end of 2016. Moreover, this figure is expected to grow to 103 million by 2018, which would make Indonesia the fourth-largest smartphone market worldwide after China, India and the United States
- Internet penetration is rising in Indonesia. According to the Indonesian Internet Service Providers Association (in Indonesian: Asosiasi Penyelenggara Jasa Internet Indonesia, abbreviated APJII) there are currently 132.7 million Internet users in Indonesia. With the government's Palapa Ring project this figure will rise steeply in the years ahead
- Online shopping is a popular activity among the Indonesian population. Moreover, this population likes to purchase the newest "trending" products
- More than 70 percent of Indonesia’s internet traffic originates from mobile devices. In other words, Indonesians love to use their mobile device (not a desktop) to access the Internet