If McKinsey's projection is accurate then it would mean the value of Indonesia's e-commerce market is to rise nearly eight-fold between 2017 and 2022. In 2017 Indonesia's e-commerce market was valued at USD $8 billion. This figure refers to the gross merchandise value (GMV) of goods and services that were purchased online from e-commerce and socio-commerce platforms. Meanwhile, Indonesia had only about 30 million online shoppers, or approximately 15 percent of its total adult population of 195 million individuals.

Through the formal e-commerce platforms McKinsey estimates the GMV at USD $40 billion by 2022 on the Indonesian market. Meanwhile, regarding the socio-commerce platforms (for example Instagram and Facebook) the GMV is estimated to reach up to USD $25 billion.

There are a couple of factors that support rapid growth of the e-commerce sector in Indonesia. Firstly, smartphone and Internet penetration is continuously rising. Secondly, Indonesia has a big population that sees its purchasing power strengthening amid robust macroeconomic growth. Thirdly, Indonesia has a young and tech savvy population, meaning they rapidly adjust to new technology.

However, McKinsey also detects several challenges for further growth of the e-commerce industry. Firstly, due to infrastructure bottlenecks logistics costs are high. Secondly, in terms of non-cash payment infrastructure Indonesia is still in the early stages of development (there is a lack of seamless, secure, and scalable payment opportunities). Thirdly, there is a strong need to enhance the nation's talent pool. Fourthly, the investment climate has to be made more conducive.

Despite these challenges the e-commerce market of Indonesia is expected to take giants steps in the coming years. While currently e-commerce sales only account for 5 percent of the nation's total retail sales, this figure is expected to rise to the range of 17 - 30 percent in the next five years.

This would be a great asset to the economy because it generates employment opportunities. According to McKinsey, by 2022, online commerce could directly or indirectly support up to 26 million full-time-equivalent jobs, representing around 20 percent of Indonesia's total workforce.

Read the full report:

The Digital Archipelago: How Online Commerce is Driving Indonesia's Economic Development