Value of E-Commerce Transactions in Indonesia Predicted to Soar
Indonesia's e-commerce industry has grown rapidly (in two-digits, annually) over the past five years. This growth is expected to continue in 2017 as well as in the years ahead. Aulia Marinto, Chairman of the E-Commerce Association (idEA), expects the value of e-commerce transactions in Indonesia to surge between 30-50 percent year-on-year (y/y) to USD $45 billion in 2017 from an estimated USD $30 billion in 2016. Indonesia is still in the early stages of the digital economy revolution and therefore there is ample room for robust growth, particularly due to rising Internet and smartphone penetration.
Marinto mentioned five factors that encourage 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 roughly 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 products that are "trending"
Marinto added many new local and global e-commerce players are eager to start or expand their business in Indonesia. Currently there are 250 e-commerce players that have become a member of Idea but this figure is expected to rise strongly in the future. However, because e-commerce is a relatively new industry in Indonesia there is still some confusion about the legal and fiscal regulations. Therefore, Marinto said Idea is ready to sit together with the government to make a roadmap that includes tax-related issues.
If the e-commerce business is given the opportunity to continue its rapid growth, then Marinto expects this industry to become the main pillar of the Indonesian economy, one that should include the millions of micro, small and medium-sized enterprises of Indonesia and therefore would contribute significantly to nationwide welfare. This would also require the need for mediators that can facilitate sales and delivery between producer and end-consumer.