E-Commerce takes off in Indonesia
Sep. 20, 2017
Some experts say Indonesia is on course to become the world's 3rd-largest digital marketplace. Despite this potential, companies there face high hurdles operating online. But some entrepreneurs are not just clearing these obstacles -- they're changing the business landscape.
After a slow start, Indonesia's e-commerce market is set to explode. Total business is forecast to rise from 1.7 million dollars in 2015 to 43 billion dollars by 2025. That would amount to more than half of the entire Southeast Asian market.
Lazada operates a leading online shopping platform, and it's growing fast. China’s e-commerce giant Alibaba last year took a majority stake in the firm. Its facility can sort 9,000 parcels an hour, and the firm plans to double that capacity this year.
"There is more spending power very soon and a lot of people -- 250 million or more. Internet penetration is already pretty good so you have around half of the population having access to internet," says Lazada Co-CEO Duri Granziol.
The company uses a fleet of trucks and motorbikes to deliver orders. The trouble is, Indonesia's infrastructure is still a work in progress. "I always get stuck in traffic whether I'm going out on a delivery or coming back," says a Lazada driver.
Drivers have to deal with gridlocked traffic in the big cities and bad roads in rural areas. That slows delivery times and pushes up shipping costs. And it can make doing business in Indonesia more expensive than in other countries like Thailand or Malaysia.
Some see this as a business opportunity. One of them is Popbox. Thanks to its lockers, shoppers don't have to wait all day for drivers to deliver their goods through relentless traffic in Indonesia.
Online shoppers placing an order can select PopBox as the delivery method. Next, they choose which locker to send their parcel to. They pick up the parcel at a convenient time, opening the locker by punching in a code sent by email. "It's very convenient. All I need to do is press the button to get the item. It's simple and easy," says a customer.
Drivers delivering the packages also like the system. "When the customer is not home, I have to bring the package back the next day. But with this service, I can just leave it in the locker. The customer can pick it up during the day, in the evening or even at night," explains a delivery agent.
There are about 200 of these lockers across the country, mainly in Jakarta. Most have been installed out front of apartment and office buildings. The company is now gearing up to double the number of locations.
"We started talking to e-commerce players and logistics partners and they realized that it does save them a lot of time and add value to their business. Because their volume of deliveries is growing on daily basis," says PopBox CEO Adrian Lim.
But even if a delivery goes smoothly, e-commerce companies face another problem – getting paid. Only about 40 percent of Indonesians have a bank account, and far fewer have credit cards. Most e-commerce customers pay with cash. But once again, a local start-up arrived on the scene, offering a solution.
Go-Jek is an online motorbike taxi service, accessed through a smartphone app. Recently, the company launched a new service for those without a bank account. It's called Go Pay. Customers set up a Go Pay account by depositing cash with a Go-Jek driver. Once that's done, the customer can pay for any Go-Jek service using the Go Pay smartphone app.
"Go-Pay specifically, I see as the gate to access this world of variety of products and service, that can only be accessed digitally," says Go-Jek CEO Nadiem Makarim.
The payment app has opened the door to whole new areas of business. This customer places an order for groceries and settles the bill with Go Pay. Soon after, a Go-Jek driver arrives at the supermarket to pick up the order. Online shopping means no waiting at the checkout -- and a motorbike is the fastest way through the traffic.
They don't just deliver products – professional service providers arrive on the motorbikes, offering everything from manicures to massages. And Go Pay users aren't restricted to Go-Jek services. They can also send money to and from other app users. The company's young CEO says Go Pay is a winner – and he plans to ride it all the way.
"I see Go Pay as the gateway to exponentially grow the digital ecosystem in Indonesia. And, you know, no matter who they are, even some of our competition may benefit from Go Pay. Go Pay's mission really is to basically eliminate wallets," says Nadiem.
With hugely ambitious companies chasing huge rewards, e-commerce is now on the fast track in Indonesia. From foreign majors to small start-ups, the competition has only just begun.
NHK World's Yuko Fukushima joins Newsroom Tokyo anchors Hideki Nakayama and Aki Shibuya in the studio for more.
Shibuya: We've been hearing about the potential of e-commerce in emerging markets for years. It's now finally happening in Indonesia.
Fukushima: Yes. The tech field there is really building momentum. Consumers have shown they want to do more online shopping, and all sorts of companies are competing to win their business. Some are forecasting Indonesia will become a digital superpower within 10 years. Don't forget, we're talking about a country of 250 million people. So don't be surprised if you see Indonesian start-ups on the international scene before long.
Nakayama: What factors will make Indonesia the next digital superpower?
Fukushima: If I had to pick one factor I'd say the rise of the smartphone. They're everywhere in Indonesia -- and in constant use. In fact, some surveys rank Indonesia in the top 3 worldwide for the amount of time people spend using social media apps like Facebook, Instagram and Twitter. So there is a lot of potential for businesses who can engage those users on the mobile platform, not just e commerce.
Shibuya: So, not just online shopping but services like the digital payment app we saw in the video.
Fukushima: That's right -- Go Pay. History shows that controlling the payment platform is always a lucrative business -- that's been true anywhere, in any period. So for Indonesia, where many people don't have bank accounts, and don't own debit or credit cards, it's the ideal place to create a digital payment platform.
Nakayama: But is it safe? I'd be concerned about handing money over to a Go-Jek driver.
Fukushima: Go-Jek drivers have to register using their passports or national ID cards. Also, because the taxi reservation or food or any order is placed online, there's a log. It's highly unlikely that a driver could take off with your money without being caught.
Talking about security, about a year ago there was an online rumor about Go Pay being hacked and that people's Go Pay accounts were being auctioned on the internet. But Go-Jek has denied the rumor. Officials say the firm has the highest security standards used by traditional banks or credit card companies.
Shibuya: So you're saying that banking in the digital world will grow in Indonesia?
Fukushima: Go Jek's CEO Nadiem told me he doesn't just want people to use Go Pay for transactions in the digital world. He's wants to be the middle man in the real world. He says people who don't have bank accounts in Indonesia are deprived of loans and many other financial services. He wants to reach out to those neglected people and take on the role of the traditional banks. Go-Jek isn't alone in that endeavor. It was the first major company to offer a mobile payment service, but now a host of other companies are breathing down its neck, eager to take its place.