July 31, 2024
Source: SIRCLO.
Indonesia’s digital economy is not just growing; it’s undergoing a transformative shift. At the crossroads of the digital revolution, we explore Indonesia’s e-commerce sector, reflecting on its growth, the synergy driving it, and the visionary outlook shaping its future.
Indonesia’s digital economy is projected to reach 105 billion rupiah by 2025, representing over 40% of the digital economy in ASEAN. The e-commerce sector is the largest contributor to this expansion, with total transactions expected to reach 82 billion by 2025¹.
This remarkable growth in the e-commerce sector will significantly impact Indonesia’s future macroeconomic landscape. SIRCLO’s internal data shows a 245% increase in e-commerce transactions between 2020 and 2023, a 3.45-fold growth². This surge in digital commercial activity was propelled by the pandemic in 2020, which transformed consumer behaviour and accelerated digitalisation³.
The rise in e-commerce transactions is closely linked to the increasing number of consumers making purchases through online marketplaces. Our data indicates an average annual consumer growth of 51% from 2020 to 2023, with a 7% average monthly increase in consumers outside Java shopping at online marketplaces over the past year⁴.
These statistics highlight the robust development of Indonesia’s digital economy, driven primarily by the thriving e-commerce sector and the expanding base of online consumers. This development is also reciprocal with consumer tendencies when shopping online, which include: (1) seeking convenience, and (2) cheaper prices.
Online Shopping Convenience
Wide Selection of Product
E-commerce appeals widely to consumers by offering a vast range of products and services. In a single marketplace, consumers can explore various brands across different price points, allowing them to choose what best suits their needs and budget. This convenience and variety significantly contribute to the popularity of online shopping.
Certain product categories, such as beauty and personal care, fashion, and home living, have become particularly popular among online shoppers⁵. The ability to compare products, access consumer reviews, and find competitive pricing all from the comfort of home enhances the shopping experience, underlining the critical role of online marketplaces in delivering a comprehensive and satisfying experience.
Easy Payment Process
Easy payment methods are a key driver in e-commerce, offering options such as e-wallets, virtual accounts, mobile banking, ATMs, and cash on delivery (COD). These diverse payment methods increase consumer confidence and willingness to shop online. In Indonesia, COD is particularly preferred due to limited access to bank accounts and e-wallets.
This trend highlights the importance of mobile-optimised e-commerce platforms, prompting businesses to develop mobile-friendly interfaces to cater to this dominant preference.
Delivery
E-commerce delivery methods offer several key advantages that significantly enhance the online shopping experience, providing speed, convenience, and flexibility. These benefits are particularly evident through regular, next-day, and same-day delivery options. These delivery methods cater to the varying needs and preferences of consumers, making online shopping more attractive and efficient.
Regular delivery ensures reliable and timely receipt of purchases, often accompanied by tracking services that keep consumers informed about the status of their orders with estimated arrival time of around 2-3 days. Next-day delivery appeals to those who need their items quickly, offering the advantage of receiving products almost immediately after purchase, while same-day delivery takes this a step further, catering to urgent needs and providing unparalleled convenience.
According to SIRCLO’s internal data, regular delivery remains the most favoured option among consumers, though there has been a notable shift towards faster delivery options. Same-day delivery experienced an almost 10% increase in popularity between H1 2023 and H2 2024, while regular and next-day delivery saw declines respectively.
Cheaper Price
Cheaper prices on e-commerce platforms are a key attraction to consumers, largely due to various promotional deals, such as discount vouchers, bundle promotions, and free gifts. These promotions enable consumers to purchase goods at lower prices than those found in traditional retail stores, appealing to budget-conscious individuals.
The added ease of comparing prices across different sellers, coupled with lower overhead costs for online retailers who do not maintain physical storefronts, further enhances the value proposition of e-commerce. These factors collectively contribute to making online shopping a cost-effective choice, fostering its growth and widespread popularity.
E-Commerce Synergy
The significant surge in the digital economy over the past years has significantly enhanced economic growth through e-commerce, necessitating strong synergy among stakeholders. The government plays a vital role in regulation, capacity building, and promoting collaboration among industry players. Meanwhile, brands must focus on developing competitive products and services for both national and international markets.
Essential operational aspects, including channel management, logistics, marketing, and customer service, can be outsourced to third parties, such as an omnichannel commerce enabler like SIRCLO, which allows brands to focus on core areas like product development.
Outsourcing in sales operations allows brands to concentrate on innovation and quality enhancement, ensuring their offerings stand out in a crowded market.
An exemplary case of this synergy is ASICS, a sportswear brand that has experienced growth by utilising SIRCLO’s enterprise solutions: SIRCLO Commerce, SIRCLO SWIFT, and SIRCLO StreamLab. This collaboration demonstrates the transformative impact of adopting comprehensive e-commerce solutions and highlights the importance of strategic partnerships in the evolving digital economy.
Parting Words
Brands should stay ahead by adopting a visionary approach to business growth. Proactive planning for the future is essential, rather than merely reacting to emerging trends. This approach requires leveraging data insights to inform decision-making and fostering synergies with other industry players. By doing so, brands can ensure sustained growth and remain competitive in the marketplace.
For more insights and strategies on how to position your brand for future success, reach out to us at [email protected].
References
Data from the Ministry of Trade of the Republic of Indonesia, as presented by its Director of Trade Through Electronic Systems and Trading Services, Rivan Ardianto, in SIRCLO Insights Webinar 2024.
SIRCLO’s Internal Data.
https://www.weforum.org/agenda/2022/05/digitalization-growth-indonesia-msmes/
SIRCLO, Loc. cit.
Ibid.
Data from NielsenIQ + Gfk Indonesia, as presented by its Managing Director, Adrie R. Suhadi, in SIRCLO Insights Webinar 2024.
SIRCLO, Loc. cit.