Indonesians are online, but are they shopping?

Indonesia's eCommerce scene is undoubtedly on the rise. The explosion of the Internet coupled with affordable mobile phones have opened up a whole new arena for the retail scene.

The Indonesian E-commerce Association (idEA) predicted that the total value of Indonesia’s e-commerce market will expand by almost three times, from Rp 94 trillion (USD 8 billion) in 2014 to Rp 283 trillion (USD 24 billion) in 2016.

However, e-commerce comprises of just 0.5% of the total retail sales in the country.

Singapore-based global logistics firm SingPost found that 5.9 million out of 75 million Internet users in Indonesia had shopped online. That translates to only 8% of Internet users there, and a mere 2% of the entire 255 million Indonesia's population.

Against the rosy backdrop of an e-commerce boom in Indonesia, this seemingly sluggish consumer adoption of online shopping may appear to be a cause for concern. Nonetheless, it actually displays a huge untapped potential for businesses in the e-commerce space.

Let’s dive deeper and look at the reasons why 92% of Internet users are not shopping online:

1. Lack of confidence and trust in online shopping

Nielsen reported that 80% of Indonesian shoppers read reviews on social media and do researches online, before they log out to make the purchases offline. The same source also found that 60% of the Indonesian shoppers do not trust providing their credit card information online.

What causes this lack of trust?

• Fraud clouds the online retail scene – The usual complaints can be classified into the following categories:
  • Mismatch between listed products and actual purchases
  • Lapses in last mile delivery
  • Scams involving money transfer
  • Phishing websites

All it takes is one bad apple to spoil the barrel. These complaints may not be plenty, but they are magnified by the power of social media and online discussion forums. Ironically, the same tools that empower online shopping, also hinder its growth.

• Credit card is (apparently) king online – The usual perception is that the online shopping space favours users with credit cards. However , according to a report from investment bank UBS, the current credit card penetration in Indonesia is only at 6% .
• Lack of infrastructure – Slow Internet speed coupled with developing e-commerce infrastructure could create a sense of insecurity about the online shopping space.

2. Bright spots amidst existing concerns

The above conditions appeared to be all doom and gloom for Indonesia’s e-commerce scene. So why are experts consistently predicting that Indonesia will be the most promising e-commerce market in Southeast Asia?

• Booming middle-class – A growing number of people with access to the Internet, and the knowledge to leverage Internet to improve their quality of life.
• Increasing affluence of second and third tier city-dwelling Indonesians seeking convenience – While they are equipped with the spending power, they are also confined by the limited access to brick-and-mortar shopping malls.
• Lower prices, discounts and Cashbacks – Online retail stores get to save in a few areas, such as storefront, staff and rental. These savings are generally translated to lower prices for the consumers. Easy access to discounts and savings via Cashbacks also contribute to another layer of savings for the consumers.
• Notorious traffic jams – These can often mean long hours of being stuck on the roads. Shopping online helps Indonesians save time and money, and save them from the jams.

Tips for online merchants

Indonesia is essentially sitting in the same boat that China used to occupy just a few years back. Look at the massive volume of sales that Alibaba amassed on Singles Day. This is the growth potential that we can expect from Indonesia.

These are some of the learnings that have worked well for successful online merchants in Indonesia, such as Blibli.com and Lazada, both have made a name for themselves in the market. 

• The local flavour – Locals know best. Localise your model and ensure that it fits the local market. This includes everything from ensuring local hires, to adopting local dialects in marketing campaigns.
• Active customer support – Be proactive and offer different channels of communications to help customers shop online. Apart from using email, try investing in hotlines and LIVE chats as well to stay connected to your customers.
• Focusing on what’s important to you: Conversions – Instead of spending on acquiring clicks or impressions for awareness, opt for marketing channels that double up as revenue drivers. Cashback websites such as ShopBack only charge a commission upon delivery of transactions to merchants. Both Blibli.com and Lazada tapped on ShopBack’s platform to drive this KPI.
• Expand payment options – Adapt new payment methods as the market shifts, but for now, do what must be done to capture the market. Since Indonesians prefer offline payment, adopt payment options like e-wallets or mobile wallets, convenience stores transfers, ATM transfers and of course, cash-on-delivery to spark online purchases.
• Build brand credibility – Engage the media. Garner exposure in media publications. This will help you to raise consumer awareness and foster brand presence, which in turn contributes to establishing brand credibility. Additionally, consider offline activations to remind your (potential) consumers that your business can afford it.
• Integrate Social Elements into your Site – According to McKinsey and Company, Indonesians are generally more risk-averse compared to the rest of the world. As such, utilising social networking tools to build interaction between sellers-buyers or buyers-buyers via reviews is vital to building trust.

The writer is Josephine K Chow, chief strategy advisor to head of emerging markets, ShopBack.

Hear more from Josephine and on this topic at Marketing magazine’s inaugural Digital Marketing Indonesia conference, happening 3-4 December in Jakarta, Indonesia.

The conference is nearly sold-out. To book your seats for the conference, contact Nadiah Jamaludin at nadiahj@marketing-interactive.com or +65 6423 0329.

ShopBack is a Knowledge Partner for the conference. For sponsorship opportunities, contact Johnathan Tiang at johnathant@marketing-interactive.com or +65 6423 0329.