Indonesia has the largest economy in Southeast Asia and is one of the fastest growing eCommerce markets in the region. Reportedly, Indonesia’s digital economy is poised to become the largest in Southeast Asia as its market value triples to US $100 billion by the year 2025 as compared to $27 billion in 2018, creating more jobs and promising more consumer choices for an emerging tech-savvy digital generation.

Currently, out of around 270 million people living in Indonesia, more than 10% of the population is actively indulging in online shopping. And, with the rise in internet penetration, social media usage as well as growth in income, this emerging trend is expected to gain further pace. According to a report by McKinsey, Indonesia is set to have over 44 million online shoppers, with an estimated worth ranging between over $55 billion to $65 billion. The 2018 Google Temasek report said that the market will be worth $53 billion by 2025.

With the burgeoning digital economy in Indonesia, the government’s recent decision to withdraw the implementation of PMK 210/2018, a regulation to tax e-commerce transactions, could not come out at a better time.

selective photography of man pedaling wagon

The Google Temasek report says that the growth will be spurred by four key digital services:

  • E-commerce with a contribution of more than 53%
  • Online travel contributing up to 25%
  • Ride-hailing services making up to over 14%
  • Online media contributing an approximate 8%

The region’s fastest growing eCommerce market in terms of revenue

Indonesia is arguably the region’s fastest growing eCommerce market in terms of revenue and all set to emerge as the dominant player in this sector in the region as well as globally in the coming years.

According to the latest data on Statista, the worth of eCommerce revenue in Indonesia is more than US $11,100 million so far this year and is expected to show an annual growth of over 10.3% (CAGR 2019-2023), resulting in a market volume of around US 16, 500 million by the year 2023. With an average revenue per user currently amounting to US $75.66, the ever-increasing eCommerce user penetration is currently at more than 54.5% and is expected to hit over 86% in the next four years.

Home to 4 unicorn startups and the region’s second decacorn

Indonesia’s thriving tech startup landscape has produced four unicorn startups that seem to be growing each year with new investments, expansions, and new products and services launches.

Tokopedia- the country’s biggest eCommerce platform was founded in 2009 with a mission to “democratize commerce through technology”. In the past ten years, it has emerged to become the leading eCommerce platform in the country with a current valuation of over US $7 billion. In October 2018 alone, the platform had some 169 million visitors making this unicorn, the most-visited eCommerce website in the country.

Another dominant eCommerce player in Indonesia is Traveloka- an online ticket and hotel booking platform. Traveloka currently operates in various countries across the region, including Indonesia, Thailand, Malaysia, the Philippines, Singapore, and Vietnam. Recently, this travel tech startup acquired three online travel agents from Japanese firm Recruit Holdings for around US $66.8 million.

Having earned its unicorn status in early 2018, Bukalapak has a gross merchandise value of around US $270 million per month. This eCommerce platform seeks to serve 10 million users by the year 2025.

This year the Indonesian eCommerce scene took a big leap when the homegrown ride-hailing unicorn Go-Jek attained a valuation worth over $10 billion, becoming the country’s first and the region’s second decacorn right behind its competitor Grab.

We recently examined the rise of Go-Jek as a decacorn in detail in this post.

There is always room for improvement

Indonesia’s rise in the eCommerce landscape of Southeast Asia has been commendable. However, there is always some room for development. Factors like availability of required digital talent, logistics and payment method may still hinder this growth.

With the rapid increase and evolution of eCommerce companies, more and more human resources adept with the latest digital skills will be required. As these startups create job opportunities, suitable and well-skilled talent will be required to take on to these jobs. To address this concern, the Indonesian government has already promised to focus on building an infrastructure where digital talent can be groomed and trained.

red and white flag under blue sky during daytime

Furthermore, Indonesia has a heavily fragmented payment landscape and the internet-based companies here need to come up with and facilitate the integration of online payment services. Maybe, investors should start looking at Fintech startups to resolve this challenge.

With the rise of decacorn Go-Jek as a promising super app and emergence of unicorns like Travelok, Bukalapak and Tokopedia, Indonesia is establishing its dominance in the region as an eCommerce hub. Factors like increasing mobile as well as internet penetration and predictions about the strengthening digital economy are encouraging local and regional players to invest here. However, players thinking global will have to address the small yet significant challenges of logistics, integration of payment services and digital talent to sustain this momentum of growth. But, there is no doubt that the country has risen to become the region’s fastest growing eCommerce market and definitely has significant potential to become a global leader eventually.

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