What Will Gonna Happen in Indonesia E-Commerce Industry this Year?
Another year another competition. What was felt successfully applied last year, not necessarily going to be successful again this year? Remember, marketing is not just about selling. It means dealing with the ever-changing market. Same happened in Indonesia e-commerce industry.
When it comes to e-commerce industry, there is almost zero fear to all obstacles that will come in this year. All players said that they don’t have any reason to not optimistic. Their optimism based on many research stated that the e-commerce industry in Indonesia still has many rooms to growth.
According to research Global Consumer Insight Survey 2018: Indonesia Results by PricewaterhouseCoopers (PwC) Indonesia, claim that sense of optimism from the players comes from the confidence of all the customers. It said that 73% respondent of the research willing to spend more money in the online commerce platform.
Even though the average of a respondent in Southeast Asia (53%) willing to spend more. Besides frequent shop, weekly or daily, Indonesian shopping frequent still above the majority of the region. It means, from all of the countries in the Asia Pacific, Indonesian likely to shopping more.
Related to products, fashion items and shoes (37%), as well as health and beauty products (35%) are the most purchased product by Indonesian consumers when shopping online.
In this research, there were also 51% of respondents planning to buy everyday equipment online. Uniquely, as many as 62% of respondents didn’t mind the fact that e-commerce platforms monitor the shopping patterns and purchases of each consumer.
“With this confidence and the growth rate of the internet in Indonesia, the retail industry landscape can change and thriving e-commerce platform in the coming year,” said Ade Elimin, Partner Leader of PwC Indonesia Consumer and Retail.
Fajrin Rasyid as President of Bukalapak believes that the e-commerce industry in 2018 has succeeded in doubling. He estimates that in 2019, the industry is also likely to grow above 50%. His opinion may happen this year. If we see the results of the players on Indonesia Biggest Shopping Day (Harbolnas) on December, many player claims succeed growing their transaction.
Blibli.com recorded a number of consumers transaction as much as 35x compared to average days. This surge also caused the number of orders and Gross Merchandise Value (GMV) to increase by 11x compared to normal days. Same things happened to Lazada Indonesia. They recorded an increase in GMV (Gross Merchandise Value) of 18x from the usual day. Meanwhile, Shopee Indonesia recorded 5,4 million transactions at that event.
In the majority, Harbolnas 2018 estimated to have managed transaction of IDR 6.8 trillion or an increase of IDR 2.1 trillion from the transaction value last year. Of the total 6.8 trillion, local products managed to contribute 46% of the transaction value, which was IDR 3.1 trillion. It’s a freaking huge number.
According to Chairman of the Indonesia E-commerce Association (IDEA) Ignatius Untung, on a market basis, this industry had managed to grow. However, that this industry had matured, he saw that it had begun to show who had survived, and who had begun to run out of breath.
“We see in the United States only two big ones, as well as in China. In Indonesia, there might be ten big players. The question is, do we need that much.”
Even though optimism is still mounting, both the industry and players, at least there are a few things that industry players must watch out for this year.
A political year and finding a new normal
We all know that in 2019, Indonesia will celebrate a big five-year party, the legislative and presidential elections. Political turmoil has also begun from all sides. However, it seems that the e-commerce industry is not affected by the political turmoil.
Christin Djuarto, Director of Shopee Indonesia, said that the e-commerce industry benefited. Because both candidates understand that e-commerce is the industry of the future, so whoever wins later will make a policy that supports the growth of this industry. Fajrin conveyed the same thing. He hopes that all parties and candidates competing in the election can commit to industrial growth. Existing rules are implemented, and regulations that do not yet exist can be immediately refined and implemented.
“As an industry we want to remain neutral, supporting whoever will be elected,” said Fajrin.
On the one hand, the political year also brings its opportunities. Much money will be circulating. Starting from the production of shirts, flags, banners, vendors, and the money to move the masses. But what needs to see are when they receive money from the campaign will they have the desire to spend or not.
“This political party has much money. E-commerce players if want to get the ‘cake’ must be able to build the appropriate campaign, “Untung added.
In addition to the issue of political years, the current situation that has not seen the bright point is exchange rates issues. In October 2018 the exchange rate of the rupiah against the US dollar had exceeded IDR 15000. Slowly in early January of 2019, the exchange rates touch IDR 14000. For ordinary people it seems terrible, but not for e-commerce players.
According to Fajrin, when people find a product that feels expensive, they will look for a substitute product at a lower price. Well, most of these cheap products can be found on e-commerce platforms. Moreover, e-commerce players in Indonesia are encouraging the growth of local products. The impact of the exchange rate will be felt on imported and electronic goods. However, this is an excellent opportunity for local SMEs to showcasing quality goods.
“On the e-commerce platform, it has balanced between local and imported products. If the dollar rises, it becomes an opportunity for local SMEs. They can get a bigger market, “explained Christin.
Meanwhile, for Untung the exchange rate issue was momentum for local SMEs. This condition is a time when people find new normal conditions.
“The point is that Indonesian people are forgiving.”
Logistics and Payments
E-commerce indeed will not be separated from its two supporting systems, logistics network, and payment system. Both of these have a vital role in increasing market penetration. Today issue in logistical are infrastructure and coverage area. However, it is undeniable that in recent years there have been efforts by the government to expand infrastructure networks. This is intended to make the distribution cycle easier to all regions in Indonesia. Because the fluctuations in the prices of goods in Indonesia are very dependent on logistical problems.
On the one hand, e-commerce is one of the primary sources of income for logistics players. Based on research from PwC, 25% of the revenue from the players is obtain from e-commerce freight forwarding services.
But in 2019 both players, logistics, and e-commerce are facing the problem of how fast goods can be delivered to consumers. PwC research found that Indonesian consumers want the items they buy can be received within the same day when they make a transaction. In fact, 72% of respondents said that they were more interested in promotions in the form of free shipping than other promotions.
When looking at established markets such as in China and the United States, e-commerce players there can deliver goods to consumers in a matter of hours. Some even promise that the goods will arrive in the duration of one hour after payment.
In Indonesia, the same day delivery service has been implemented. However, most same-day delivery services only can be enjoyed by consumers in big cities, Jakarta more precisely.
Today, most players limited the maximum time of same day delivery before 16.00. This means that all transactions after this hour will be sent the next day.
Christin explained that in 2019 the maximum limit time most likely will be increased, at 18.00. Of course, this requires coordination between e-commerce and logistics players. If the same day delivery services are resolved, it is not impossible that the delivery of goods can be done in a matter of hours, as happened in China and the United States.
“Next year is still too early if we talk about playing in a matter of hours. But all the directions will be there, “Christin said.
Meanwhile, from the payment system side, the majority of e-commerce actors have provided a complete service system. The cash on delivery (COD), bank transfer, and credit card methods are commonly found in the majority of platforms. Bank transfer payments still dominated transactions. Followed by COD and credit card payment methods.
It’s just that 2019 will see an increase in the use of digital payment services as one of the methods that consumers will use. Just mention the use of services such as Go-Pay, TCASH, OVO, DANA, and other similar services.
Besides, services from digital credit card platforms such as Akulaku and Kredivo will also increase. The presence of a digital credit card platform, on the one hand, opened a new consumer segment and increase transaction value because credit card penetration in Indonesia is low.
“In 2018 there are already many digital payment methods. Next year it will be easier for consumers. Moreover, the government also supports the cashless movement, “Fajrin said.
Digital payment methods cannot be resisted. Consumers like everything that makes them easier. According to Untung, when someone makes a payment in non-cash, the goods purchased will be greater in value.
“When we pay and don’t hold the money, we don’t feel the pain of paying. People automatically want to spend more than holding physical money,” said Untung.
PwC data says 48% of Indonesian respondents will shop more when using digital payment methods as long e-commerce and payment players can ensure the security issues of each transaction.
Who is gonna going home?
Besides external obstacles, e-commerce players must be ready to compete with each other. Two thousand nineteen marks a new chapter for the industry. Who survives and who will go home, can be seen today. Therefore the competition will be even tighter.
“The competition far more important than the changes from outside,” Christin stated.
Three years ago, the conditions were still easier than today or in the years ahead. The focus of awareness, logistics, and payment, slowly began to shift towards innovation from each player in addition to the innovations, how the players can convince their users to remain loyal. This is more than just presenting discounts and promotions.
Shopee, for example, tries to present a gamification system. Also, many players are collaborating with specifics brands to present special promos in one day.
“If other players present similar promos or campaigns, it’s normal. Because they also see data and patterns at the same time. Because everyone wants to bring something interesting, so it’s likely that the idea can be the same, “explained Christin.
JD.id presented the new concept by introducing the Omni concept to be able to shop online at their physical retail outlets. Bukalapak has other ideas with empowering warung partners in the Bukalapak Mitra program. Later, these warung partners will provide services to their customers to shop online at Bukalapak through the warung. In short, the shop is part of the Bukalapak sales channel.
“People who have never been shopping online, or people who do not know how to shop online, can go to our partner stalls and ask the stall owners to order goods for them. Then they can pay the stall owner in cash.”
For Christin this will stimulate other players to be creative again. Although he considered Shopee would not implement the concept. However, she believes, in the end, all the efforts made by each player aim to educate and enlarge the market itself.
As chairman of the association, Untung saw that the competition would bring great players together. However, he sees that there is a pattern that is likely to affect vertical commerce actors.
He gave an example that currently large e-commerce players also provide electricity, credit, insurance, up to hotel and flight ticket services. If this condition continues to apply in 2019, it is likely that there will be vertical commerce actors who will be kicked out by this big player. He reminded the vertical commerce players able to have a uniqueness that other players do not have.
Traveloka and Tiket.com for example, even though airplane and hotel tickets are presented in large e-commerce players, their market share will remain. Because both of these brands already have strong perceptions in the market. Although the service can be found elsewhere, consumers will continue to buy on these two platforms.
He also stated the issue of promotions and discounts that are often carried out by e-commerce players. For him, promotions and discounts are things that cannot be separated, but he warns that players must be able to stop doing product subsidies. Especially if the subsidy as done to buy a loss.
“This is not good for the market, especially for players. Because if it’s done, this will only be a strong place for the money. “
Regarding consumers, they will be happy, because of low prices. However, it will show a market that only looking for cheap goods and prices, not quality goods. Practically, producers will prefer to produce cheap products rather than quality goods.
Currently, there are many products in e-commerce at low prices because there is still competition. When there is no competition, prices will change, and consumers have no choice because consumers have eliminated other players with not buying their products when they don’t give discounts.
Another interesting thing about competition is the presence of new players. Arguably, this market has slowly closed the door for the presence of new players. However, there is still one big giant to watch out for, Amazon.
Amazon’s investment commitment of IDR 14 trillion in ten years for its cloud business in Indonesia opened new speculation, which the Amazon’s presence in Indonesia is getting closer. It is probable that currently, Amazon is testing the market.
Both Fajrin and Christin claimed to be ready if Amazon present at any time in Indonesia. The market potential is still vast, is likely to lead Amazon to try their luck in Indonesia.
For Untung, whenever Amazon enters it is not the main problem. He underlined, as long as the government treats Amazon on an equal with other players, this will not be a significant threat.
“Maybe they are waiting for who the president will be elected. However, if I become them, I wait until the number of players decreases. With their capacity, they don’t need to be afraid to enter later.”
So what’s your opinion about Indonesia e-commerce industry this year?
