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Indonesia’s Online Commerce Journey

MCKINSEY & COMPANY | NOVEMBER, 13, 2020

A look into the largest online commerce market
in Southeast Asia.

Indonesia is a digital-first nation.

Indonesians are among the world’s most enthusiastic users of digital technology. The average Indonesian spends four hours a day accessing the Internet on their mobile device —twice the USA average. In addition, Indonesia has:

The largest population of Instagram users in the regions, with 57 million active accounts – and is the largest Instagram Story producer in the world

Two of the most active cities for Twitter in the world – Jakarta and Surabaya come in first and sixth place respectively

The most number of billion-dollar tech startups in Southeast Asia – including, most notably, Tokopedia, GO-JEK, Traveloka and Bukalapak

Online commerce is big and growing rapidly.

30 million Indonesians today are transacting online, creating a market of at least $8 billion. Market could grow to $40 billion upwards in the next five years.

(*) We define online commerce as the online buying and selling by consumers of physical goods

The current online commerce market consists two key models: e-commerce platforms such as Tokopedia, Shopee, and Lazada; and social commerce, which involves the buying and selling of physical goods through a social media platform such as BBM, Facebook, Instagram, Line, and WhatsApp. Under conversational commerce model, goods may be listed for sale, but payment and delivery are handled separately.

60% of sales are done through online commerce while the remainder are done through social commerce.

Electronics, fashion, healthy and beauty are the top three product categories for online commerce and make up 70% of the sales.

Online commerce has had a large impact on Indonesia.

35% of online retail revenue is generated by women, while women only generates 15% of revenue in offline retail.

Provinces outside of Jakarta will be spending 10% more on average than Jakarta; meaning, if tomorrow the average consumer in Jakarta spends $10, the average consumer outside of Jakarta will spend $11.

Rate of new consumption could grow above 30% since online commerce delivers more choices, greater accessibility and more competitive prices for consumers

Online commerce has had a large impact on Indonesia.

In 5 years, the online commerce market in Indonesia will be five times larger than today. This has significant implications for all aspects of Indonesian life, including the job market.

By 2022,

Online commerce will directly and indirectly support about 26 million jobs. 26 million jobs would represent 20% of the total workforce.

Number of parcels processed could grow to 1.6 billion annually from 200 million in 2017. Growth will require additional support and infrastructure, including new positions at logistics companies as well as other job demands.

Two-thirds of online commerce spend will come from outside of Greater Jakarta. Tier 2 and 3 cities would drive about 50% online spending growth – around $18 billion.

There are many ways to participate in online commerce

Small Business Owner:

  • Join an online marketplace to achieve greater exposure and avenue for sales
  • Create a website to secure an online presence and reach digital-first shoppers
  • Join workshops and community efforts to stay current with digital trends and learn new skills

Online commerce ecosystem players:

  • Enhance and innovate customer experience
  • Expand services and pursue the high-margin, cross-border export market
  • Invest in cashless finance and payment solutions, which make transactions quicker and easier for buyers and sellers
  • Empower small- and medium-sized businesses to grow with more advanced tools and strong customer support solutions

Emerging digital talents:

  • Stay up to date on the latest trends and technology and continue to learn new skills through online training modules
  • Participate in initiatives designed by private players and government to help businesses with their online transition

The digital archipelago: how online commerce is driving Indonesia’s economic development

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PT. Myooz Digital Indonesia

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Bali, Indonesia

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