Indonesian E-Commerce Prospect: Who Will Be The Next Amazon and Alibaba?

Indonesian e-commerce is quite interesting. In many ways, it very much like the early days e-commerce booming in the US: the customers didn't trust online payment, the logistic infrastructure is struggling to get on the online market, and there is no dominant e-commerce player in the market yet. But in other ways, it is more like the e-commerce booming in China: the traditional sellers try to get online to expand the market reach, users are placing great emphasis on social media recommendation, several online payment solutions emerge and also the coming wave of demand. Nowadays, Indonesian e-commerce market is further developing: several providers began to show their existence, online payment is getting their trust, demand increases, and the most important is support from government. As a result, during 2012 - 2015, Indonesia recorded a largest growth 42% comparing with other Southeast Asia countries. The next big question is: will Indonesian e-commerce be the next Amazon and Alibaba?

To answer that question, lets break down some interesting opportunities about Indonesian market.

1. Indonesia is the 4th largest population in the world, of 260 million inhabitants, 60% of them are digital native which born and living in the Internet era. 
2. The rapid growth of middle class, which is population with daily per capita expenditure between $ 2 - 20 per day. There will be 141 million Indonesian middle class in 2020. 
3. The rise of Indonesian netizens, there will be 102 million netizens in 2016, with more than half are less than 30 years old, which make "fertile" for e-commerce business.
4. With 70 million active Facebook users, placed Indonesia at 3rd world rank as social freak. The use of social media to facilitate e-commerce is a big chance for any consumer-driven business to think about.
5. Prospect for future growth are still exceedingly strong, from 7.4 million online shoppers in 2015 to 8.7 million predicted in 2016, with average spending on e-commerce rise from $ 482 per year in 2015 to $ 516 per year in 2016.

Now lets take a look about the challenges

1.  As an archipelago country, consist of 17.508 islands, spanning around 5000 km from west to east, it only served by only 700 suffering under-investment ports. Indonesia is desperately need a very good logistic services that can cover all the archipelago, of course with a certain additional price and time delay.
2. Only 40% population in Indonesia has bank account, and only 4.5% of them has credit card. Therefore, the bank transfer and "cash on delivery" are still dominant as payment method. This indicate that trust level towards online services is still on the table, although there are less and less online fraud occurred nowadays, it would be a long journey to educate the market.
3. As the 9th largest smartphone users in the world, regulators and operators, however, are slow to satisfy the speed demands. Smartphone users are still experience low download speeds, low quality, and irregular coverage limiting access to internet services.
4. The e-commerce players are getting confused by the uncertainty of regulation applied from the government. The unsocialized taxation scheme and the certification system are some example that adding a long list of those uncertainties. 

Indonesian E-Commerce Association (idEA) listed hundreds of e-commerce players. Among of them, the most interesting might be Tokopedia. As one of pioneer, Tokopedia now become the most popular online marketplace in Indonesia. It is quite interesting to observe that there are some similarities between Tokopedia and Alibaba, such as the early story, business model, and the strategic value. Most probably in the next 10 years, the e-commerce infrastructure is better, the ecosystem is supporting each other, the online shopping with online payment has become a lifestyle, and the society has been educated properly about the information security, Tokopedia will become the leader in Asia, along with hundred of e-commerce players to create a better future with Internet. 

References

1. https://www.statista.com/outlook/243/120/ecommerce/indonesia# 
2. https://www.techinasia.com/indonesia-tokopedia-alibaba 
3. http://www.themalaymailonline.com/money/article/tokopedia-indonesias-alibaba-wannabe-moving-from-underdog-toward-unicorn 
4. http://www.gbgindonesia.com/en/main/partners_updates/kadin/e_commerce_in_indonesia_outlook_prospects_and_challenges.php 
5. http://www.thejakartapost.com/news/2016/01/27/analysis-between-opportunities-and-challenges-ri-e-commerce.html 
6. http://think-banking.org/thinknew/index.php/782-what-is-driving-the-growth-in-e-commerce-and-m-commerce-in-indonesia
7. https://blog.tokopedia.com/2014/10/investasi-100-juta-usd-dari-softbank-dan-sequoia/ 
8. https://www.idea.or.id/direktori-member