Indonesia: An Enormous but Challenging E-commerce Opportunity
Indonesia’s population is 278.3 million, the fourth-largest globally, with about 20% of the country considered middle-class. Its capital, Jakarta, is the biggest city in Indonesia and Southeast Asia and is home to more than 10 million residents.
Indonesia’s population is 278.3 million, the fourth-largest globally, with about 20% of the country considered middle-class. Its capital, Jakarta, is the biggest city in Indonesia and Southeast Asia and is home to more than 10 million residents.
Indonesia is the ninth largest e-commerce market, with projected 2022 sales of $59 billion, according to Statista. Consulting firm Redseer reported that the number of online shoppers in Indonesia grew from 75 million pre-Covid to 85 million during the pandemic.
Despite these staggering numbers, it is unappreciated as an e-commerce market. The archipelago consists of more than 17,000 islands, an enormous e-commerce opportunity but also a logistics challenge. Consulting firm McKinsey & Company estimates that e-commerce consumers in small towns and remote islands save 15 to 25% on online shopping because prices are high at the few small, local stores.
The country is a mobile-first market as many residents do not own a computer. According to McKinsey, almost 80% of internet traffic goes through mobile connections. The population’s median age is 30 years, and the 30- to 39-year-old cohort accounts for 47% of e-commerce spending.
The Institute of Southeast Asian Studies in Singapore adds that about 138 million Indonesians shop online. The e-commerce sector accounts for 72% of the digital economy’s total value. Currently, only a quarter of e-commerce purchases are cross-border but are expected to expand.
Although Indonesia’s e-commerce market has seen significant growth, it also faces certain challenges. With the main challenge is logistics services, with a high percentage of deliveries done on motorcycles.
Indonesia also lacks an educated, digitally savvy workforce. Only 13% of Indonesians have a university education. Moreover, only 49% of Indonesians use banking services, according to a report from the Institute of Southeast Asian Studies.
Unlike other countries, C2C marketplaces play a prominent e-commerce role, which contributes to fraud and inconsistent service quality.
