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Is Indonesia Ready for Online-to-Offline Logistics Scheme?

Adjie Priambada - 27 March 2015

Even though the e-commerce industry in Indonesia is currently on a fast lane that it even beats the growth pace in China, the issue of logistics, particularly the delivery service, has always been attached to it. A report by Nielsen showed that the high rate of delivery service contributes to people’s reluctance in doing online transaction. However, the emergence of a new concept, namely the O2O (Online-to-Offline), is predicted to change this condition.

Basically, this concept lets users to purchase products online to later take their order and pay them at an offline cashier. This concept has been a theme of discussion in Indonesia ever since MatahariMall spent Rp 6 trillion to present an online platform which is integrated to their logistics business. With such gigantic investment and national network of offline stores, this is surely a promising step taken by MatahariMall.

How come? Well, it’s simple. The first reason derives from a statement by IPMI International Business School’s Economist Jimmy M. Rifai Gani during a session with CNN, “Last year’s Nielsen Global Survey of E-Commerce showed that consumers were reluctant to purchase products online because the cost was too high and the infrastructure in Indonesia was too poor.”

The second reason came from A.T Kearney’s report suggesting that the implementation of e-payment in Indonesia is still quite poor since the number of unbanked population in Indonesia still dominates the total population with 70 to 80 percent. This indicates that people still give low level of trust to online transaction. Indonesians are accustomed to see the goods first before deciding to purchase them online, that’s why COD remains one of most favorite payment methods in Indonesia.

With O2O concept, there is a new opportunity for e-commerce and logistics industry in Indonesia. Nonetheless, has Indonesia been ready to implement such concept?

Here are a few barriers that need to be resolved before establishing the O2O ecosystem.

1. Transportation Infrastructure

While transportation infrastructure is a fundamental component in assuring that the delivery to retailers and storage becomes more efficient, the infrastructure in Indonesia is still considerably poor, compared to neighboring countries, based on A.T Kearney’s report.

2. Storage and Retailers’ Availability

To fulfill the market demand in all parts of Indonesia, O2O concept needs more retailers and storage to be available. MatahariMall was confident in launching its service because Matahari has had 131 offline stores all over Indonesia.

There ara actually more barriers to face. How big is the required investment? Can the concept go hand in hand with minimart network? Can it serve as a solution to the issue of logistics in Indonesia?

Through Echelon Indonesia, which is going to be held on this coming April 14-15, you will no doubt get tons of insight regarding the current condition of logistics for e-commerce. Hadi Wenas (aCommerce Indonesia’s CEO) and Ryu Kawano Suliawan (PT. Midtrans’ Co-Founder) will dig deeper on the challenges faced by e-commerce players in buidling their logistics network.

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