The Issue of E-Commerce in Indonesia in 2015

A.T Kearney’s Lifting the Barrier to E-Commerce in ASEAN predicted that the valuation of e-commerce in Indonesia will reach $25-30 billion (Rp 320,8-385 trillion) in the next few years. This is a highly seductive number to many. However, with great result, comes great challenges. In fact, huge population, vast coverage, and tax issues in Indonesia may serve as the most problematic ones.

Actually, many have predicted that 2015 will be the year for e-commerce in Indonesia. Bayu Krisnamurthi, Vice Minister of Trade, claimed that the Indonesian e-commerce market will reach $10 billion of valuation in 2015 and its growth will touch 40 percent in the next 3-4 years. Achmad Zaky, Bukalapak’s Co-Founder and CEO, also stated that 2015 will be the year for Indonesian e-commerce.

One thing to consider is that Indonesia is a unique market. There are tons of challenges exist for e-commerce to grow. Below are some of those.

1. Payment

Even though Indonesians have been more and more convenient in doing online transaction, part of them still prefer offline payment method (e.g Cash on Delivery). According to A.T Kearney’s report, Indonesia has the most unbanked population (70 to 80 percent) in the world. This leads to the poor application of e-payment by consumers.

The condition reflects that Indonesians’ trust level towards online services is still on the table, although there are less and less online fraud occurred nowadays. The challenge would be to educate the market.

2. Logistic Efficiency

Delivery is also an issue that drives Indonesians reluctant to shop online, even though logistic providers admitted that e-commerce is the biggest contributor to their revenue.

Regarding this condition, a number of new concepts may serve as the problem solver, while an upgrade on logistic services is a must. Some of those include the establishment of in-house delivery service by e-commerce players, Online to Offline (O2O) concept, and the construction of distribution center in various parts of Indonesia.

3. Regulation

At the moment, the e-commerce players in Indonesia are getting confused by the uncertainty of regulation applied upon them by the government. The unsocialized taxation scheme and uncertain new regulation, added with the certification system that will be implemented upon all online merchants, make everything so problematic for the e-commerce players.

Moreover, Indonesia has yet had any clear law which regulates about privacy and consumer protection (according to A.T Kearney), compared to several neighboring countries.

Indonesia has limitless potential in the future and what we described above is just a little peek of the industry. What are the actual challenges for e-commerce players in Indonesia? Can Indonesia produce world-class individuals? How massive is Indonesia’s market potential?

You can get much more insight in Echelon Indonesia 2015 which is going to be held on this coming April 14-15. Ferry Tenka (Bilna’s CEO), Alexis Horowitz-Burdick (Luxola’s Founder), Choon YanTap (Paypal’s Startup Advocate, and Andrew Senduk (WhatsNew Indonesia’s CEO) will dig deeper on  challenges faced by and the potential of e-commerce in Indonesia.