Indonesia's e-commerce sales rising

E-commerce in Indonesia is expanding as retailers capitalise on a rising middle class, growing demand outside of Jakarta and a tech-savvy population embracing new sales and payment platforms. “It is important to start adopting social media as a stable part of our business strategy,” Henri Honoris, president-director of Modern Internasional, a retail operator and owner of the 7-Eleven franchise in Indonesia, told OBG. While challenges persist as a result of low banking and credit card penetration and an infrastructure deficit, investment in the sector has spiked in recent months in the wake of soaring demand, and future opportunities abound in mid-tier cities, development of new payment platforms, and expansion of third-party logistics services.

Diverse Offering

Lacking a single, dominant e-retailer such as eBay or Amazon, Indonesia’s fledgling e-commerce sector is diversified, dynamic and tailored to local demographics and consumer habits. According to a 2014 study published by SingPost, Singapore’s national postal service, the number of online shoppers in Indonesia rose by 28.2% in 2013 to hit 5.9m, a number expected to jump to 8.7m by 2016.

Unlike Western markets, however, just 20% of online shoppers in Indonesia shop on traditional business-to-consumer (B2C) websites, with Zalora, Bhinneka, Agoda and Lazada among the country’s most popular B2C retailers. SingPost reports that 26.6% of online shoppers make their purchases via online platforms and classified websites, like the online sales portal Tokopedia, while another 26.6% use social commerce platforms like Facebook, to make online purchases. Although e-commerce comprises 0.5% of total retail sales in the country, annual turnover was an estimated $1bn in 2014 and could reach up to $4.5bn by 2016.

Payment Platforms

In Indonesia, the segment faces a unique set of challenges and opportunities. Credit card penetration in the country stands at just 3.5%, and an estimated 80% of the population is unbanked, while major infrastructure deficits make it difficult to offer the same delivery options as in more developed e-commerce markets. However, in a 2015 article in Tech In Asia, Adrian Li, founder and managing partner at tech investment firm Convergence Ventures, argued these deficits are not significant enough to seriously hobble short-term expansion. “It is not that goods and services online cannot be paid for, or that they cannot be delivered. Rather, it is more that these enabling layers of payments and logistics are not as welldeveloped as they could be,” wrote Li. Cash-on-delivery has risen to become the payment option of choice, accounting for roughly a third of transactions in the country, and with an estimated 50m banking customers in the country, wire transfers are also popular.

Mid-Tier Market

As in the country’s traditional retail industry, second- and third tier cities offer significant potential to retail investors. Logistics and transportation networks have been improving in recent years, and Indonesia’s infrastructure deficit will be addressed through billions in planned new investments under the administration of newly elected President Joko Widodo. At present, third-party logistics providers like First Logistics, JNE, ESL Express, and RPX offer service across most of the country. JNE reported a monthly average of 4m e-commerce deliveries in 2014. Lazada’s CEO, Max Bittner, said over 60% of its customers were outside Jakarta, and 20% outside Java, while JNE made 40% of its e-commerce deliveries outside Jakarta.


The sector has witnessed a flurry of investment since 2014: in addition to a $100m investment in Tokopedia’s, notable deals in 2015 include a $1.5m investment in online retailer Vela Asia, Bridestory’s $1m investment and new funding for Jakarta-based travel auction website, Grivy. Perhaps most significantly, in March 2015 Lippo Group, the biggest shareholder in Indonesia’s top retailer, Matahari, announced it will invest $500m over the next three years to expand e-commerce offerings. Moving forward, new payment platforms are another investment opportunity and start-ups like aCommerce and Veritrans are focusing on logistics and payment solutions for e-retailers.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Indonesia 2015

Retail chapter from The Report: Indonesia 2015

Cover of The Report: Indonesia 2015

The Report

This article is from the Retail chapter of The Report: Indonesia 2015. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart