Interview: Kusumo Martanto
What is your overall assessment of Indonesia’s e-commerce segment at the moment?
KUSUMO MARTANTO: Indonesia has the highest growth in the region in a variety of sectors. This is no surprise, as domestic economic growth is driven by a labour force of nearly 70m. With e-commerce burgeoning, both the public and private sector support its development. At the same time, methods and points of payment have become a lot more sophisticated in terms of options and user friendliness. The e-commerce volume is likely to remain stable, accounting for around 5% of total retail volume in Indonesia until 2019. However, e-commerce players still face logistical challenges. Various modes of transport remain fragmented, though the government’s infrastructure agenda should help make deliveries across the archipelago easier. The government and state-owned enterprises play the key role in infrastructure development. The private sector does not get too financially involved as the pay-off is too low.
What the private sector, particularly logistics companies, should advocate is investment in tracking technologies. Many logistics companies came to the fore in recent years and they all utilised advanced radar and tracking technologies. With logistics costs still driving up shipping prices by more than 30%, advanced tracking technologies are set to reduce transport costs. In e-commerce the variety of products adds to this complexity. For instance, customers can buy make-up from a warehouse in Jakarta, but efficiently sending it elsewhere across Indonesia remains difficult.
In what ways can small and medium-sized enterprises (SMEs) be further integrated into e-commerce?
MARTANTO: SMEs are the drivers of Indonesia’s economic growth, as they employ over 95% of its labour force. In this regard, the Palapa Ring project is set to facilitate broadband access across the archipelago until 2019 and will enable a gradual e-integration of SMEs located outside of Indonesia’s major economic hubs. However, a sizeable proportion of SMEs have already grown remarkably in recent years. Accordingly, there is a cultural scepticism towards e-commerce, as profitable SMEs received rewards from recent revenues and choose not to take the e-commerce leap forward.
There is a misperception over online business and shops. Everyone can start an online shop, but we have seen in other countries that SMEs also enter big platforms to make their products marketable. There are also a number of mid-sized and big SMEs which find it easy to go online. Companies that work with us grow really fast, but a lot of them still think that once they have grown a bit, it’s enough for now. The understanding of doing business online is taking longer for them to learn, and a lot of SMEs lack resources. However, companies in the private sector, like ours, along with the relevant associations are creating training and workshops to raise awareness of the benefits of e-commerce.
What sectors have the greatest potential?
MARTANTO: There are several opportunities to be developed through e-commerce. Clothing is always one of the most popular things to purchase online. Looking at gadgets, mobile phones are already covered. Indonesia has a young population, the economy is growing and people are travelling more. This will further boost growth in the tourism sector for e-commerce, especially with the growth of domestic travel.
Automotive sales also have huge potential. Online car purchases are increasing. Offline dealers are often not transparent price-wise. Young people especially don’t like to bargain and want to know the real price.
We can also use e-commerce in synergy with finance companies to finance the vehicle. Buyers can upload their information, which is sent to financial partners. There are also opportunities in digital services. For several things, such as electricity, the government has implemented prepaid subscriptions so you pay as you go, and this can grow through online and mobile sales.
