Indonesia’s large internet population and high social media engagement has made it an excellent market for rapid expansion in the social commerce sector. Despite low digital payments penetration and logistical challenges, Indonesia is still poised to expand their eCommerce market through a consumer demographic active on social media and a fast evolving B2B support sector aimed at turning the country into one of the most lucrative digital economies in the Asia-Pacific region.
Indonesia is quickly transitioning from a vibrant and vocal community of internet users into one of the fastest growing digital economies in Asia. With over 73 million internet users in a country of 250 million people, Indonesia’s internet population size is fourth worldwide after China, India and Japan.
This continued adoption of the internet has spread well beyond conventional computer screens as users take to their mobile devices. Smartphone penetration in the country has doubled from 12% to 24% from 2012 to 2013 and is expected to approach the 30% mark by the end of 2014.
While Indonesia’s internet penetration of 29% is lower than Asia’s regional average of 33%, the sheer size of the country’s internet population makes it a viable market for online growth. Market research company Statista predicts Indonesia’s internet population to steadily increase to 93.4 million users by 2015, ramping up to over 120 million by 2018. As internet users continue to boom, so will the country’s adoption of online shopping, with sales projected to grow as high as $10 billion USD by 2015, a substantial increase from 2014’s current estimate of $1 to $3 billion USD.
Indonesians are also highly connected in the social space. A majority of Indonesian internet users spend most of their time on Facebook and Twitter, with Facebook users climbing to 69 million and Twitter users numbering close to 20 million in 2014. Social sites like Facebook and Twitter’s experimentation of new ways to enable business transactions on their platforms, combined with Indonesia’s fixation on social media, makes the country ripe for social commerce growth.
Turning Shares to Sales through Indonesian Social Media
While social commerce is relatively new to Indonesia, the country’s large internet population and highly active social media base has opened the doors for social commerce to gain real traction. In fact, research shows that the push for social commerce is being led by none other than Indonesian consumers themselves, a community long known for mixing shopping and socializing.
In an eCommerce index released by Japanese-owned online retailer Rakuten in 2013, 78% of Indonesian internet users said they were willing to share their purchases and recommendations via social media, beating more developed markets like Japan, Malaysia, U.K and the U.S, who all fell below 70%.
Businesses are starting to recognize Indonesians’ affinity for talking about what they have purchased and are leveraging their social media sharing to build greater brand awareness. This is especially effective in the highly interconnected online social space where comments and posts often go viral. It has also allowed digital marketers to gain insights into what products are trending so as to serve up the most relevant content, products and services in an effort to eventually increase conversion rates.
The growing number of businesses offering B2B social commerce services is another indication that the country’s social commerce market is on the rise. Indonesian-based B2B companies like Lakubgt and Onigi are offering to help ready brands for the social commerce market. These services include transforming Facebook fan pages into fully-functional online stores, utilizing product catalogues with integrated check-out systems. In essence, a highly social internet population, coupled with a fast-evolving B2B support system, is creating a highly conducive environment for existing and new players to enter Indonesia’s social commerce sector.
Social Shopping Isn’t Always Easy
Just like other emerging markets, Indonesia is in the process of building up its infrastructure in order to overcome existing logistical challenges to the eCommerce market. Streamlined order fulfillment processes, low cost delivery services, processing of international deliveries, along with efficient warehousing and distribution systems within an archipelagic nation, all these if done well can really accelerate the growth of eCommerce in Indonesia.
Another key challenge for eCommerce businesses in Indonesia is the population’s affinity for cash-on-delivery and bank transfers instead of online payments, which is driven by the lack of trust in digital payment options and low credit card penetration. However, eCommerce players are slowly finding innovative and effective ways to address these challenges through eMoney tools like eWallets and prepaid cards. Total electronic money transactions hit a record high of $174 million USD in 2013, with daily eMoney transactions rising steadily from $122,000 USD in 2009 to $340,000 USD in 2013.
As Indonesia approaches a tipping point in terms of eCommerce growth, developing a reliable low-cost logistics and payment infrastructure are quintessential to growing the country’s digital economy.
A further indication of Indonesia’s push towards social commerce, the country’s leading e-payment solutions provider, Doku, has also adapted to the increasingly social media centric market. In 2013, Doku launched MyShortCart, a service aimed at providing blogshops and Facebook shops with their own cart and check-out system. This service has been set up to cater to the growing number of businesses making the transition to social commerce. As social commerce grows, digital B2B services can be expected to follow suit as more businesses seek out faster, more convenient ways to transact business with their consumers.
But the real challenge to Indonesia’s social commerce landscape goes well beyond payment solutions and logistical considerations. The real test is in harnessing Indonesia’s passion for social media and their growing appetite for online shopping. While western nations like the US have shown a distinct gap between online purchasing power and social media use, countries like China have shown that there are clear benefits for businesses when the two intersect. In the case of Indonesia, there is strong potential for brands to replicate that same success by providing utility and value to consumers through social media platforms.
The Future of Social Commerce in Indonesia
The shift to social commerce seems inevitable for Indonesia, especially with the country’s growing internet population, increasing online retail sales and its unwavering affinity towards social media. With a fast growing B2B sector offering services designed specifically to meet the growing demands of online retailers, brands who are looking to make the jump to Indonesia’s social commerce market are presented with a highly conducive environment for social commerce opportunities.
However, brands still need to keep their ears to the ground as the Indonesian market continues to evolve with constantly changing technologies and consumer shopping habits. If the numbers are any indication of what is to come, Indonesia will continue to reign as the region’s social butterfly, making social commerce one of the major entry points for eCommerce success in Indonesia.