The Indonesia e-commerce market is expected to grow from $52.93 billion in 2023 to $86.81 billion by 2028, at a Compound Annual Growth Rate (CAGR) of 10.
4 percent during 2023-2028. According to the International Trade Administration of the US Department of Commerce, Indonesia stood the largest among other ASEAN countries with $51.9 billion, or around IDR 778.
8 trillion, in e-commerce business revenue in 2022. In total, e-commerce revenue in ASEAN in 2022 reached $99.5 billion and it means Indonesia’s e-commerce businesses make up 52 percent of the total.
Arsjad Rasjid, Chairman of Indonesian Chamber of Commerce and Industry (Kadin Indonesia), told Khmer Times that the remarkable growth of Indonesia’s e-commerce market, with an 18.3 percent increase in 2023 and a projected 15.5 percent surge in 2024, highlights the transformative power of the country’s digital economy.
“This sector is not only a new engine of economic growth but also a critical opportunity for our 65 million MSMEs to expand their market reach through digitalization. As a strategic partner of the government, Kadin Indonesia is committed to supporting these enterprises in seizing the economic advantages of the digital era, ensuring they contribute significantly to our nation’s prosperity,” Arsjad said in a message. It may be recalled that Arsjad as the chairman of ASEAN-Business Advisory Council in 2023 campaigned extensively for a common ASEAN QR Code.
The integration of QR codes will help visitors from any ASEAN country to make a digital payment in another ASEAN country using their own country’s QR code. For example, Cambodians visiting any of the countries in the region will be able to make payments using KHQR, the digital payment platform of the country. In April 2023, Arsjad who was in Phnom Penh leading a delegation of Kadin, met with several high-ranking officials of the Cambodian government, the National Bank of Cambodia (NBC) and various business chambers in the Kingdom to promote among other things the idea of ASEAN QR code, and also the two other digital initiatives, namely Marketplace Lending platform for MSMEs and Wiki Entrepreneurship.
Wiki Entrepreneurship is a hub for large companies to market their products and for MSMEs to access the resources they need including technology from these large companies. The Marketplace Lending Platform will require partnerships with fintech companies and lending institutions to widen the MSME digital lending access. In Indonesia, the e-commerce market is driven by the local market and it is poised for a jump in growth.
The trend occurs in many developing countries because the portion of online shopping to total retail sales is still relatively small and there is still a lot of potential for increasing digital adoption in developing countries, including Indonesia. According to the International Trade Administration of the US Government, the growth of e-commerce transactions, including those from the Lokapasar platform, will continue to occur through penetration in tier two and tier three cities that still have great potential for e-commerce in Indonesia. Indonesia’s E-commerce market is segmented by B2C e-commerce (beauty and personal care, consumer electronics, fashion and apparel, food and beverage, furniture, and home, and other (toys, DIY, media, and others)) and B2B e-commerce.
In late November 2019, Indonesia’s government introduced its long-awaited law on e-commerce. The regulation was issued to improve the governance of internet-based and electronic trading activities in addition to ensuring tax compliance among e-commerce businesses. The Indonesian government in 2023 imposed a blanket ban on e-commerce platforms from selling certain foreign goods with a value under $100.
According to the regulation, the products that are traded must also adhere to Indonesian standards, such as the Indonesian National Standard (SNI) and the Food and Drug Supervisory Agency (BPOM). Standards like these are the same as the standards for goods circulating in the offline market. On September 26, 2023, Indonesian Minister Zulkilfi Hassan released the latest regulation on e-commerce.
Under this new regulation, the government banned the sale of goods on social media platforms. The government sought to prevent direct sales on major platforms that they believe take away business from small businesses. Social media platforms are allowed to advertise, like on TV, but the advertisement cannot be for a sales transaction.
Companies that do not comply will first receive a warning and then risk the revocation of their Indonesian business licence. The largest number and value of e-commerce transactions are among people who are married and don’t have children. The transactions of this group are greater than the group of single residents or those who already have children.
Based on “Report Consumer Behavior E-Commerce Indonesia 2023: Post-pandemic Economic Recovery and Shopping Trends”, released by Kredivo in collaboration with Katadata Insight Center, of all the number of e-commerce transactions in 2022, consumers with the highest number of transactions will come from consumers who are married with a portion of 58.2 percent. The reason is that when married, income can be greater as it comes from two people and there are already allowances.
However, when the couple has children, there are financial burdens that must be borne so that income is no longer fully spent. The percentage of e-commerce transactions from single consumers is 38.7 percent and the remaining 3.
1 percent is from other groups as per the study. In 2022, there were six marketplaces leading the pack among other contributors to Indonesia’s Gross Merchandise Value (GMV). They were Shopee, Tokopedia, Lazada, Bukalapak, TikTok Shop, and Blibli.
Digital wallet is the most popular payment method used by 72 percent shoppers while buying things on e-commerce. The use of pay later is more common for older segments such as Millenials and GenX. After massive growth in the e-commerce sector during COVID-19 pandemic, social commerce became the next commercial phenomenon to take the Indonesian market by storm.
From finding inspiration to purchasing the desired products directly on social media platforms, social commerce offers a convenient, seamless, and one-stop shopping experience to Indonesian consumers. This emerging way of shopping, although still relatively small in Indonesia, is posed to grow rapidly in the next few years and reach GMV of around $22 billion by 2028. The most used social media platforms for purchases in Indonesia are TikTok, Instagram, Facebook, YouTube, WhatsApp, Line and X (ex-Twitter).
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