Last week, we discussed the drivers of Indonesia’s e-commerce market growth. Here, we’ll find out what makes the Indonesian online shopper behave the way they do.
Meet Indonesia’s online shoppers
Their motivations for shopping online
What influences their online shopping decisions?
Where do Indonesians shop online?
What are the payment methods Indonesian consumers have for online purchases?
Meet Arief, our City Convenience Seeker. He lives in Jakarta and earns roughly IDR 120 million (US$8,200) per year working as a software engineer.
In his free time, he likes to watch videos of YouTubers unboxing and reviewing gadgets. He reads extensively about mobile phones before choosing which one to buy. But because he lives in Jakarta, going to the mall to purchase a new phone means driving through hours of traffic. So he buys it online instead, comparing deals between Lazada and Tokopedia. Putri is a professional in her mid-20s who lives in up-and-coming cities like Bandung and make around IDR 80 million per year. She’s one of Indonesia’s Trendsetters.
She likes finding trendy clothes at a bargain and follows Indonesian fashion icons on Instagram. While the city she lives in is experiencing rapid growth, it doesn’t have a wide enough range of apparel stores, including niche boutiques like those that sell K-pop-inspired clothing. She turns to online retail stores like Shopee to get her affordable fashion fix, as well as to social sellers on Instagram and Facebook. In another part of the city is a full-time mom of an infant and a toddler.
She relies on a WhatsApp group of acquaintances who share motherhood tips and recommend baby products and kids’ toys. As she needs to care for her children, she has no time to hop from mall to mall looking for these products, and isn’t sure she’ll find them anyway. She purchases the items online. Her friends recommend Orami and Bukalapak. In Surabaya, a young married couple that owns a café is looking for heating lamps. They are our busy small business owners.
With few staff and no time to head out to buy equipment, they find a specialised B2B online marketplace like Ralali. At the same time, they realise they’ve run out of a few ingredients, and engage a personal shopper via the HappyFresh app. These four types of shoppers represent the larger e-commerce trends in Indonesia—what people are buying, why they’re buying, and where they shop. More Indonesians than ever are shopping online. In 2015, 18 million people in the country made online purchases; this figure may reach 119 million by 2025, according to a report by Google and Temasek. But what exactly influences them to make these online purchases?
Indonesia’s online shoppers visit e-commerce sites for different reasons. A survey by Deloitte revealed that 31 per cent of Indonesian online shoppers chose to shop online for the convenience and practicality it provides as their main reason. These practical reasons include avoiding traffic or the ability to compare products and prices among different sellers without leaving one’s seat for example.
On the other hand, 26 per cent of Indonesians cite price as their main reason for buying online, given their ability to compare deals among various sellers. Another 17 per cent cited product range, as e-commerce stores can aggregate the products of different sellers to offer more choices, and even offer items that are not found in the country.
Meanwhile, 14 per cent cited reliable reviews while 12 per cent pointed to promotions as their primary reason for shopping online, such as zero interest rates and free shipping as their main reason for buying online. The reasons further vary by city, according to Austrade. For instance, those in larger cities like Jakarta shop online mainly for convenience, given the heavy road traffic. McKinsey also found that consumers outside of Java tended to save up to 25 per cent on the price of goods when buying them online instead of in brick-and-mortar stores.
This may be because e-commerce operations don’t usually come with other costs often incurred by offline retail networks such as maintaining brick and mortar operations.
Before making a purchase, at least 45 per cent of Indonesian buyers conduct Google searches and read customer reviews, and 98 per cent of mobile users look up products online. They also rely on social media to discover products—especially YouTube, Facebook and Instagram, which are the country’s top one, two, and four social platforms, respectively. You should also bear in mind the influence of social groups on WhatsApp and Line. These aps are among the country’s top social platforms with the highest number of monthly active users.
Thinking about expanding your online store to Indonesia? Get the latest tips and tricks in our latest Indonesian e-book, now updated with Ramadan-related info!
In Indonesia, as elsewhere, there are several types of online platforms for shopping.
One example of a B2C platform is where businesses sell directly to consumers from their own websites. This is especially useful for luxury brands that aim to maintain exclusivity. For example, one can either shop at the website of jewellery designer John Hardy or visit his shops in Bali.
People may also buy from marketplaces, another B2C channel, where different e-tailers sell products. This is the space occupied by the likes of Lazada, Tokopedia, Bukalapak, OLX, Blibli, Zalora, and Elevenia. Depending on the platform, sellers may include both SMEs and individuals, and even the e-commerce company that hosts the marketplace. One emerging C2C trend is social commerce which allows buyers to connect with individual sellers through online social networks. Around 30 per cent of online purchases in Southeast Asia in 2016 were made via social networks. Although relatively nascent in Indonesia, social commerce is growing, given the rapid growth in the number of social media users in the country since 2017. Apart from Facebook and Instagram, there are dedicated social commerce platforms like Kaskus, which started out as an online forum and evolved to leverage its engaged online community by connecting buyers and sellers.
Other creative C2C models include that of AirFrov, an app that matches travellers with people willing to pay to get them to bring back products from overseas. A majority of the requests are for beauty products, but people may also request food and drinks, household items, clothing, gadgets, accessories, and more. AirFrov operates in Singapore and Indonesia.
Customers might purchase directly from businesses for their availability of supply or because they trust the seller or brand. On the other hand, online shoppers may turn to other consumers to find unique products or affordable second-hand items, such as on OLX.
Cash is still king in Indonesia, being used for 65.3 per cent of digital purchases. Credit cards are used for an estimated one-fifth of purchases, while ATM or bank transfers account for around 13.9 per cent. Different e-commerce platforms offer their own e-wallets as well, or partner with fintech companies to do so. Alibaba, which owns Lazada, has its own payments platform, Alipay. Go-Jek’s Go-Pay can be used by other merchants. The country’s high mobile phone penetration rate has also paved the way for cashless payments to be made via mobile. Tcash is a mobile wallet owned by Telkomsel, the country’s largest mobile operator, which had 178 million subscribers as of June 2018. BlackBerry launched its Dana in BBM mobile wallet in March 2018. There are also multiple choices for payment gateway solutions, such as Doku and Xfers.
If that sounds like too many options, that’s perhaps because it’s true. See, for example, Tokopedia’s payment options:
However, with all the different modes of payment and Indonesia’s fragmented online payments space, a setup like Tokopedia’s helps e-commerce players cater to a wider audience.
For e-commerce players around Southeast Asia, Indonesia’s large population, online activity, and growing consumer class are certainly enticing.
But just because the pie is big, it doesn’t mean you should immediately dive straight in. There are some things you need to consider before entering the Indonesian market.
Customs clearance may be slow. To avoid delays and reduce the chances of mistakes, make sure you have complete documents and requirements for customs clearance. It also helps to have a partner who has customs clearance experience in Indonesia.
Make available a wide variety of payment options. There are plenty of fin-tech startups who are offering different payment options—but keep in mind that 80 per cent of new businesses fail. Spread your options by accepting payments from different online platforms, as well as from mobile wallets, credit cards, bank transfers, and of course, cash on delivery. This will also help you avoid diminishing the user experience by forcing shoppers to create an account with your preferred payments platform instead of allowing them to use the one they like.
Indonesia is an archipelago. Some areas will be more difficult and expensive to reach than others. Consider this when estimating delivery times, as well as when choosing your shipping model, be it cross-border shipping or local distribution.
User experience plays a big role in winning and keeping customers. You not only have to beat the competition—you also have to make your online store visually appealing on smartphones’ small screens, and make sure it works smoothly despite the country’s average mobile Internet connection speed of 9.82mbps.
Lastly, given Southeast Asia’s diversity, it’s wise to observe and learn.
Analyse what makes some e-commerce businesses succeed and what makes others fail. Understand their culture, work with local partners, and steadily win your slice of ASEAN’s biggest e-commerce pie.
Interested in e-commerce in Indonesia? Find out more about Indonesian e-commerce here:
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If you’d like to find out more about how we can solve your SEA e-commerce cross-border delivery needs, come and have a conversation with us.
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