All eyes on Indonesia's e-commerce pie

Madam Maihar, who runs a small provision shop in Jakarta, made the plunge into cyberspace four months ago when she was introduced to Kudo, a local tech start-up which allows "agents" like her to sell clothes and concert tickets from its merchant part
Madam Maihar, who runs a small provision shop in Jakarta, made the plunge into cyberspace four months ago when she was introduced to Kudo, a local tech start-up which allows "agents" like her to sell clothes and concert tickets from its merchant partners through a shopping application installed on its tablets.ST PHOTO: ARLINA ARSHAD

Small entrepreneurs and big firms alike want a slice of the country's fast-growing market

Squinting at the electronic tablet screen, shopkeeper Maihar tapped the colourful icons to top up her customer's mobile phone credit.

"Today I sell phone credits. Tomorrow I will run an online grocery store from my bed," the 59- year-old told The Sunday Times from her small provision shop in Jakarta, which she has been running for the past 20 years.

"I used to be 'gaptek'. I knew only how to switch the computer on and off," she said, using the Indonesian slang "gagap teknologi", which refers to people who are technologically backward. "But the Internet is changing the way we do business so I am learning to use it."

Madam Maihar made the plunge into cyberspace four months ago when she was introduced to Kudo, a local tech start-up which allows "agents" like her to sell clothes and concert tickets from its 10-odd merchant partners through a shopping application installed on its tablets.

So far, she has used it to pay utilities and phone bills for her customers. In return, she gets shopping discounts from Kudo.

GETTING ON THE DIGITAL BANDWAGON

I used to be 'gaptek'. I knew only how to switch the computer on and off. But the Internet is changing the way we do business so I am learning to use it.

MADAM MAIHAR, an Indonesian shopkeeper, using the Indonesian slang "gagap teknologi" to refer to people who are technologically backward.

Small-time entrepreneurs like Madam Maihar as well as big capital owners and tech start-ups like Kudo and others, including from Singapore, are all eager for a piece of Indonesia's e-commerce pie, valued at US$12 billion (S$16 billion) in 2014 and US$18 billion last year.

Billed as the next frontier in e-commerce after China and India, Indonesia's market is expected to swell to US$130 billion in 2020, with an annual growth of 50 per cent, Information and Communications Technology Ministry spokesman Ismail Cawidu told The Sunday Times.

The government wants e-commerce to become "Indonesia's backbone in digital economy so we can become the biggest in Southeast Asia in 2020", he said. It will soon roll out a road map for the industry that will provide clear guidelines on logistics services, financing for start-ups, consumer protection, taxes and cyber security.

Recognising Indonesia's digital potential, Singapore's Foreign Minister Vivian Balakrishnan during a visit to Jakarta in January proposed a new partnership between the two neighbours.

"We believe Indonesian universities and technical institutes will produce many graduates with digital skills and we are thinking of launching a scheme in which Singapore companies which are looking for talent will be able to recruit talent here, deploy them here and provide services for the rest of the world," Dr Balakrishnan said.

With nearly a third of its 250 million population able to access the Internet, seven in 10 of whom do so on their smartphones, Indonesia has a ready captive market.

This, coupled with low labour costs and growing affluence, is a big draw for budding tech firms.

Mr Ivan Tan, IE Singapore's group director of South-east Asia Group, which has helped 50 Singapore firms to collaborate with Indonesian players, said: "The increased spending power of the middle class and the rapid adoption of new technology will drive e-commerce growth in this country."

While traditional on-demand transport, food and shopping services such as Go-Jek motorcycle-hailing service and Tokopedia online marketplace continue to dominate the industry, new ventures such as UangTeman, which provides short-term micro loans online, and HaloDiana, a private virtual assistant, have sprung up.

Low Internet penetration rates and service gaps such as poor infrastructure which drive up logistical costs, patchy mobile connectivity and limited banking facilities have spawned a new breed of innovative businesses.

For instance, Kudo, whose investors include two from Singapore, targets the "have-nots" by recruiting agents in rural locations to shop on behalf of their less technologically savvy communities.

Bareksa, an investment portal start-up, allows people to start mutual funds online with only $10 without stepping into a bank.

Singapore firms also are jumping on the bandwagon, despite challenges such as language barrier, few business connections, foreign investment restrictions, bureaucracy and online payment problems.

SingPost said it has "a special arrangement with Pos Indonesia" with full online tracking and work sharing at a discounted price that helps to lower logistic costs and cut delivery times for Chinese e-commerce giant Alibaba merchants selling to the Indonesian market.

Mr Henry Chan, business development head at ShopBack, which returns a portion of cash to shoppers who buy through the website, said while China has high demand, its "competitiveness is also very, very high".

"Indonesia is closer to home and something we can relate to a lot more on a cultural basis," he said.

Despite an "imperfect ecosystem", from unclear government regulations to Indonesians' love for haggling, it is only a matter of time before the country completely embraces the idea of e-commerce, technology experts say.

Said Indonesian Internet Service Providers Association chairman Jamalul Izza: "There's no way but up. When we are lazy to go out or get stuck in a traffic jam, what else is there to do but shop or buy food online?"

A version of this article appeared in the print edition of The Sunday Times on March 27, 2016, with the headline 'All eyes on Indonesia's e-commerce pie'. Print Edition | Subscribe