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eCommerce in Indonesia
August 2012
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Leading online paymentprocessor for theIndonesian market
Founded in 2011
www.veritrans.co.id
Tech media and researchcompany that focuses onthe Indonesian market
Founded in 2008
www.dailysocial.net
About Us
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This study was conducted as part of anindependent research project at Harvard BusinessSchool by the management of Veritrans, in joint
effort with DailySocial
First-hand interviews and transaction informationwas collected from leading eCommerce companies
in Indonesia This report is the first study solely focused on the
Indonesian eCommerce market
Research Background
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Why we conducted this study
Lack of market research & data on the Indonesian eCommerce industry
Available estimates of the Indonesian eCommerce market vary widely
with figures anywhere between $50 million to $3 billion
Current market reports do not provide a clear or consistent definition of
eCommerce, making cross-country comparisons difficult
Major market research firms have published figures on Indonesian
online shopping behavior, but only as part of a more general market
report on Internet users in South East Asia
Research Background
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Number of online shoppers surveyed: 584
Distributed through email lists owned by DailySocial,Disdus, and other cooperating parties
Research Background
Female
60%
Male
40%College/Graduate
54%
SecondarySchool
33%
Diploma
15-2453%
25-3439%
13%
Gender Age Education
35-447%
45+1%
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The sales of goods and serviceswhere an order is placed by thebuyer or price and terms of sale
are negotiated over the Internet
U.S. Department of Commerce
Defining eCommerce
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Payment does not necessarily need to bemade online
Includes classified ads sites (e.g. Kaskus,Tokobagus, Facebook)
Does not include online travel services,
financial brokers and dealers, and ticketsales agencies
Defining eCommerce
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Percentage ofeCommerce users
out of the internetpopulation
17%
$824
$11 B
28%
$799
$115 B
71%
$1,111
$193 B
WorldwideeCommerce
Market
Avg. annualeCommerce spend
per eCommerceuser
eCommercemarket size
Source: Internet World Statistics, BCG, US Departmentof Commerce, JP Morgan, Business MonitorInternational, Webshopping
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How about Indonesia?
$ 0.9 billion(2011)
Avg. annualeCommerce spend per
ecommerce user
$256
Percentage ofeCommerce users out ofthe internet population
6.5%Source:Internal estimates, Survey 9
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Its only 0.7% oftotal retail sales
$ 134 BillionSource: DataStatistik
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Top-down Analysis
Calculation of Indonesian eCommerce market
from public data & consumer survey
Estimated market size: 0.6 - 1.2 billion11
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Source:BCG, DataStatistik, Internet World Statistics, Survey
Average spend per transaction
No. of transactions per year
Low High
Rp. 500,000 Rp. 500,000
4x 5x
Population in 2011 (millions)
Internet penetration
No of Internet users (millions)
236
23%
55
eCommerce penetrationeCommerce buyers (millions) 2.8 4.4
5% 8%
Total e ommerce revenue5,500 11,000In Rupiah Billion
In US$ Million 611 1,222
% of total retail sales 0.5% 0.9%
Key Assumptions& Calculations
Assumptions 12
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Bottom-up Analysis
Calculation of Indonesian eCommerce market
from survey of leading eCommerce players inIndonesia
Estimated market size: 0.8 - 1.0 billion13
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Many eCommerce companies and investorscontributed transaction data to this analysis
However, they have requested that we do notdisclose individual company data so we can only
report in aggregate terms However, , Indonesias leading online
forum, has given us special permission to disclosetheir transaction data. Thank you Kaskus!
The following page gives you detailed calculation ofhow we were able to estimate Kaskus transactionvolume
Bottom-up Analysis
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Source:BCG, Internet World Statistics, Survey
Total monthly sales volumefrom new listings
Low High
New listings (millions)
Products per listing
New products per month (millions)
1.0
4.0
4.0
Average transaction size (US$)Close rate
$22.2m $33.3m
Assumptions
20% 30%
Total monthly salesfrom all listings $24.7m $37.0m
Key Assumptions& Calculations
+ sales from old listings
$27.8
$2.5m $3.7m
Estimated annual sales ofKaskus only$296m $444m
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Indonesia Today
Total population
248 million
Median Age
28 years
GDP per capita
$4,70016
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Internet Penetration Rate
23
67
56
3833 31
-
10
20
30
40
5060
70
80
Indonesia Singapore Vietnam Malaysia Philippines Thailand
% Total Internet users inIndonesia: 55 million
Source: Internet World Statistics, Nielsen 17
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More than two-thirds access internetby desktop & laptop in home
How & Where?
Desktop&
Laptop
Smartphone
TabletOther
71%
24%
3%2% School &
InternetCaf
Office
Home
Other
63%
25%
8%4%
device used access locationSource: Survey Source: Survey 18
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Time Spent
30
More than a quarter
of users spend over
30 hours per week
online
Compared to other
Southeast Asian
countries, itson par
with Malaysia and
Philippines but less
than Singapore and
Vietnam
hours spent online weekly
Source: Survey 19
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4
22
24
30
34
41
56
65
78
89
91
Other
Blog
Games
Career/Education
Travel
Online Banking
Music/Video
News
Email
Social Network
Search
Internet Usage
Search & social network are the
most popular internet uses
Many Indonesian entrepreneurs
and businesses are connecting
online through online advertising
and social commerce to profit
from these activities
Source: Survey 20
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9
8
30
47
55
59
69
Other
Blog
Games
Music
Search
Email
Chat
Mobile Usage
Chat is the primary use ofmobile phone service among
Indonesians
The top three most used
mobile functions require
mobile data connection
Source: Survey 21
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18
8
13
20
20
37
Other
Books
Electronics
Music/Video/Games
Travel booking
Fashion
Online Shopping
Fashion goods are the most
popular things bought,followed by online travel
bookingswhich nowadays are
easily booked over the
Internet
Some of the more popular
categories found in developed
market (e.g. online groceries)
are virtually nonexistentSource: Survey 22
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22.5
3.8
4.7
4.7
5.5
8.5
8.9
11.9
13.6
19.5
49.2
50
Other
Tokopedia
Blibli.com
Multiply
Bhinneka
eBay
Amazon
Dealkeren
Tokobagus
Disdus
Kaskus
Facebook
Where to Shop
Half of online shoppers uses
Facebook or Kaskus to buy
goods
In addition to facilitating trust
building for consumers with lackof trust in making purchases
online, social networks are also
able to more accurately screen
user behavior for ad placementsSource: Survey* We partnered with Disdus to distribute the survey through their social media mailing list. Therefore, penetration rates for Disdus and DealKeren (another group buying site) are likely to be exaggerated.
*
*
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70%
41%
30%
24%
15%
Bank
Transfer
Klik BCA Credit
Card
CoD Mandiri
Internet
Payment Method
Note:Bank Transfer means ATM payments, cashier payments ortransfer of funds electronically to a specified bank account
KlikBCA and Mandiri Internet is the transfer of money usingthe respective banks proprietary electronic payment network
Bank transfer is the most widely used
method of payment for eCommerce
Online payment solutions are fragmented
and still not widely used
eWallet solutions have less than 5%
penetration
Source: Survey 24
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Bank Transfer Problem
9
8
7
4
Bank Transfer
Klik BCA
Mandiri Internet
Credit Card
Despite high usage, the bank transferprocess is highly tedious and involves
many more stepsthan credit card
number of steps
needed to completea transaction
Source: Veritrans and DailySocial estimates by testing on 5 major e-commerce websites in Indonesia 25
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Online Spend
100k-500k
500k-1m
1m-2m
2m-5m
5m-10m
>10m
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By 2015
2011 2015
GrowthOpportunity
Internet Users(millions)
Middle classpopulation (millions)
Broadbandpenetration
55 149
110 150
2% 30%
Internet usage will risethreefold over the
next 4-5 years
eCommerce Market
Size
$0.9bn $10bnSource: Nomura Research Institute, Economist, Indonesia Statistics Bureau, Euromonitor International, Indonesia Broadband DeclarationNote: Middle class defined as those with household disposable income above $5,000/year
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Growth Opportunity
Supported by robust economic growth &increase of purchasing power
Mobilepenetration
GDPgrowth rate
Credit Cardusage
30%6.4%77%
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Growth Opportunity
Facebook and Twitter are heavily usedand present great opportunities to reachpotential eCommerce customers
43 million users(4thlargest globally)
90% under age of 35
11.5 million users
(4thlargest globally)
12% of total tweets
globally 29
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Challenges
BetterInfrastructure
BetterProducts
& Services
BetterPaymentSystem
Price, quality, variety,
and customersupport are not
competitive vs.
offline channels
Slow internet and
unreliable delivery
time
Indonesias banksand conventions are
slow to adapt to
online transactions
Explosive growth in eCommerce30
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2012 DailySocial & Veritrans
Designed by Naning Utoyo & Ramda Y