Exploring Indonesia’s rising E-commerce: 5 unique characteristics

What makes Indonesia one of the fastest growing e-commerce markets in the Southeast Asian region?

Despite facing challenges from external economic factors, Indonesia is projected to recover and achieve a value of approximately $110 billion by 2025, primarily driven by the growth of the e-commerce sector. We look into the 5 unique characteristics of Indonesia’s e-commerce market and how it sets them apart from the Southeast Asian counterparts.

1. Homegrown E-commerce Players

• Indonesia boasts big domestic e-commerce companies like Tokopedia and Bukalapak
• These companies have competed effectively with regional giants such as Shopee and Lazada
• Homegrown e-commerce players display Indonesia’s ability to foster homegrown talent and innovation in the competitive e-commerce landscape

2. Growing middle income segment

• The growth of Indonesia in the middle-income sector is evidenced by its Gross National Income (GNI) per capita reaching US$4,580 in 2022, marking a 9.8% increase from the previous year
• This increase placed Indonesia within the upper middle-income classification range of USD 4,466 to USD 13,845
• This increase suggests that the population, on average, would have more spending power on e-commerce. This rise in spending power can contribute to the growth of the e-commerce market as individuals are more likely to engage in online shopping activities with increased disposable income

3. More Indonesians are engaging in E-commerce

• In 2022, it was recorded that there were 68.37 million e-commerce users in Indonesia
• There has been a steady increase in the number of users in the past years and it is forecasted to reach 133.78 million users in 2029
• More users engaging in e-commerce activities will indicate a growing market demand and potential for increased transactions and revenue within the sector

4. Inevitable integration of E-commerce in the retail landscape

• In 2022, the penetration rate of e-commerce in Indonesia was 27.39%
• There has been a steady increase in the penetration in the past years and it is forecasted to reach 47.03% in 2029
• More Indonesians would embrace e-commerce as a preferred shopping channel
• E-commerce is poised to be an integral part of the retail landscape

5. Preference for Cash on Delivery

• In Indonesia, the preference for cash on delivery (COD) payment method is notably high compared to other Southeast Asian countries
• This payment method entails customers settling their payments in cash at the time of product delivery
• In 2022, 11% of Indonesian e-commerce payments method were through COD, and this was the 3rd most popular payment method

Indonesia’s e-commerce industry stands out with unique characteristics that set it apart in the digital landscape. These 5 unique factors collectively showcase Indonesia’s dynamic e-commerce sector, characterised by local innovation, a growing user base, and distinct consumer behaviour patterns that contribute to its prominence in the regional market.