Google and Temasek Holdings released a joint report last week showing that Indonesia`s e-commerce industry is projected to be worth $53 billion by 2025, largely due to first-time buyers in second- and third-tier cities across the archipelago. (Reuters Photo/Lucy Nicholson)
Aina Isnaini, a 28-year-old civil servant in Jakarta, regularly shops online for hijabs, cosmetics and beauty products.
She regularly browses popular e-commerce platforms such as Shopee and Lazada, spending on average about Rp 300,000 ($21) per month on online transactions. Aina said she mainly prefers these platforms for their numerous discounts and trusted sellers.
Meanwhile, 27-year-old marketing executive Arief Haadi Mulia said he prefers shopping online as it eliminates the need for personal interaction, which makes the transaction process much more efficient, thus saving him time.
"I usually buy apparel and gadgets. I even bought my iPhone through an e-commerce site," he said.
Aina and Arief are both millennials, a powerful consumer segment that has been driving sales of among others, gadgets, clothing, beauty products, phone credits and electricity tokens. A recent report by Paris-based marketing research firm Ipsos shows that millennials dominate Indonesia`s online shopping scene, contributing at least 64 percent to the industry`s growth.
Last week United States-based technology giant Google and Singapore`s wealth fund Temasek Holdings released a joint report showing that Indonesia`s e-commerce industry is projected to be worth $53 billion by 2025, largely due to first-time buyers in second- and third-tier cities across the archipelago.
This figure is 31 times higher than in 2015, when a similar study was carried out for the first time. According to last week`s report, e-commerce is experiencing healthy growth in Southeast Asia, with Indonesia leading the pack at $12 billion this year.
Google projected that Indonesia`s internet economy, which refers to the financial value of all activity based on digital technologies, including the internet, could reach $100 billion by 2025 ? the highest in the region ? from $27 billion now and $8 billion in 2015.
This estimate includes e-commerce valued at $53 billion, online travel ($25 billion), ride-hailing services ($14 billion) and online media ($8 billion).
Some unicorn startups in Indonesia, such as Tokopedia and Bukalapak, have played a key role in boosting the popularity of e-commerce through a mobile-friendly user experience, seamless logistical networks, frequent sales promotions and diverse product ranges.
About 120 million people in Southeast Asia now shop online, according to Samuele Saini, Google`s head of strategy and insights in the region. This represents a 144 percent increase compared with three years ago.
"So, there are 70 million people in Southeast Asia who have made online purchases for the first time in the past three years. That has been the primary driver of growth, bringing increasingly more people to buy on e-commerce platforms," Saini told reporters last week.
With Indonesia being the main battleground for e-commerce players due to its young, thriving population and large internet user base, first-time buyers living in second- and third-tier cities are the driving force behind the strong growth.
"Many customers are looking for products that are not available in offline stores and the only way [to buy such products] in those cities is through e-commerce websites," Saini said.
He said almost everyone would be shopping online at some point in the next few years and that the key measurements would then be how many categories of consumers buy online, and how frequently they shop.
Southeast Asia has attracted funds from both local and global investors over the past four years, with the lion`s share going to unicorn startups.
Startups in the region attracted total investment of $24 billion, which according to Google`s estimate, is on the track to increase to between $40 and $50 billion by 2025.
Google said the internet economy in the region attracted about $9.1 billion in the first half of this year, which is more than double compared with the same period a year earlier.
The bulk of the capital, or around $16 billion to $24 billion, went to unicorn startups Go-Jek, Grab, Traveloka, Tokopedia and Bukalapak.
At around $6 billion, Grab secured the highest amount, emerging as the next decacorn ? a company valued at more than $10 billion.
Southeast Asia has at least 10 unicorns compared with 131 in China and 82 in the United States.
"The Indonesian market is the largest and fastest growing in the region. The opportunities are very big. All the ingredients are present to have more unicorns and decacorns," Saini said.
He added that one of the key factors for these companies to reach higher valuations is securing large markets.
"Investors, when looking at the valuations of these companies, consider the size of the opportunities, and how many users and transactions on such platforms. How much growth you have in that particular sector," Saini said.
"There are many unicorns in China because it`s a market of 1.3 billion people. As soon as they become leaders in online food delivery, even in the smallest sector, these companies could find a new market [and become] a new unicorn, [or] a new decacorn," he said. https://jakartaglobe.id/business/indonesias-e-commerce-industry-projected-to-be-worth-53b-by-2025
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