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Indonesia Advances Toward Mobile-Led Digital Transformation

It’s no surprise that the biggest players in e-commerce in Southeast Asia are setting their sights on Indonesia, given its young, increasingly affluent, and mobile-centric population. The market clearly exists, with eMarketer estimating that the number of digital shoppers will grow to 107.2 million by 2020 from the current 83 million.

But while successful e-commerce companies, from Singapore startup Sea (formerly Garena prior to its 2017 rebranding) to Chinese behemoth Alibaba, are prepared to invest and expand into Indonesia, the country’s lack of infrastructure could pose challenges.

Piotr Jakubowski, CMO of Indonesian ride-sharing startup Go-Jek (now valued at US$4 billion), suggested digital leaders look to China as a guide for what to expect.

“Indonesia is in a bit of a unique situation due to its mobile-first nature. People skipped over desktop when experiencing their first connection to the online world,” Jakubowski told CMO.com. “The level of growth and adoption is quite similar to what happened in China a few years ago, albeit at a much different scale. The development of the digital space in China is fascinating, as the country has quickly become the leader in mobile-based innovation.”

Forecast: Growth
The fourth most populous nation in the world, Indonesia has 3.51% of world’s population, and more than half of that population resides in urban areas. The forecast for Indonesia for the next three decades has the median age rising from the current 28.6 to 37, with Indonesia retaining its share of the world population. At present, smartphone ownership is estimated to be at 37.5% of the population, with mobile phone user penetration expected to reach 45.3% by 2018. Smartphone user penetration is predicted to reach 47.6% of the mobile market by 2019, or 92 million, maintaining Indonesia’s position as the third largest smartphone market in Asia. 


In 2012 Jakarta was named the No. 1 Twitter city in the world, and 96 million Indonesians are predicted to have a Facebook account by 2018. Brands, both local and international, use social media to connect with consumers, though TV still gets the lion’s share of advertising dollars, whilst e-commerce continues to lag.

Indeed, the total advertising spend in Indonesia sits at about US$2.8 billion, most of which is invested in television, which has 90% market penetration. Jakubowski said he thinks digital can realistically take some of the market share from TV, but that it will be highly dependent on the speed at which internet adoption happens.

Time will tell. Tech in Asia reported that the 2014-2019 Indonesia Broadband Plan, an initiative to boost the country’s economic competitiveness, aims to provide mobile internet access to 52% of the population, with broadband infrastructure expected to cover 49% of households.

“Being the world’s largest archipelago complicates both the installation and access to high-speed internet. That being said, we’ve already seen a shift in some spending to digital spend as a complement to other types of media, particularly for brands looking to reach the younger, more connected consumer,” Jakubowski said.

An April report from Macquarie Research (PDF) seems to support this view: “Many projected that Indonesia had China’s potential, with similar market and customer dynamics. ... Both countries were also facing similar issues with regards to payment methods and infrastructure. Indonesia’s e-commerce potential is indeed large but growth of 65% YoY in 2016 was slightly lower than our expected 80%.”  

The report also noted slower-than-expected e-commerce growth. That means traditional retail and media are not yet facing disruption, so, in the short term, e-commerce could be an opportunity rather than a threat, as it provides access to new customers. Macquarie said e-commerce advertising has boosted the total ad spend, and that free-to-air TV is set to remain dominant up until 2020.

Reaching Connected Consumers
Young and social-media savvy, the mobile-internet users of Indonesia are both using and doing digital business in their daily lives with ride-sharing apps, online travel agents, and other assorted service providers. Despite this, the lag noted in e-commerce growth seems to be centred around online shopping.

Singapore-based Sea has factored this into its Indonesian expansion strategy. According to eMarketer, it is targeting desktop competitors by focusing on providing a great mobile experience for shoppers.

“It's quite clear that the online-based brands‒travel, e-commerce, and on-demand platforms like Go-Jek‒will be pioneering much of the growth,” Jakubowski said. “However, the likes of Unilever, Danone, Indofood, and others have definitely become more prominent in the digital space.”

With high-speed access, big players like Alibaba entering the field, and other digital giants including Amazon rumoured to be doing the same, it doesn’t look long before the yet-to-be-experienced disruption in Indonesia occurs‒and, from there, digital transformation. 

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