eCommerce in Indonesia
August 2012
About Us
 Leading online payment
processor for the
Indonesian market
 Tech media and research
company that focuses on
the Indonesian market
 Founded in 2011
 Founded in 2008
 www.veritrans.co.id
 www.dailysocial.net
2
Research Background

This study was conducted as part of an
independent research project at Harvard Business
School by the management of Veritrans, in joint
effort with DailySocial

First-hand interviews and transaction information
was collected from leading eCommerce companies
in Indonesia

This report is the first study solely focused on the
Indonesian eCommerce market
3
Research Background
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
4
Research Background

Number of online shoppers surveyed: 584

Distributed through email lists owned by DailySocial,
Disdus, and other cooperating parties
35-44
7%
45+
1%
Male
40%
Female
60%
25-34
39%
15-24
53%
College/
Graduate
54%
Secondary
School
33%
Diploma
Gender
Age
Education
13%
5
Defining eCommerce
“
The sales of goods and services
where an order is placed by the
buyer or price and terms of sale
are negotiated over the Internet
“
— U.S. Department of Commerce
6
Defining eCommerce

Payment does not necessarily need to be
made online


Includes classified ads sites (e.g. Kaskus,
Tokobagus, Facebook)
Does not include online travel services,
financial brokers and dealers, and ticket
sales agencies
7
Worldwide
eCommerce
Market
Percentage of
eCommerce users
out of the internet
population
17%
28%
71%
Avg. annual
eCommerce spend
per eCommerce
user
$824
$799
$1,111
eCommerce
market size
$11 B
$115 B
$193 B
Source: Internet World Statistics, BCG, US Department
of Commerce, JP Morgan, Business Monitor
International, Webshopping
8
How about Indonesia?
$ 0.9 billion
(2011)
Source:
Internal estimates, Survey
Avg. annual
eCommerce spend per
ecommerce user
Percentage of
eCommerce users out of
the internet population
$256
6.5%
9
It’s only 0.7% of
total retail sales
$ 134 Billion
Source: DataStatistik
10
Top-down Analysis
Calculation of Indonesian eCommerce market
from public data & consumer survey
Estimated market size: $0.6 - $1.2 billion
11
Key Assumptions
& Calculations
Low
High
Population in 2011 (millions)
236
Internet penetration
23%
No of Internet users (millions)
55
eCommerce penetration
5%
8%
eCommerce buyers (millions)
2.8
4.4
Average spend per transaction
Rp. 500,000
Rp. 500,000
4x
5x
5,500
11,000
In US$ Million
611
1,222
% of total retail sales
0.5%
No. of transactions per year
Total eCommerce revenue
In Rupiah Billion
Source:
BCG, DataStatistik, Internet World Statistics, Survey
0.9%
Assumptions
12
Bottom-up Analysis
Calculation of Indonesian eCommerce market
from survey of leading eCommerce players in
Indonesia
Estimated market size: $0.8 - $1.0 billion
13
Bottom-up Analysis

Many eCommerce companies and investors
contributed transaction data to this analysis

However, they have requested that we do not
disclose individual company data so we can only
report in aggregate terms

However,
, Indonesia’s leading online
forum, has given us special permission to disclose
their transaction data. Thank you Kaskus!

The following page gives you detailed calculation of
how we were able to estimate Kaskus’ transaction
volume
14
Key Assumptions
& Calculations
Low
High
New listings (millions)
1.0
Products per listing
4.0
New products per month (millions)
4.0
$27.8
Average transaction size (US$)
Close rate
Total monthly sales volume
from new listings
+ sales from old listings
Total monthly sales
from all listings
Estimated annual sales of
Kaskus only
Source:
BCG, Internet World Statistics, Survey
20%
30%
$22.2m
$33.3m
$2.5m
$3.7m
$24.7m
$37.0m
$296m
$444m
Assumptions
15
Indonesia Today
Total population
Median Age
GDP per capita
248 million
28 years
$4,700
16
Internet Penetration Rate
Total Internet users in
Indonesia: 55 million
%
80
67
70
56
60
50
38
40
30
33
31
23
20
10
Indonesia Singapore
Source: Internet World Statistics, Nielsen
Vietnam
Malaysia Philippines Thailand
17
How & Where?
More than two-thirds access internet
by desktop & laptop in home
Other
Tablet
School &
Internet
Café
2%
3%
Other
4%
8%
Smartphone
24%
Source: Survey
Office
Desktop
&
Laptop
Home
71%
63%
device used
25%
Source: Survey
access location
18
Time Spent
<1
1-4
>30
5-9
20-30
10-20
 More than a quarter
of users spend over
30 hours per week
online
 Compared to other
Southeast
Asian
countries, it’s on par
with Malaysia and
Philippines but less
than Singapore and
Vietnam
hours spent online weekly
Source: Survey
19
Internet Usage
Search
91
Social Network
89
Email
78
News
65
Music/Video
56
Online Banking
41
Travel
34
Career/Education
30
Games
24
Blog
Other
Source: Survey
22
4
 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
20
Mobile Usage
Chat
69
Email
59
Search
55
Music
47
Games
30
Blog
8
Other
9
Source: Survey
 Chat is the primary use of
mobile phone service among
Indonesians
 The top three most used
mobile functions require
mobile data connection
21
Online Shopping
37
Fashion
20
Travel booking
20
Music/Video/Games
13
Electronics
Books
Other
Source: Survey
8
18
 Fashion goods are the most
popular
things
bought,
followed by online travel
bookings which nowadays are
easily booked over the
Internet
 Some of the more popular
categories found in developed
market (e.g. online groceries)
are virtually nonexistent
22
Where to Shop
Facebook
50
Kaskus
49.2
Disdus*
19.5
Tokobagus
13.6
Dealkeren*
11.9
Amazon
8.9
eBay
8.5
Bhinneka
5.5
Multiply
4.7
Blibli.com
4.7
Tokopedia
3.8
Other
 Half of online shoppers uses
Facebook or Kaskus to buy
goods
22.5
 In addition to facilitating trust
building for consumers with lack
of trust in making purchases
online, social networks are also
able to more accurately screen
user behavior for ad placements
Source: Survey
* We partnered with Disdus to distribute the survey through their social media mailing list. Therefore, penetration rates for Disdus and Deal
Keren (another group buying site) are likely to be exaggerated.
23
Payment Method
 Bank transfer is the most widely used
method of payment for eCommerce
70%
 Online payment solutions are fragmented
and still not widely used
 eWallet solutions have less than 5%
penetration
41%
30%
24%
15%
Note:
Bank Transfer means ATM payments, cashier payments or
transfer of funds electronically to a specified bank account
KlikBCA and Mandiri Internet is the transfer of money using
the respective bank’s proprietary electronic payment network
Bank
Klik BCA Credit
Transfer
Card
Source: Survey
CoD
Mandiri
Internet
24
Bank Transfer Problem
 Despite high usage, the bank transfer
process is highly tedious and involves
many more steps than credit card
Credit Card
Mandiri Internet
Klik BCA
Bank Transfer
4
number of steps
needed to complete
a transaction
7
8
9
Source: Veritrans and DailySocial estimates by testing on 5 major e-commerce websites in Indonesia
25
Online Spend
>10m
5m-10m
<500k
100k500k
2m-5m
15%
42%
1m-2m
13%
500k-1m
 The majority of online
shoppers spend up to Rp.
500,000 (US$ 55) per
transaction
 There is a minority of
shoppers who spends
over Rp 5 million
16%
26
Growth
Opportunity
By 2015
Internet usage will rise
threefold over the
next 4-5 years
2011
2015
55
149
Middle class
population (millions)
110
150
Broadband
penetration
2%
30%
$0.9bn
$10bn
Internet Users
(millions)
eCommerce Market
Size
Source: Nomura Research Institute, Economist, Indonesia Statistics Bureau, Euromonitor International, Indonesia Broadband Declaration
Note: Middle class defined as those with household disposable income above $5,000/year
27
Growth Opportunity
Supported by robust economic growth &
increase of purchasing power
Mobile
penetration
GDP
growth rate
77%
6.4%
Credit Card
usage
30%
28
Growth Opportunity
Facebook and Twitter are heavily used
and present great opportunities to reach
potential eCommerce customers
 43 million users
(4th largest globally)
 90% under age of 35
 11.5 million users
(4th largest globally)
 12% of total tweets
globally
29
Challenges
Slow internet and
unreliable delivery
time
Better
Infrastructure
Price, quality, variety,
and customer
support are not
competitive vs.
offline channels
Better
Products
& Services
Indonesia’s banks
and conventions are
slow to adapt to
online transactions
Better
Payment
System
Explosive growth in eCommerce
30
© 2012 DailySocial & Veritrans
Designed by Naning Utoyo & Ramda Y.