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Ecommerce is growing rapidly in Indonesia, with the market expected to soar to $10bn by 2015. More global businesses are looking to take advantage of this fast-growing market, with its resilient economy and huge population.

With the world's fourth largest population, more than 700 languages, and 18,000 islands, Indonesia is a fascinatingly diverse country. Its idyllic beaches and stunning mountains draw tourists from around the world.

But for global businesses, its huge population, resilient economy, and emerging ecommerce market, are the main attractions.

Indonesia was recently named by global business leaders as a key market to watch in 2013. An annual survey by the Economist Corporate Network highlighted it as a country businesses “can’t ignore”. It came third on their list of where companies would be increasing investment, after China and India.

Analyst Justin Wood highlighted its economic growth, estimated at 6 to 7% this year, as well as its young, increasingly affluent population.

Ecommerce in Indonesia is still at a relatively early stage compared to Europe and North America. But it’s grown rapidly in the last few years – and this is expected to continue.

Research by Veritrans and Daily Social (in a project at Harvard Business School) estimated that the current ecommerce market is worth $0.9bn. They predict this will soar to $10bn by 2015. This goes hand-in-hand with a rise in internet use, with user numbers almost trebling from 55m to 149m.

A report by Emarketer in March 2012 highlighted the steep rise in internet connections, predicting that by 2014, nearly a third of the total population would be connected.

Nielsen Indonesia also found that consumers were beginning to spend much more money online once they were connected, with the proportion using the web for shopping rising from just 3% in 2008 to 68% in 2010. And it’s been named by the UK Department of Trade and Industry as one of the “high growth markets” in the world.

Many global businesses believe now is a good time to gain a foothold in this emerging market. While Indonesian companies, such as Bhinneka and hotel booking site Agoda, still dominate, this is beginning to change as more international competitors move in. 

Ikea, Starbucks, and Samsonite International SA are just some of the major companies that have recently launched in the country. And luxury goods manufacturer LVMH predicts Indonesia will become its largest market in Southeast Asia within the next few years, with rising demand for high-quality watches, jewellery and cosmetics.

One way that businesses are reaching out to new customers is via social media. Despite being spread among thousands of islands, its population are among the most socially connected in the world. Indonesia comes close to the top when it comes to ranking social media engagement, (according to WebIndex) with the population firmly embracing Twitter, Facebook and other networks. They found users were far more likely to upload content, create microblogs, and connect with brands, than in any country apart from China.

For foreign marketers targeting Indonesia, there can be many hurdles to overcome. Some of the challenges include complex bureaucracy and lack of legal regulations. And its unique geography can also pose difficulties for some suppliers in distribution. 

Although wireless connections are increasing, a lack of infrastructure still restricts access to the internet for many. With a large proportion of users relying on mobile connections, these should be a key part of any marketing strartgey.

As more global companies turn their eyes towards Indonesia in 2013, it will be interesting to see whether this huge, emerging market, fulfils the high expectations.

Christian Arno

Published 27 March, 2013 by Christian Arno

Christian Arno is Founder and Managing Director of Lingo24 and a contributor to Econsultancy. He can also be found on Twitter

23 more posts from this author

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