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E-commerce in Indonesia has experienced significant growth over the past decade. From 2012 to 2022, total e-commerce sales in Indonesia increased from $140 million to $15.6 billion, representing approximately 3.4% of total retail sales.
This 10-year growth of 11,143% has dramatically changed the landscape of Indonesia. While being a poorer infrastructure-ready economy, comparing with its neighboring countries, we can still see e-commerce continue to grow dramatically over the coming years.
Over the past decade, the growth has been driven primarily by three factors: the expansion of the middle class, increased access to the internet and mobile devices, and the rapid development of fintech and alternative financing options. These factors have increased the availability of goods and services and facilitated the meeting of rising demand.
The Covid-19 pandemic has played a major role in the recent surge of e-commerce growth in Indonesia. Since 2020, the penetration of e-commerce has doubled in just three years. The government’s restrictions on physical retail and the public’s fears of the virus have led many consumers to turn to e-commerce as their primary means of shopping.
It is interesting to note that during the multiple waves of the Covid-19 pandemic from 2020 to 2022, small electronic devices such as phones, tablets, and other consumer electronics experienced the most growth. Groceries such as food and drinks also saw increased purchasing, and this behavior seems to have persisted among many Indonesian consumers even after the pandemic.
The majority of e-commerce penetration in Indonesia is concentrated in the Java region, which accounts for about 76% of buyers, followed by Sumatra (14%) and Sulawesi (4%). Digital shoppers in Indonesia are predominantly millennials between the ages of 20 and 37, comprising about 88% of the total. Men make up the majority of online shoppers in the country, accounting for around 53% of digital buyers. Almost all customers in Indonesia access e-commerce through smartphones, while a small minority use personal computers. Despite Indonesia’s weaker infrastructure compared to its neighbors, the increasing penetration of smartphones, rising GDP, growth of the middle income population, and increasing tech-awareness are contributing to the rapid growth of e-commerce in the country. The pandemic has also led consumers of all income levels to turn to online shopping, further driving the growth of e-commerce in Indonesia.
In 2021-2022, major e-commerce platforms in Indonesia have intensified their competition by expanding their capabilities in areas such as transportation (for example, Gojek and Tokopedia) and payment methods. These collaborations and partnerships allow the platforms to offer lower prices to consumers, which has attracted more customers to e-commerce, particularly given the negative impact of Covid-19 on purchasing power. In addition, reduced shipping costs from logistics partnerships are likely to encourage more frequent purchases throughout the year, reducing retailers’ reliance on seasonal sales periods or large basket purchases.
In Indonesia, Tokopedia and Shopee are the most dominant players in the e-commerce market, holding a combined market share of 65%. It is worth noting that a few years ago, Alibaba, along with their consumer-facing brand Lazada were the leading players in the Indonesian market, but their failure to cultivate the local market has ultimately cost them their dominant position.
In Indonesia, There are about 2.4% of people use credit cards, and 30.8% of people use debit cards. While there are 9.9% of people purchase on the internet, there is only 7.7% of people with online banking accounts.
For E-Commerce Customers in IndonesiaWhat are the major driving factors to purchasing online?
There is 158.6 million consumer goods e-commerce users in Indonesia, and they spend total of around 53.81 billion USD dollars in 2021. That makes a per capita spending on consumer goods e-commerce of around 339 USD. Also, in those e-commerce users, about 63.8% of them purchase through their mobile phone.
Our consumer research practice tracks what customers spend and how they make decisions across major economies in the world.
