eCommerce: Indonesia

eCommerce in Indonesia: Key Insights

• Spending Lead: Indonesia shines in APAC with 64% of consumer spending done online, aiming for a 46% eCommerce penetration by 2028. Rapid tech adoption and widespread internet are key drivers.

• Revenue Jump: eCommerce revenue in Indonesia is set to break US$100 billion by 2030, pushed by more internet users and a pandemic-induced online shopping surge. Daily shoppers mark the strong market potential.

• Livestream Growth: 69% of Indonesian shoppers turned to livestream commerce in 2022, showing a quick shift towards engaging, real-time shopping experiences and positioning Indonesia at the forefront in APAC.

• Social Hurdle: The government's block on social media transactions challenges Indonesia's social commerce, with TikTok's move to buy into Tokopedia spotlighting efforts to sidestep these challenges and stay in the game.

Indonesia, as of 2023, is the world's fourth most populous country, home to over 270 million people and a rapidly urbanizing society with a total number of internet users of over 230 million. The Southeast Asian archipelago consists of more than 17,000 islands, has over 700 local languages, and a predominantly digital-savvy, young population.

With an anticipated revenue exceeding US$100 billion by 2025, the country's eCommerce market is projected to swell to an impressive US$204 billion by 2028 according to our numbers. This growth is made possible and nurtured by various factors in the country, some of which we'll have a brief look at here.

Two Thirds of Consumer Expenditure in Indonesia is Online 

Indonesia is a significant player in the APAC region. According to a 2022 report by Wunderman Thompson Commerce, Indonesia's online spending accounted for a significant 64% of the country's total consumer spending, aligning it with India and just trailing China, which led the pack at 66%.

Moreover, Indonesia's performance surpasses other countries like Thailand, Australia, and Japan, which reported online spending rates of 60%, 55%, and 48%, respectively.

Indonesia's high online spending percentage stems from multiple factors. The country's rapid digital transformation, fueled by widespread internet access via mobile phones, has driven a shift towards online shopping. With the fourth-largest global population, Indonesia's growing internet penetration naturally increases online transactions.

Indonesia’s eCommerce Penetration Rate Continues Growing 

In general, there is a high probability of a positive correlation between Internet penetration and eCommerce penetration rate. As more people gain internet access and develop digital literacy, the customer base for eCommerce grows, potentially increasing the country's penetration rate.

Back in 2019, Indonesia's eCommerce penetration rate was only 23%, and by 2023 it grew to 32%. As projections indicate, this increase is set to continue, pushing the rate to an estimated 46% by 2028.

This expansion reflects the nation's burgeoning digital literacy, even though countries like Germany and the United States are way ahead with values twice as high as the Indonesian eCommerce penetration rate, each forecasted at 93% by the year 2028. Meanwhile, China remains behind and is expected to reach a 28% rate by 2028.

Indonesian eCommerce Revenue is to Pass US$100 Billion by 2030

As internet access expands and digital skills improve, more people are shopping online, boosting the potential for eCommerce revenue in Indonesia.

Looking at recent data, we see a significant jump in revenue from 2019 (nearly US$25 billion) to 2020 (US$49 billion), largely driven by the COVID-19 pandemic's boost to online shopping. After this surge, growth has continued at a steadier pace. For instance, revenue moved up from US$53 billion in 2021 to US$59 billion in 2022, following with almost US$73 billion last year.

Forecasts for upcoming years are even more optimistic. Revenue is expected to hit US$95 billion this year and continue its upward trajectory, reaching US$120 billion in 2025, US$147 billion in 2026, and further climbing to US$174 billion by 2027. By 2028, eCommerce revenue in Indonesia is projected to exceed US$204 billion, showcasing a substantial growth from the figures recorded in recent years.

10% of Indonesian Consumers Shop Online Almost Everyday 

The Indonesian eCommerce market is characterized by consumer engagement that isn't simply episodic, but rather habitual.

The 2023 data from Rakuten Insight showcases the online shopping frequency among consumers in Indonesia. The majority (37%) shop weekly, followed closely behind by 36% who shop several times a week, and 15% shopping less than once a week. Less frequently, 10% shop almost every day, and a mere 2% never shop online.

This trend reflects a persistent demand that businesses can seize for their benefit. Additionally, the small fraction of consumers who never partake in online shopping suggests there is still substantial room for market growth. 

Livestream Commerce on the Rise
in Indonesia

One of the latest developments in the eCommerce landscape is the emergence of livestream commerce which originated in China. Livestream commerce, or live shopping, is essentially a hybrid of entertainment and eCommerce.

It involves the use of livestream video content to showcase and sell products directly to consumers in real-time, with the ability to interact with sellers and make purchases immediately, combining the thrill of live video and social media engagement with the convenience of online shopping.

In the case of Indonesia, where this digital trend is gaining popularity in the online shopping sphere, the data shows that the country is a strong adopter of livestream commerce within the APAC region.

As per the forementioned report by Wunderman Thompson Commerce, 69% of Indonesian shoppers engage with livestream commerce in 2022, marking a significant adoption rate. This, however, still places Indonesia slightly behind China, India, and Thailand, which report rates of 77%, 75%, and 72% respectively. Meanwhile, Japan and Australia trail behind with respective livestream commerce adoption rates of 32% and 22%. 

The high adoption rate in Indonesia suggests a development towards more interactive and real-time shopping experiences, mirroring global trends where consumers are increasingly seeking engagement and authenticity. The rising popularity of livestream commerce has the potential to further drive the growth of Indonesia's already flourishing eCommerce market, introducing new forms of consumer engagement, and providing businesses with innovative ways to showcase their products.

Indonesia Prefers eCommerce Platforms for Live Shopping 

Indonesia's recognition of the growing livestream commerce trend is evident in the proactive steps taken by its eCommerce platforms, like Shopee. The Singapore based eCommerce platform has integrated livestream commerce into their marketing strategies by creating Shopee Live, effectively employing this potent tool to stimulate sales growth and enhance customer engagement. The adoption, however, extends beyond businesses — it's being wholeheartedly embraced by consumers as well. 

A 2022 survey conducted by Snapcart revealed that a significant 57% of Indonesian participants engage in live shopping, primarily through eCommerce platforms. Although social media platforms captured a substantial share with one-third of the responses, the traditional medium TV stood at a mere 10%.

The popularity of livestream commerce platforms in Indonesia is driven by increased internet access, mobile use, and a youthful demographic keen on real-time, interactive shopping experiences. These platforms, through their innovative blend of entertainment and shopping, influencers' product showcasing, immediate feedback mechanisms, and alignment with modern consumer trends, significantly bolster Indonesia's thriving eCommerce market.

Indonesian Government Against
Social Commerce

Considering the ban of direct transactions on social media by the Indonesian government in September 2023, it is probable that social commerce in the country might lose some ground. The sanction specifically targets TikTok's sales platform, the TikTok Shop, as it grew so quickly and created a monopoly in the Southeast Asian region that the government was forced to intervene.

Even though the new regulation obligated TikTok Shop to close in Indonesia, TikTok is working on buying 75% of Goto’s Tokopedia, the biggest Indonesian eCommerce platform. This may be a tactic to overcome government protectionism and regain ground in what was once TikTok Shop's largest market.

The exact plans of the Chinese company are still unclear, and it remains to be seen whether Indonesia will manage to maintain the separation of social media and eCommerce or whether social commerce will be able to celebrate a comeback in 2024.

Sources: Wunderman Thompson Commerce, Rakuten Insight, Snapcart, Statista, ECDB