INSIGHTS AND TRENDS OF E-COMMERCE MARKET IN

INDONESIA COMPARED WITH CHINA

PAPER

Compiled as one of the requirements to fulfill

Chinese Economy Course

BABY NATASIA CHANDRINOVA

詹如意

FACULTY OF ECONOMICS

NANJING XIAOZHUANG UNIVERSITY

December 19th, 2017

 NANJING XIAOZHUANG UNIVERSITY
FACULTY OF ECONOMICS
ACCOUNTING STUDY PROGRAM

Students Name : Baby Natasia Chandrinova, 詹如意

Course : Chinese Economy

Title : Insights and Trends of E-Commerce Market in Indonesia Compared With China

Due Date : December 19, 2017

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I declare that the assignment presented here is entirely my own work except where
otherwise indicated.
Student Signature Date
December 19, 2017
 Could Indonesia be the next
China in the world of E-Commerce?
In conversations with consumers
across the country, we discovered
an online revolution in the making
that has huge growth potential for
investors.
Indonesia is experiencing explosive Internet growth. The number of Indonesians online
is expected to more than double from 92 million in 2015 to 215 million by 2020.
With an expanding middle class and growing smartphone penetration among its
roughly 255 million residents, Indonesia could well become a major E-Commerce
market in the coming years. But challenges exist, and it may take time to assess the
most promising investments.
It’s easy to make comparisons to China, where E-Commerce penetration is higher
than in many developed markets. For example, both countries have huge markets and
populations with increasing disposable income, which feeds demand for new products
and services. But there are major differences. To begin with, Indonesia is a vast
archipelago with some 6,000 inhabited islands. Because its infrastructure is less
developed than China’s, delivery logistics can pose problems.
On a recent grassroots research trip, we spoke with consumers from urban Jakarta to
rural Sidoarjo. We saw how key improvements in logistics, road infrastructure and
online payments are paving the way for an online revolution
China the largest E-Commerce market in the world is now setting the benchmark
for present and future global retailing. This is driven by its mobile first consumer
behavior, innovative social commerce model, and a trusted digital payment
infrastructure. E-Commerce is the clear growth story; in 2017, the China national
online retail sales of goods and services reached 499 million USD, 32.1% higher than
a year ago. In comparison, retail sales of the physical stores went up by 7.2% only.
While Indonesia home to 258 million people with a total GDP of 862 billion USD it’s
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E-Commerce revenue only amount to 7.06 million USD, Indonesia is still in growing
phase but show a large grow potential although Indonesia is a fragmented
E-Commerce market with a low percentage of E-Commerce activity compared to total
retail sales, growth in broadband and mobile connectivity combined with consumer
openness to online retail buying means there is huge potential.

As China has “better roads and highways”, as well as other infrastructure facilities
compared to Indonesia, a comprehensive E-Commerce ecosystem similar to that in
China has just stared to emerge in this country. China is must-play, must-win market
for retailers and brands globally. It is already the world’s biggest retail market and the
increasing purchasing power of china millennial will sustain future growth. China’s
retail market has never been so simultaneously attractive and challenging,
consumer-spending power is increasing but they are faced with an abundance of
choice and are easily bored. E-Commerce is experiencing tremendous growth but the
market is fiercely competitive and innovation is constant.
While Indonesia E-Commerce market is still in earlier stage with a few number of
major seller controlling the market that’s the reason why Indonesia market is so
attractive to business or even foreign investor because it has large potential in growth
but low in term of competition, in 2015 China second largest E-Commerce JD launch
their services in Indonesia and now in just two years’ time they are the fifth largest
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E-Commerce platform in Indonesia. China wealthiest man Jack Ma also enter
Indonesia E-Commerce market by buying the largest E-Commerce market Indonesia
which is Lazada.

To put it in more simple word, china’s E-Commerce market is approximately 15

to 20 years ahead of that in Indonesia, and that is why it is so attractive as growing
market has a lot of potential compare to matured market like China.
We are seeing a very different trend happening this year in these two market,
China is shaping into an Omni-channel, more and more consumers shop online and

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less often at a physical stores. This phenomenon make many retailers and brand
started to embrace the growth of digital by experimenting with Omni-channel
capabilities, Omni-channel strategies are intended to improve operational efficiency,
customer experience and overall profitability by turning their physical store network
into fulfillment hubs for E-Commerce sales. This ship from store model allows the
retailer to better manage E-Commerce demand during peak sales season like singles
day and also optimizes merchandising and gross margin by enabling inventory to be
universally managed across online and offline channels. China’s retailer also invest
heavily in order to provide user generated content for their user and bringing all their
selection of product to online platform

While in Indonesia customer just start to learn to shop online with total online
retail sales amount to less than 20% of total national retail sales, people just start to
have their first taste of the internet, and hold distrust and afraid of fraud when make a
purchase online. But the number of digital shopper is growing from 4.6 million in
2013 to 8.7 million in 2016, these number shows that even though with Indonesia
market limitation people that embrace E-Commerce is growing rapidly.
In China E-Commerce market more than half of their consumer shop using their
mobile on weekly and daily basis, as compared to 14% of consumer globally. Within
only 4 years, this trend has come to characterize the E-Commerce landscape in China.
If the internet mean mobile, then WeChat is the de facto mobile platform. With over
800 million monthly active users, it is almost a proxy for mobile penetration in China,

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with that retailer and brands have come to recognize that capturing consumer’s
attention typically means operating within the WeChat environment rather than
building a direct-to-consumer mobile app. Many retailers have embedded their loyalty
programs within the WeChat app and now run customer relationship management and
engagement through the platform itself. And it is very effective Tech in Asia total
retail survey revealed that 41% of Chinese consumers use social platforms as a way to
receive promotional offers this enable company to bridge online and offline data to
build a detailed customer database used to send personalized message via the Wechat
platform based on difference stages of consumer life cycle.
As for Indonesia, market is still pretty lacking in term of interacting with
customer, with business still depend on email marketing to build relation with their
customer. Most business still do business only in one channel and have not embraced
multiple channel yet, Indonesia is slowly embrace the changes that E-Commerce
bring but it have not reach the level of china market.
China has a good infrastructure system because of that goods that customer buy
from online retailer can reach their doorstep in just a few days, but that is not the case
for Indonesia, because of under developed infrastructure many rural hesitate to make
their purchase online this make online transaction focus more on the urban area and
even in urban area it can take a lot of time for good to be delivered on time in high
season.
E-Payment landscape in both countries also have a very big difference in China
payment is made very easy when you purchase online whether on online retail stores
or offline stores. China has two most famous E-payment that is widely used across
mainland which is Alipay and WeChat pay most if not all retailer support at least one
of these to payment, it’s very convenient because it can ties directly to your bank
account balance so basically you can just buy anything in an instance. While
Indonesia does show some new E-payment being introduce by, certain local bank or
provider but not all retail store support it. Some retail sore may only support one of
Indonesia bank E-payment while other may not, this make customer need to have
multiple payment method to buy product from different places, which is a hassle. Not
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to mention Indonesia most popular way to pay online is still manual bank transfer that
can take a long time to verified and customer need to go to nearest ATM to do it.

Indonesia has the largest population in Southeast Asia, by far, and an

E-Commerce penetration that is still very low, making it one of the hottest
E-Commerce market in the world. Attracting both global and local companies’
interests, Indonesia now has fast growing e-commerce scene poised to become a
global powerhouse.
Still inferior to 1% of all sales in Indonesia, E-Commerce is expected to expand
in high double digits in the coming years in Indonesia. Though the market is not as
mature as E-Commerce in Malaysia or Singapore, the Indonesian population of more
than 260 million, makes the absolute numbers of growth in the country vertiginous,
with millions of new online on-line shoppers every year.

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 The fast growing Indonesian telecommunications infrastructure, its large
population with a growing internet connectivity, especially through mobile phones,
will make Indonesia the leader of E-Commerce in Southeast Asia in a very near
future.
Much more work needs to be done before Indonesia can become a major
E-Commerce market. And it’s still unclear who the market leaders will be. But we
believe they’ll build on price competitiveness, a wide selection of merchandise and,
above all, trust. Unlike China, where Alibaba dominates e-commerce, Indonesia’s
market could be more fragmented.
For now, the big winners from the E-Commerce boom are consumers, while there
are limited ways for investors to play the development of online culture in Indonesia.
As the market expands, investors should look out for telecom companies that stand to
gain from increased data traffic, and banks, which will profit from more online banking
and E-Wallet transactions. Big opportunities will surface in the coming years, as
companies step up to capture the largest share of e-wallets and ride the wave of
E-Commerce as it spreads across Indonesia.