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eCommerce in Indonesia[1]

eCommerce in Indonesia[1]

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eCommerce in Indonesia

August 2012

About Us

 Leading online payment processor for the Indonesian market
 Founded in 2011  www.veritrans.co.id

 Tech media and research company that focuses on the Indonesian market
 Founded in 2008  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


6

— U.S. Department of Commerce

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 Avg. annual eCommerce spend per eCommerce user

17%

28%

71%

$824

$799

$1,111

eCommerce market size
Source: Internet World Statistics, BCG, US Department of Commerce, JP Morgan, Business Monitor International, Webshopping

$11 B

$115 B

$193 B
8

How about Indonesia?

$ 0.9 billion
(2011)
Avg. annual eCommerce spend per ecommerce user Percentage of eCommerce users out of the internet population

Source: Internal estimates, Survey

$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
Population in 2011 (millions) Internet penetration No of Internet users (millions) eCommerce penetration eCommerce buyers (millions) 5% 2.8
Rp. 500,000

High
236 23%

55
8% 4.4
Rp. 500,000

Average spend per transaction No. of transactions per year
Total eCommerce revenue In Rupiah Billion In US$ Million % of total retail sales
Source: BCG, DataStatistik, Internet World Statistics, Survey

4x

5x

5,500 611 0.5%

11,000 1,222 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
New listings (millions) Products per listing New products per month (millions) Average transaction size (US$) Close rate 1.0 4.0

High

4.0
$27.8

20%
$22.2m $2.5m

30%
$33.3m $3.7m

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

$24.7m
$296m

$37.0m
$444m

Assumptions

15

Indonesia Today

Total population

Median Age

GDP per capita

248 million

28 years

$4,700
16

Internet Penetration Rate
%
80 70 60 50 40 30 20 10 Indonesia Singapore
Source: Internet World Statistics, Nielsen

Total Internet users in Indonesia: 55 million
67

56
38 23

33

31

Vietnam

Malaysia Philippines Thailand
17

How & Where?
More than two-thirds access internet by desktop & laptop in home Other
2%
Other

Tablet

3%

School & Internet Café

8%

4%

Smartphone

24%

Desktop & Laptop

Office

25%
Home

71%
device used

63%

Source: Survey

Source: Survey

access location

18

Time Spent
<1
 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
19

>30

1-4

20-30 10-20

5-9

hours spent online weekly
Source: Survey

Internet Usage
Search Social Network Email News
65 56 41 78 91 89

Music/Video
Online Banking Travel Career/Education Games
34
30 24 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

Blog
Other
Source: Survey

Mobile Usage
Chat
Email Search Music Games Blog Other
8 30 69

59

55

47

 Chat is the primary use of mobile phone service among Indonesians  The top three most used mobile functions require mobile data connection

9

Source: Survey

21

Online Shopping
Fashion

37
20 20 13 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

Travel booking

Music/Video/Games

Electronics

Books

Other
Source: Survey

Where to Shop
Facebook Kaskus Disdus* Tokobagus Dealkeren* Amazon
19.5 13.6 11.9 50 49.2

8.9
8.5 5.5 4.7 4.7

 Half of online shoppers uses Facebook or Kaskus to buy goods  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
23

eBay
Bhinneka Multiply Blibli.com Tokopedia

3.8
22.5

Other

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.

Payment Method
70%

 Bank transfer is the most widely used method of payment for eCommerce  Online payment solutions are fragmented and still not widely used
41%

 eWallet solutions have less than 5% penetration
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

4

Mandiri Internet

7

Klik BCA

8

number of steps needed to complete a transaction
9
25

Bank Transfer

Source: Veritrans and DailySocial estimates by testing on 5 major e-commerce websites in Indonesia

Online Spend
>10m 5m-10m

<500k

2m-5m

15%
1m-2m

100k500k

 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

42%
500k-1m

13%

16%

26

Growth Opportunity

Internet usage will rise threefold over the next 4-5 years

By 2015
2015

2011
Internet Users
(millions)

55 110 2%

149 150 30%

Middle class population (millions) Broadband penetration eCommerce Market Size

$0.9bn

$10bn
27

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

Growth Opportunity
Supported by robust economic growth & increase of purchasing power

Mobile penetration

GDP growth rate

Credit Card usage

77%

6.4%

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
Price, quality, variety, and customer support are not competitive vs. offline channels Indonesia’s banks and conventions are slow to adapt to online transactions

Better Infrastructure

Better Products & Services

Better Payment System

Explosive growth in eCommerce
30

© 2012 DailySocial & Veritrans
Designed by Naning Utoyo & Ramda Y.

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