Digitization, E Commerce, ICT:

Opportunities and
Challenges
Dera Thorfiani S.MB., M
Business-to-Consumer (B2C) Types of
When the exchange of goods and service takes
place between the business entity and the
E-commerce
customer, over the internet, then it is known as
B2C commerce.
Business-to-Business (B2B)
When the business transaction takes place between
two business houses, through the electronic
channel, it is called B2B commerce.
Consumer-to-Consumer (C2C)
When the buying and selling of goods and services
take place between customers using electronic
medium, then it is called C2C commerce
 DOMESTIC vs CROSS-BORDER E-COMMERCE

• Domestic transactions dominate in developed countries

• Canada: 80% domestic; 15% to US; 5% to rest of the world
• Japan: 82% domestic
• Republic of Korea: 75% domestic
• Different picture in some developing countries
• In India and Singapore: >50% are cross-border
• In Colombia, Paraguay and Venezuela, cross-border trade
accounts for the bulk of e-commerce
• For many, no data is available…
Source: UNCTAD, based on Payvision, national and other sources.
 DIGITAL ECONOMY IMPLICATIONS
• More activities conducted online
• New business models
• New market places
• New products and services
• New competition
• Changing skills requirements
• Need for new or revised laws and regulations, e.g.
• Data protection and privacy
• Consumer protection online
• Cybercrime
 DIGITALIZATION IS TRANSFORMATIONAL
Opportunities
• Lower transaction costs
• Improved market access - domestically
and internationally
• Lower delivery costs (digitally provided)
• Opportunities for entrepreneurship and
innovation
• Rural development
• Greater consumer choice
• Overcome barriers to growth
Challenges
• Economic barriers
• Infrastructure weaknesses
• Limited purchasing power
• Payments
• Risk of market dominance
• Socio-economic barriers
• Legal frameworks
• Cultural preferences
• Cognitive barriers
• Awareness and knowledge
• Low levels of e-literacy
Pertumbuhan Pengguna Internet dan
Nilai transaksi Penjualan E-
Commerce di Indonesia
Sumber: Statista, 2017
Catatan:
• Nilai penjualan E-
Commerce th 2017
Sebesar Rp 96,8T
• Dgn asumsi biaya distribusi
& storage sebesar 12,5%
maka nilainya sebesar Rp
12T
6
 Potensi Pertumbuhan Paket di Indonesia
Penetrasi E-Commerce Sangat Tinggi
In parcels per capita, per year
20x

10
x

5x ~8 trillion by 2025

~20
parcels/capit 3
a 9

26
22
~7 1 1
1
parcels/capit 1 7 8
9 6
a 7 8 3
1 2 6 6
0.5- 4
Sumber: 0, 1.0
Barkah 5 Luxe Bel Den- Switzer- Austria Chi USA UK Kor Chin
Hadimoeljono Indi Indo Portugal
a - Italy m- g- Ireland mark land na Japan G ea a
Direktur
nesi bour iu (tot er- (tier
Integrasi
a2 g m al) m 1)
Logistik
PT Pos
an
Indonesia Low-penetrated markets Mid-developed y
(Persero) markets Mature markets

1 eCommerce relevant is defined as domestic B2C parcels, with speed typical for e-commerce shipments in the given country 7
2 Triangulation
SOURCE: McKinsey,
for <1 parcel/capita:
DHL Annualized YTD Pos Indonesia shipments of ~13mn; market share ~10%; total of~130mn 3
business
shipments/
outlook
260mn population = 0.5 parcel/capita 7
Ekosistem E-Commerce di Indonesia

8
Pengarusutamaan RPJMN IV 2020-2024
1
0
1
1
 10 E-commerce Yang Merajai Pasar
Indonesia
Di Kuartal I 2019 Versi Iprice
• Peningkatan jumlah tenaga kerja.
1. Tokopedia • Q1 2018 jumlah karyawan di
2. Shopee Lazada, Tokopedia, dan Bukalapak
3. Bukalapak rata-rata hanya 1000-an orang
saja.
4. Lazada
• Q1 2019 jumlah karyawan ditiga
5. JD.id
perusahaan tersebut hampir
6. Blibli.com mencapai 3000 orang.
7. Zalora
8. AliExpres Alibaba invetor di Tokopedia, Lazada,
9. Zilingo dan AliExpress.
Shopping Tencent dan JD selaku investor dari
Shopee dan JD ID.
10. Amazon [idr]
1
3
14
Digitization, E-Commerce, ICT:
Opportunities and Challenges
 What is different about e-trade – and what might this
mean for Indonesia?
Lowering trade costs
>Distance matters 65% less for offline than online Potential
trade, based on study using EBay data outcomes
>More exports
>Wider range Some areas of interest for Indonesia
Increasing the tradability of most services of export >Travel and tourism exports
>Online outsourcing growth from USD2bn revenue in markets >Other services exports (e.g. building
2013, to USD15-20bn in 2020; Global services >Wider range on successes in services outsourcing)
outsourcing USD160bn in 2017 of products & >Niche products (including
services agriculture, manufactures and
Boosting the inclusiveness of trade >Higher services?)
>Nearly all Ebay-based SMEs in one study sold productivity >Import and export of inputs/final
overseas, vs median of 20% for offline firms >Economic products (goods and services)
growth and
poverty
Accessing inputs to boost firm productivity at lower reduction
cost (connecting to suppliers)
What will be needed for e-trade to take off?

• Strong foundations for

growth, and specific
enabling conditions for
e-trade
• The picture is mixed for
Indonesia – progress in
some areas (e.g. good
connectivity), challenges
in others (regulations?)
Agenda in three questions

Q1 How is digital changing trade?

Q2 Is this good for development?

Q3 How can we lead the change?

How is digital changing trade?
 ICT
 Digitalization
 eCommerce
 Problems with trade
SMEs do not trade Trade is not transparent Trade is slow + expensive

AFG 243hrs
BGD 147hrs
direct exports FJI 56hrs
Trade misinvoicing
PRC 21hrs
national sales 11hrs
Other THA
MYS 10hrs
JPN 2hrs

SMEs only export 83% of illicit 57 hours avg to fulfill

10% of total sales financial flows EX doc compliance
(Developing Asia) trade-based

Sources: World Bank enterprise surveys; Global Financial Integrity (2015), World Bank (2015)
3 trends are changing trade

Better ICT connectivity

Digitization

E-commerce
 ICT: penetration rates growing
Penetration per 100
inhabitants
Asia Pacific CIS
60 60
49,7
42,3 42,3
40 40
22,0
18,5
20 12,7 13,6 20
7,4 8,9 8,0
7,8
5,5
0 0
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015

Asia + Pacific (fixed) Asia + Pacific (mobile) CIS (fixed) CIS (mobile)

EU
100 78,2

50 30,5 29,6

0 23,6
2010 2011 2012 2013 2014 2015

EU (fixed) EU (mobile)
Source: ITU World telecommunication/ICT indicators database
 Ecommerce: Growth rates (US)
E-commerce retail sales in USA (% total retail sales)

• Ramping up fast
• BUT, still small percent
total retail sales

• 2015: E-commerce 7.3% of total retail sales

• 2015 value of e-commerce sales: $341 billion
• E-commerce increased 14.6% over 2014
Source: St. Louis Fed, US Bureau of the Census • General retail increased 1.4%
1995: Amazon’s first
shipment
• B2C direct sales
1996: eBay
• Online auctions
1999: Alibaba
• B2C sales
platform
2000: Baidu
• Search engine
2009: Tokopedia
• B2C direct sales
 Great progress, mixed outcomes

Physical supply chain Trade finance Official documents

100%
80% 100% 16%
80%
80% 57%
60% 50% 60% 52%
25%
62%

Governments
Private Sector

60% 83% 40% 9% 18%

40% 14%
40% 20%
Banks

32% 30%
36% 20%
20% 20% 29% 0%
14% Electronic Electronic Electronic
9% 14%
0% 3% Single Window submission of Submission of
0% System Customs Sea Cargo
A&P LatAm Africa &
2014 2015 2016 2017 declarations Manifests
Middle East
airports airlines freight forwarders Fully implemented Partially implemented
Great Extent Somewhat Little to none pilot Not implemented

Penetration rates of eAWB Digitalization progress in banks Implementation of eDocs

Sources: IATA (2017), ICC Banking Commission Annual Survey (2016), UNRC trade facilitation and paperless trade (2015)
Is this pro-development?
• Bank digitalization (or Digital Financial Services)
• Website optimization
• What about women?
Firms online, but ltd website presence
 Firms not optimizing online presence

Prevalence of digital marketing basics among Samoan firms

Enquiry Form 63% • Low visibility

• 20% are searchable
Contact Page 83% • 30% enabled transactions
Social Media 66% • Social media not integrated
• 11% of firms have websites
Paid Search 3%
• 66% have FB pages
Basic UX 29%

Basic SEO 20%

Google
46%
Analytics

Source: DiCaprio and Laps (2016)

Few firms have women in ownership
How can we lead the change
• 3 slides
The needs of small exporters are different

• Postal shipping times

• Warehousing
• Air transport
• ICT connectivity
Moving forward consider
• How to measure and tax ecommerce
• Risk assessment (customs)
• Create and capture digital footprints for finance
• Consider Legal Entity Identifiers (LEI)

Visibility Inclusion Integration

Key messages
• E-trade could help reduce the cost – especially in conjunction with
other economic trends
• The changes being brought about by e-trade present opportunities in
goods and services exports and imports
• E-trade helps address some of the costs of trade – but it doesn’t
overcome them
• A conducive e-trade environment is needed, including basic
foundations and enabling conditions – as well as a sound overall
business environment