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Analysis: It's time to digitally do-or-die
I wonder if Alexander Graham Bell knew what he had started when he got the telephone going
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wonder if Alexander Graham Bell knew what he had started when he got the telephone going. No other revolution has lived longer nor is there another one that is likely to continue, forever. Telecommunications is an old word now, even the internet is aging. Whatever your business, you need to think of the digital universe and your place in it, if you haven't done so already. If you have, you have to keep on improving if not reinventing it. Because, like that other universe, it will keep on expanding and changing. If you haven't explored it yet, if you haven't got an online strategy in place, you run the real risk of hastening your demise. That's the world we live in.
Last week, we made a two-country two-screen presentation on the 'Digital Universe' comparing a mature online marketplace like Australia to a rapidly developing one, Indonesia. We chose an unusual venue to host the presentation, the atrium of the Pasaraya shopping centre in Jakarta's Blok M district. The mall is a work-in-progress, transforming itself into a lifestyle center. That transformation hasn't started a day too early. That was part of the message. As my friend and colleague Howard Seccombe pointed out to the packed audience, e-Bay is now Australia's single largest shopping mall. It isn't just the auction site it used to be. Every day, it has more visitors online than any other brick-and-mortar retailer or mall owner. Now e-Bay is just one of many websites that have redefined shopping in Australia. Online shopping is a mainstream activity nowadays, an activity that has made the virtual world very much a part of living reality. Many retail outlets across metro Australia are now showrooms for those who may wish to touch-and-feel, to compare prices, before they buy the same thing online and have it delivered home. Everything's in the consumer's online shopping basket: from airline tickets and hotel rooms to shoes and cosmetics, furniture to artwork, blenders to broccoli. And everything in between.
But there are differences, market to market and country to country. In Australia, 'travel and tourism' tops the shopping list online. In Indonesia, it is 'clothes and shoes'. This comes as a surprise to many marketers in their ivory towers, most of whom believe that all Indonesians live the privileged lives they do. The airline business is growing indeed but it is still a small fraction of the population that flies around Indonesia, more often now than they used to. On the other hand, there is a large and growing horde of home-based entrepreneurs selling clothes and shoes online to fellow Indonesians, from platforms as unconventional as Facebook.
At Roy Morgan Research, we estimate that Australians spent over 22 billion of their dollars shopping online in the calendar year 2012. Our number for Indonesia is A$2 billion dollars, or Rp 2 trillion during the same period. In other words, a mature market with almost 23 million people spent 10 times more than a developing market with more than 10 times the population. What do these numbers mean? The more relevant question should be 'where is the Indonesian online shopping industry heading'? The obvious answer is up. Again, more importantly, the better answer is 'up, rapidly'. When we first introduced an additional battery of questions to the e-commerce template in our Indonesian survey early in 2012, we got very low levels of response that made the data unreadable. But by the last quarter of the year gone by, we had reliable levels of incidence, leading us to make some amazing revelations with confidence. That's how rapidly upwards the industry is zooming, right across the country.
If we were to conduct a quick review of where Indonesia is today, online, we need to start with mobile phones. That's because Indonesians are famous for leap-frogging. (Or should that be frog-leaping?). At the end of last year, 81 percent of Indonesians 14 years of age and older had at least one mobile phone. Of that universe, 25 percent had a smartphone. That is surprisingly high, compared say to Thailand, especially when you consider per capita incomes. In contrast, only 29 percent of the population had 'ever accessed the internet', nationwide. Lower levels of penetration among the rural population do bring the overall number down, but don't write them off entirely. Country cousins in densely populated Java may live in rural postcodes but many ride in to the bigger cities to work, every day. Of all the online industry statistics, they often contribute a fourth or even a third of all the national numbers. But it is the smartphone that will be the game-changer in Indonesia. Even though more people access the Internet via a PC at home, warnet or office today, the smartphone is poised to take-off. It will increasingly become the instrument of choice in a country where it can still take forever to turn a page on a website. User-friendly apps on a smartphone will circumvent the frustratingly slow internet speeds on a PC.
As I write, many of the statistics are already-outdated. Whatever your business might be, please remember that these are early days. If you can't really sell your products online, social networks will become increasingly important. The fact that many of the numbers are still very small but multiplying rapidly, augurs well for the future. Only 2 percent of Indonesians who have a bank account use internet banking. Only 7 percent of smartphone users have ever shopped online. Is that a problem, or an opportunity? If you are wondering how to answer the question, consider this. An amazing 21 percent of those online shoppers say they now shop in brick-and-mortar stores less often than they used to. Now apply a factor of five or ten to any online number, over the next five to 10 years. Where would your business be, then?
The trouble with many businessmen in Indonesia is that they are penny-wise and pound-foolish. For some, this article will constitute the only 'market research' they will do for the rest of this year. They have 'invested' 10 minutes reading what their secretary has photo-copied, happy that they have 'saved' maybe Rp 500 million because they didn't buy the research. A few will then tell themselves they know better and go straight ahead and sign off on yet another multi-billion rupiah shopping mall in downtown Jakarta. From where I sit, I think they'd get better returns from a graveyard, in just 10 years from now. If you get your kicks from building malls, go to Banda Aceh or Manado while it still makes sense, it's too late in Jakarta already. If you are a department store, use the goodwill you have today and transfer it to an online store before it's too late. Too many retailers in countries like Australia are now paying the price for worrying too much about cannibalizing their brick-and-mortar stores. Now it's too little too late, for too many. On the other hand, if you are a budding web-entrepreneur, my advice would be to stop being a generalist and start being a specialist. There really isn't a great future ahead for another 'Tokobagus.com'. But there's plenty of room for specialist e-retailers in electricals and electronics, right down to linen and lingerie. There are many good examples around the world that are worthy of emulation.
The opinions expressed are my own. The conclusions are based on Roy Morgan Single Source, the country's largest syndicated survey with over 26,000 Indonesian respondents annually, projected to reflect almost 90 percent of the population over the age of 14.
The writer can be contacted at debnath.guharoy@roymorgan.com
