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Indonesian online shoppers ride e-commerce growth wave

Surjanto could hardly believe that it only took 10 minutes from putting his Vespa motorcycle up for sale on online marketplace OLX Indonesia before a buyer called and sealed a deal with him

The Jakarta Post
Jakarta
Sat, September 3, 2016

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Indonesian online shoppers ride e-commerce growth wave

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urjanto could hardly believe that it only took 10 minutes from putting his Vespa motorcycle up for sale on online marketplace OLX Indonesia before a buyer called and sealed a deal with him.

Shortly after that, the buyer came to his showroom in Ciledug, Tangerang and paid in cash. “Ten minutes. That was my top score,” he said in a video posted on OLX’s official YouTube channel on Aug. 4.

Surjanto was among 850,000 registered OLX sellers as of June who have benefited from the recent rapid growth of the e-commerce business in the country.

OLX, which previously went under the name Tokobagus before merging with competitor Berniaga in 2014, reported that 1.6 million products worth up to Rp 37 trillion (US$2.79 billion) were sold on its platform in June, higher than the average monthly transaction value of Rp 24.3 trillion in the first quarter of this year.

“The number of products sold in June was actually more or less the same as our monthly data throughout the first quarter of this year, but the transaction value increased significantly, particularly for motorcycles, cars and smartphones,” OLX chief marketing officer Edward Kilian said in Jakarta recently.

He said people often tended to sell products from those three categories after one or two years of use, hence the rising transaction value.

The trend also shows that people are becoming more consumer-orientated as they can easily fulfill their secondary or tertiary needs just by a tap on their phone.

“The biggest e-commerce audience comes from the millennial generation. They may not need to buy a new pair of shoes, they did not intend to buy them, but they end up buying them because they accidentally find them when browsing online,” said Daniel Tumiwa, OLX’s chief executive officer and Indonesian E-commerce Association’s (idEA) chairman.

He also attributed the rising consumer trend to the rapid growth of the urban middle class, which has led to higher purchasing power among Indonesians.

The number of middle class and affluent consumers is set to increase to 141 million people by 2020, up from 88 million in 2014, according to a Boston Consulting Group (BCG) survey. This demographic group is defined as possessing at least Rp 50 million in assets.

Moreover, the survey says they value the functional benefits of products and brands, but also have low levels of brand loyalty. More than one-third of consumers plan to try a different brand in their next purchase regardless of experience.

Meanwhile, the rise of the middle class is in line with the growth of online shoppers in the country. Around 83 percent of Indonesian online shoppers only began shopping online last year, according to a CLSA survey.

Online marketplace Lazada Indonesia co-CEO Florian Holm said the trend in online shopping was also driven by the availability of affordable smartphones and internet data packages.

“Besides affordable prices, new and unique products also play an important role in customers trying online shopping for the first time. Daily goods, small home appliances, fashion and health and beauty products are some of the product categories that have received increasing interest from customers,” Holm said.

Around 60 percent of Lazada’s transactions are generated on mobile devices, while OLX’s stand at 90 percent. Data from the idEA reveal that in 2015, the total number of online shoppers hit 7.4 million people, only 2.9 percent of the country’s 255 million population.

The association says it believes the e-commerce business can grow even higher, so that transactions will reach a value of $24.6 billion this year, three times higher than in 2013. (vps)

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