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MSMEs face challenges to sell products online
While millions of individual traders have benefited from selling their products on Indonesia’s growing number of online marketplaces, many micro, small and medium enterprises (MSMEs) are struggling to make the switch from conventional trading
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span>While millions of individual traders have benefited from selling their products on Indonesia’s growing number of online marketplaces, many micro, small and medium enterprises (MSMEs) are struggling to make the switch from conventional trading.
According to a study conducted by the Communications and Information Ministry, only 17 percent of the country’s 56 million MSMEs use e-commerce platforms to sell their products.
The researchers said financial constraints and a lack of IT knowledge prevented MSMEs from taking their businesses online.
Bastian Zaini, a researcher at the nonprofit research foundation Laboratorium Data Persada, said the main challenges MSMEs faced entering digital market places were financial considerations owing to the costs of shifting from conventional practices to online trading.
“The biggest challenge are the costs of transitioning to digital marketplaces, which include developing the necessary infrastructure and human resource capacity,” Bastian told The Jakarta Post on Thursday.
According to cloud service provider Exabytes Indonesia, the majority of MSMEs are still focused on expanding their offline businesses without considering the potential of digital marketplaces.
“Many MSMEs are still reluctant to shift into the digital economy because of a lack of knowledge regarding the e-commerce industry, including its benefits and how to shift their businesses to enter the digital market,” Exabytes country manager Indra Hartawan told the Post.
Indra said the e-commerce industry could contribute significantly to achieving economic equality in the country.
“E-commerce marketplaces open up opportunities for those who want to sell their products to a wide market. They can help them market their products outside Java,” said Indra.
In fact, according United States-based consulting firm McKinsey & Company, digital adoption in Indonesia is among the highest in the world, as indicated by the rapid growth in the number of technology start-ups and online market places.
The number of vendors who sell their products on online marketplaces reaches into the millions. However, most are individuals. For example, about three million sellers, mostly individuals, have used Bukalapak since 2018. The marketplace’s users total around 50 million, with around 500,000 daily users.
Despite their constraints, a few MSMEs have begun enjoying the fruits of their e-commerce activities, including local coffee startup Kopi Kenangan and fashion brand This Is April.
Established in 2017, Kopi Kenangan has expanded its business by developing an in-house online preorder platform and utilizing food delivery services provided by ride-hailing apps, namely Gojek and Grab.
“We estimate that 50 percent of our sales are online, either through our preorder system [that allows people to order via their smartphones] or [food delivery services] GoFood and GrabFood,” Kopi Kenangan CEO Edward Tirtanata told reporters on Wednesday.
Edward said the company sold 1.5 million beverages in July, with sales growth expected thanks to its plan to open more outlets, adding that the company currently had 90 outlets and planned to have a total of 200 outlets by the end of the year.
Meanwhile, This Is April is enjoying sales from its in-house online platform and collaboration with several e-commerce marketplaces such as Shopee and Tokopedia, with the company saying online sales was one of its top three sources of revenue.
“In terms of income, offline stores still contribute the most to sales because we have 65 retail stores and one online store,” said This Is April CEO Maria Anggraini. However, she declined to reveal the value of the company’s sales.
Meanwhile, the Office of the Coordinating Economic Minister’s economic relations expert, Mira Tayyiba, said MSMEs faced several challenges to succeed in digital marketplaces.
“MSMEs need continuous assistance because there are many tutorials they have to follow to become online sellers,” Mira told the Post.
Mira also said MSMEs that had already entered online marketplaces struggled to maintain the consistency and quality of their products, adding that MSMEs faced tight competition online.
“Therefore, the government is partnering with online marketplaces to educate MSMEs [on how to improve the quality of their products],” Mira added.
Indonesia’s digital economy is expected to almost double its value to Rp 1.45 trillion (US$101 billion) by 2024 from Rp 814 trillion in 2018, promising 5.7 million new jobs, a recent study by the Institute for Development of Economics and Finance (Indef) and the nonprofit research foundation Laboratorium Data Persada showed. That is in line with Google-Temasek “e-Conomy Southeast Asia” study that projects Indonesia to become the region’s biggest digital economy by 2025. (awa)
