The e-commerce sector in Indonesia grew at a compound annual growth rate (CAGR) of 88 percent from 2015 to 2019 with a gross merchandise value (GMV) of US$21 billion, according to the annual e-Conomy Southeast Asia 2019 study, conducted by American tech giant Google, Singaporean holding company Temasek and management consulting firm Bain & Company.

“The e-commerce sector is growing rapidly [in Indonesia] due to large funding and tight competition from local and regional players,” said Google Indonesia managing director Randy Jusuf on Oct. 7.

Randy said the growth in the e-commerce sector was thanks to online shopping festivals, in-app entertainment and seller development. “There is a lot of innovation to encourage people to use e-commerce, such as in-app entertainment through ‘gamification’ and seller development by multiplying well-known brands.”

Southeast Asian countries are experiencing a sharp increase in the number of active users, which is estimated to rise to 150 million individuals in 2019 from 49 million individuals in 2015, according to the study.

A separate study by American multinational investment bank Morgan Stanley shows that e-commerce accounted for 8 percent of total retail sales in Indonesia last year, on course to reach 18 percent by 2023 fueled by changing behavior among customers.

According to a recent report by meta-search website iPrice written in collaboration with web analytics service provider SimilarWeb, Tokopedia was still topping the list of the most visited local e-commerce sites in the third quarter this year. With a total of 65.9 million average monthly visits, it secured 25 percent of the total market share.

Although still leading the pack, Tokopedia actually experienced a decrease from the 29 percent market share it had last year. Its closest competitor, Shopee, increased its market share from 19 to 21 percent this third quarter after attracting 55.9 million monthly desktop visitors.

Following behind are Bukalapak, Lazada and Blibli, which boasted monthly visits of 42.8 million, 27.9 million and 21.3 million, respectively.

Online shoppers spent over Rp 9 trillion ($644.2 million) on National Online Shopping Day (Harbolnas), which took place on Dec. 11 and 12, exceeding the Rp 8 trillion target of the highly anticipated event, a recent Nielsen Indonesia survey showed. The figure further indicates a strong appetite for online shopping in the country.

In a bid to improve the country’s e-commerce sector, President Joko “Jokowi” Widodo issued in November Government Regulation No. 80/2019 on e-commerce, which regulates domestic and foreign e-commerce companies alike.

The regulation lays out a number of rules related to licensing, data, consumer protection, taxation and local products, among other things. It will serve as an umbrella regulation to promote ease of doing business and protect consumers, according to government officials.

Indonesia E-Commerce Association (idEA) chairman Ignatius Untung said the regulation was meant to create a level playing field between e-commerce companies and brick-and-mortar businesses.

"It is said that offline retail stores pushed the government to issue the regulation to create a level playing field. But I think we already have a level playing field. The knowledge gap between offline retailers and e-commerce companies has resulted in different perspectives between the two," he said.

The regulation has drawn much attention from e-commerce players, prompting what Untung described as "wild interpretations”.

"We have yet to decide whether to accept or reject government regulation. We, however, regretted that the government did not share the final draft with us," said Untung. "There are wild interpretations as it caused chaos among sellers, it causes headache among e-commerce platforms and it made investors rethink their decision to invest in the online marketplace."

The government has also issued a regulation to lower the tax threshold to just $3 (Rp 42,000) on consumer goods imported for retailing on e-commerce platforms from $75 previously. The measure is aimed to protect locally made products from cheaper imported goods.

In addition to reducing the tax threshold for e-commerce retail imports, the government only imposes an import duty of 7.5 percent and value-added tax of 10 percent on e-commerce retail imports. Previously, besides import duty and value-added tax, imported goods were also subject to a 10 percent income tax. With the revision, total taxes that have to be paid will be only 17.5 percent instead of 27 percent previously. The new tax regulation will be implemented in January, next year.

The new tax regulation received a backlash from merchants who sell imported items through online market places. They are worried that the low tax threshold would reduce purchases of goods imported through the internet.

Customs data show that e-commerce retail imports jumped to nearly 50 million items in 2019, compared to 19.6 million items in 2018 and 6.1 million in 2017, with most of the goods imported from China. (dfr)

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