Overview of Indonesia’s E-commerce Market
Indonesia, with a population exceeding 279 million, boasts a rapidly growing e-commerce sector with significant market potential. Southeast Asia has great potential for e-commerce, and this country stands out as one of the fastest-growing e-commerce markets in the region. This market offers immense potential for businesses looking to expand their digital footprint.
The rise of digitalisation and increasing smartphone penetration rates have fuelled remarkable growth in the country’s e-commerce sector over the recent years. Despite challenges, the country presents a lucrative opportunity for foreign investors looking to tap into its consumer market and digital economy.
We explore the market landscape, regulatory environment, and major players below:
Market Potential and Challenges in Indonesia’s E-commerce
- Market Potential: Indonesia’s e-commerce market size was approximately 53 million USD in 2022, and has been poised for growth with a current Compound Annual Growth Rate (CAGR) of 11%.
- Consumer Behaviour: With over 224 million internet users, making the country the top four online markets worldwide, and a mobile-first population, Indonesia offers a unique opportunity for retailers to dominate the online retail space.
- Challenges: The industry faces hurdles such as low online purchase penetration, concerns about payment security, and logistical challenges due to the country’s tough geography and poor infrastructure.
Regulatory Environment and Foreign Investment
- Regulatory Environment: Foreign companies looking to operate in Indonesia’s e-commerce sector can benefit from the country’s regulatory environment.
- Foreign Ownership: Indonesia allows 100% foreign ownership in specific e-commerce businesses meeting investment thresholds or creating local employment opportunities.
- The Indonesian government has introduced regulations like Government Regulation 80 of 2019 (GR 80, 2019) to govern internet-based and electronic trading activities, emphasising tax compliance, consumer protection, and rights enforcement
- Additionally, under Presidential Regulation 10 of 2021 (PR 10/2021), certain business activities are open to foreign investors with specific requirements, providing a larger window of opportunities for foreign investment in Indonesia
Major Players
Leading e-commerce platforms in Indonesia include Tokopedia and Shopee, which offer diverse product categories.
- Tokopedia: Tokopedia has grown to become one of Indonesia’s major player in the E-commerce landscape. The local platform had over 100 million visits in December 2023.The company’s name: “toko”, derived from the Indonesian word “shop”, and “pedia” from “encyclopedia”. This reflects its vision of creating an all-encompassing marketplace for Indonesian consumers.
- Shopee: Shopee was established in Singapore and has emerged rapidly as one of the major players in the Southeast Asian market. Shopee is one of the most used e-commerce platforms in Indonesia. In January 2024 alone, the platform garnered 245.8 million visitors.
Indonesia’s e-commerce market presents immense opportunities for foreign companies seeking to expand into the region. With a growing consumer base, evolving digital landscape, and supportive regulatory changes, Indonesia stands out as a promising destination for cross-border e-commerce ventures.
Prior to entering Indonesia’s e-commerce arena, foreign entities are advised to conduct thorough market research to navigate the market effectively. Here at GLOBAL ANGLE, we offer comprehensive solutions encompassing market research, market entry strategies, e-commerce establishment, and tailored marketing services, ensuring a seamless entry and growth trajectory in Indonesia’s thriving e-commerce sector.
