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Ecommerce still falls behind expectations in Indonesia. New report explores why.

Street vendor. Photo credit: Schrista.

Ecommerce in Indonesia has a high growth potential. All the ingredients are there. Most importantly, it’s a young, populous, and increasingly affluent nation.

That said, the pace at which consumers are taking advantage of online shopping currently still falls somewhat behind expectations.

In its latest report, Macquarie Research highlights that last year the ecommerce sector grew only at 65 percent over the last year, instead of an expected 80 percent. Macquarie Research is the intelligence unit of investment advisory firm Macquarie Capital.

Reasons for the lag were discussed by investors and ecommerce practitioners at the annual tech conference hosted by Macquarie in Jakarta last week. Macquarie’s report comes to the conclusion that it’s in part a lack of trust that’s holding consumers back from getting into online shopping.

The experience could be better

The report takes into account data sources like Euromonitor, Statista, and the IDC. It pegs the current ecommerce market size at US$8 billion, which is in line with IDCs estimate. These calculations factor in the total value of goods sold through online channels like online retailers and marketplaces but exclude online travel agents and ride-sharing apps. In its 2020 projection, Macquarie is more optimistic than IDC, and sees a US$65 billion market size potential. The IDC’s 2020 projection is more conservative at US$21 billion.

It’s still a healthy outlook, except that growth toward these targets has been a bit slow. Macquarie analyst Fransisca Widjaja says that additional interviews with industry players back this conclusion.

To further explain the lag, Macquarie cites a study co-authored by Indonesia’s ecommerce association (iDEA), research firm MARS Indonesia, and marketing magazine SWA.

It surveyed more than 1,800 respondents from different cities and socio-economic backgrounds. The gist: consumers still don’t find online shopping irresistible.

59 percent of respondents said they haven’t shopped online yet because they prefer to buy offline, and more than a third said they don’t trust online shops. Only 10 percent said cheap prices would compel them to buy something online.

Of respondents who had tried online shopping, 71 percent said they disliked not being able to try things on before buying. 57 percent said there was a risk of fraud, and half said the quality of products received didn’t match expectations. On the plus side, 83 percent said shopping online is practical and saves time.

Homework for the industry

Infrastructure problems like unreliable or slow delivery and lack of easy payment methods are adding to shoppers’ hesitance, but building trust with customers is something startups can work on, panelists at the conference pointed out.

Kenneth Bishop, managing director with Facebook Southeast Asia, said that businesses in the region must be faster in adopting mobile strategies that reach people at every step of the fragmented commerce journey. “While ecommerce is growing across Southeast Asia, the industry faces challenges in areas such as payments and consumer trust.”

In its report, Macquarie Research concludes that ecommerce players should work on things like improving delivery times, and more flexible return policies.

Despite the lag, Macquarie’s overall outlook for the industry remains positive. It’s now expecting a steady 65 percent to 70 percent growth YoY until 2020.

This post Ecommerce still falls behind expectations in Indonesia. New report explores why. appeared first on Tech in Asia.

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