With 265 Million people, it’s a no brainer that Indonesia would be the next biggest market to vie for with regards to ecommerce, with AliBaba, JD and Tencent already investing heavily through proxies.

However, the challenges remain a plenty with regards to fulfilling its potential.

1. 50% of all ecommerce orders are still limited to JABODETABEK (The Greater Jakarta Area) while the next 30% are in the rest of Java. This leaves 20% spread unevenly throughout Indonesia. Lots of marketing dollars (and education) will have to be spent outside JABODETABEK to push more traffic and conversion online.

2. Cash on Delivery / Bank Transfer remains a prevailing mode of payment. This would be a long battle to convert the transactions into prepaid or cashless forms but with Go-Pay and Grab Pay possibly gaining faster adoption and these wallet systems integrating with ecommerce marketplaces and merchants, there are high hopes for COD or Bank transfer transactions to be reduced.

Accepted in the local warung (or food stall) in Jakarta, Indonesia – Gojek’s Gopay has already garnered significant traction by offering innovative solutions for a primarily cash-based population to transact digitally.

3. Social commerce is massive in Indonesia and it is believed that transactions happening via Facebook and Instagram may be equally as big as the ‘traditional’ ecommerce. As of now, there is no official way to track how big this market is but looking at the data from various last mile operators based on non-corporate customers, this market share is between 25% and 35% of their volumes and has been constantly growing.

4. Last mile remains a challenge in an archipelago of 17,000 islands but this has been improving steadily with the amount of investment the government has put in infrastructure. New airports, seaports and roads (plus bridges) are being built to ensure domestic connectivity and hopefully this will drive last mile cost down especially outside of Java island. It’s at times more expensive to send an order outside of Java as compared to importing a product from Singapore.

5. Domestic ecommerce supply chain design is becoming more critical in ensuring lower OPEX. Decentralisation of distribution centres are happening with various major marketplaces and 3PL investing in distribution centers (DC) outside JABODETABEK with the objective of bringing products closer to market and also reducing the last mile cost. With a long term view, some too have started investing in having a presence in 3rd Tier Cities outside Java, in line with the government’s infrastructure development.

6. Cross-border import (B2C) will grow vis-a-vis the growing middle class and rising millennial demographic who are exposed to international brands with no physical presence in Indonesia. With ecommerce importation laws becoming less blurry in terms of cost of customs clearance and applicable duties and tax, more of these international brands have started opening up shipment options to Indonesia in their ecommerce channel. It’s a win in many ways, with the consumers able to purchase these brands easily, the government able to collect import duties and tax and the brands being able to assess their potential in Indonesia without having to invest in a physical channel.

7. However, the pressure will be on the capacity of Indonesia’s gateway with CGK now still being the primary gateway. With the opening of Kertajati International Airport in Majalenka, West Java, this may serve as a new import corridor for the growing Java market hence reducing the pressure on CGK. In time to come, other gateways such as Palembang, Denpasar and Markassar could soon be developed but this would be in line with the ecommerce growth and demands in the respective domestic zones.  


In spite of these challenges, Indonesia is NOT a market to be ignored and this is very apparent with the amount of investment being put in by predominantly the Chinese tech giants. It’s a market full of potential and any form of investment must be seen as long-term, but regardless of this, investing now rather than later is critical so as to have a foot (or a toe) in a market which is expected to be the 4th biggest economy by 2050.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].