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Social Networks Provide Ecommerce Entry Point in Indonesia

Fashion is No. 1 purchase category

The ecommerce market in Indonesia remains small—for now. But research shows that as the middle class triples in size over the next few years, according to one forecast, ecommerce sales will rise alongside.

In the report “eCommerce in Indonesia,” online payment company veritrans and Indonesian technology blog DailySocial estimated the retail ecommerce market at $900 million in 2011, with only 6.5% of internet users buying online. But that low dollar figure is expected to increase more than tenfold by 2015, propelled by growing incomes and a young internet user base willing to engage in new online transactions.

eMarketer expects online buyer penetration to rise faster in Indonesia than any other country this year, and drop to only second worldwide in 2013.

The veritrans/DailySocial study found the average amount spent per online buyer was relatively low in Indonesia—at $256 last year. In other emerging markets like China and Brazil, spending hovered around $800.

eMarketer measures B2C ecommerce spending, which includes both retail sales and online sales of travel-related services, whereas veritrans and DailySocial looked at retail only when sizing the market. For B2C ecommerce, eMarketer finds that the fast expansion of the online buyer base in Indonesia will far outpace the rise in spending per online buyer. Broader uptake will likely be the primary driver of increased online retail sales as well.

Other online trends already established in Indonesia will have an impact on the ecommerce market as it develops. In Indonesia, social networking is wildly popular, particularly on the marquee social network, Facebook.

Online buyers have now brought that comfort with social networking, and especially Facebook, to their ecommerce activity. Half of online buyers surveyed reported purchasing via Facebook in April, making it the top ecommerce site. That was followed immediately by Kaskus, an Indonesian online community where 49% reported buying.

In terms of what these relative newcomers to the ecommerce marketplace buy online, fashion took the spot by a good margin. Nearly four out of 10 buyers made a fashion purchase. Travel booking—a more expensive category—was next up, tied with music, videos and games.

And when asked how they were buying online, the overwhelming majority cited bank transfers, a somewhat antiquated—and convoluted—form of payment. Only 30% reported using a credit card.

As ecommerce develops in Indonesia, easier payment methods and platforms designed primarily for online purchases will help pave the way for wider use.

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Check out today’s other articles, “Online Retailers' New Year's Resolutions” and “Neo@Ogilvy Deconstructs Cross-Platform Ad Measurement.”

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