This is a guest post from Andi S.Boediman, Chairman of IdeoWorks, a Shopify Channel Partner in Indonesia. He is also a Director at Ideosource, a venture capital focusing on digital industries, including content, media, ecommerce and its digital infrastructures. I extract some paragraphs related to eCommerce from his long post about Indonesia Internet is going public… the original title is “Indonesia Internet is Going Public in 2015: Read This at Your Own Risk!”
The Consumer Internet Has Finally Arrived
Various studies projecting the Indonesia Internet users in 2013 will reach about 70 – 75 million users and it will grow to 90 – 95 million users in 2015. This is already more than 30% of the Indonesian population. True number of Internet users is difficult to calculate since one person can have multiple access to the Internet through various devices. But this doesn’t really matter. In other countries, this ‘mainstream’ adoption of Internet is the most crucial factor of the consumerization of Internet. This means Internet will become ubiquitous like electricity and water. You simply want to ‘connect’ as this has become your basic needs. The Internet is no longer for the early adopter, it’s for everyone!
And when everyone have an access to the Internet, there will be a change of behavior, people will use Internet for everything. Internet was used for communication, then social media. Now with the mainstream adoption, the shopping behavior will change; people will shop online more and more. Companies will use the Internet for everything, from procurement, sourcing, operation, finance, distribution and many other functions.
My focus to invest is now the consumer Internet. Companies like Urbanesia that works like Yelp, is now becomes valuable since so many users need to access a localize information. This will be followed by local social media like PicMix and others. The rest of the 2.0 model like AirBnB, Kickstarter, Uber might see its first incarnation in Indonesia as Internet users grow so much. The solution might come in various model, the one that suitable to solve local problems.
The Indonesia Digital Media Landscape: Google, Portal and the Media Giant
In 2012 from USD 6.2 Billion in Indonesia advertising spending, digital media only take 2.2% of the advertising revenue. And worst, 60% was spent on Google and Youtube. Local media has yet to compete for its advertising share. TV group doing this by package the TV spending and digital media altogether. Local media like Kapanlagi turn into content marketing servicing clients such as Unilever for its owned media strategy in the case of Clear.co.id.
Portal war is not over yet; Yahoo is leading the portal media segment by having its own editorial team. PlasaMSN as Telkom and Microsoft digital media subsidiaries has seen a strong traffic growth but it didn’t get attention and investment it deserves. Successful model by Microsoft and Yahoo in other countries are NineMSN and Yahoo7 in Australia. Local TVs and international portal players might replicate this model. Major portal players from Korea and China now are eyeing Indonesia and definitely consider to partner with local TVs that have massive contents in their arsenal.
By understanding the Indonesia media landscape, we can understand who is going to be the major digital media players. There’s only a handful giant players in the Indonesia media landscape:
MNC Group owns RCTI, Global TV, MNC TV and Okezone.com
SCTV – Indosiar group own Liputan6.com
Trans Group owns Trans TV, Trans 7 and Detik.com
AnTV, TV One and Vivanews.com
Kompas Gramedia group owns Kompas print and Kompas.com
Jawa Pos group owns various print publication in East Java that is yet to embrace digital media
Beside these big groups, there are only two future digital media players that might challenge the big guys
Kaskus, owned by Djarum Group
Kapanlagi group, affiliated with Trikomsel – Skybee
Kaskus has somewhat hard to be described as social media or classified ecommerce, but it has its place to Indonesian users. Kapanlagi group is the only independent media company at this moment.
With the consumerization of the Internet, the next competition will be in the vertical media and user generated content. On social media frontier, Indonesia is yet to find its own ‘Mark Zuckerberg’ and howegrown social media is yet to be born. If China has QQ and RenRen, why can’t we?
The Ecommerce is Still a Darling
Is there any list like this for eCommerce companies in Indonesia?
Fashion, gadget and electronic product, then health & beauty are the 3 biggest categories in ecommerce today. Sales traction for fashion ecommerce site like Zalora and Berrybenka has shown significant growth in 2012. Basically they fought its way to become offline retail giant like Matahari. Then site like Lazada and Blibli has fought its way to get an exclusive deal to sell gadget and electronic products that people know. They are willing to commit significant investment of marketing budget to offer the best deal to the customers. Tokopedia as the most visited marketplace today, got its major transaction from beauty products. It is able to facilitate transaction over 600 million IDR per day only from the health & beauty products.
What interest media the most is what defines the ecommerce trend in 2014. The answer is simple: Brand Goes Online! Every individual brand now sees that ecommerce is one of the most crucial channel for them. Each brand wants its own online store, either only as a catalogue or allows online transaction. This will drive the needs of services for online commerce for individual brand. That’s why Singtel wants this ecommerce slice by bringing Shopify as a solution for small medium size online store.
In recent years, I see market adoption for vertical ecommerce market, especially in property. When looking for or selling properties, Rumah.com and Rumah123.com becomes the first destination, but we are yet to see more advance property site like Zillow.com or Trulia.com in Indonesia. Online ticketing is also a major vertical ecommerce used by mainstream market. Agoda is the leading airline and hotel online transaction, which recently challenged by Tiket.com. There are many other vertical ecommerce yet to fill in the market needs, like music ticket, automotive, etc.
Indonesia biggest challenge is distribution. To make the most of the economic of scale, fast moving consumer goods company separate itself with distribution and retail. Learning from US, Walmart excel to become the biggest retailer by becoming the best supply chain leader. Amazon is able to compete with Walmart by challenge its supply chain management. By integrating supply chain, distribution and ecommerce, Amazon now becomes the biggest online retailer on earth. So far there are no companies in Indonesia are able to provide this kind of efficient supply chain and distribution.
Alfamart and Indomaret, the biggest modern retail market now becomes the point of sales for train ticket. 7-Eleven goes as far as selling concert ticket in their store. KFC now is the biggest music distributor compare to any music store as they have more retail chain. Music publishers experimenting on using modern market to sell music CD as well.
The true leader will emerge as the one that is able to integrate supply chain as it’s offering to the ecommerce players.
Digital Payment Solution: Who Is the Winner?
Even though total credit card in Indonesia is almost 20 millions, each person has at least 2 or 3 credit card and they used the credit card for discount card. So credit card will not gain massive traction to become the mainstream solution for digital payment.
In ecommerce, majority transaction is still done through bank transfer. So having account on BCA and Mandiri is the most crucial part for merchants as these 2 banks accounts for 80% of the Indonesian consumers. Both banks has launched their token payment for ecommerce. Companies like JNE, First Logistics and RPX are among the first to offer cash on delivery solution for ecommerce. COD is now the fastest payment solution adopted by ecommerce.
Indonesia is unique, more than 95% of our mobile phone users are using prepaid. PC multiplayer games in Indonesia like Point Blank, Ragnarok, etc. also happened by prepaid system. Basically the consumer habit is already there. A significant player is Indomog focusing on digital content ewallet beside the one provided by each of the big MMORPG players.
In late 2013, Mandiri launched its e-cash similar to CIMB Rekening Ponsel (mobile phone account). Mandiri e-cash has a strong value proposition for ecommerce as this payment allow us to pay anybody with cellphone even they don’t have an account in Mandiri. The real benefit is that merchants can withdraw the money in any Mandiri ATM.
Telco also have similar payment solution, Telkomsel with T-cash, Indosat with Dompetku, XL with XL Tunai, but the telco solution still needs to work with bank to withdraw the money. So I believe telco model will work better for digital content rather than for ecommerce.
I believe that bank ewallet has the most chance to success even though there’s no precedent of ewallet success for ecommerce.
The full post can be read here: http://andisboediman.blogspot.com/2013/11/indonesia-internet-is-going-public-in.html