American e-commerce giant Amazon will enter Indonesia with US $ 600 million. competitive local e-commerce are preparing for the winter Alibaba ramps too.
Three months after the Chinese e-commerce giant Alibaba acquired Lazada Rocket Internet for US $ 1 billion, the largest online retailer Amazon in America is now preparing to expand into Indonesia. The country is the largest market, and the house of Lazada to over 250 million people. Experts say that Amazon is packing a hefty war chest of US $ 600 million.
The competition is sure to be fierce between the two companies, but also between the juggernauts overseas holders and local counterparts. While anxiety is spreading among the players in the nation in technology, from the perspective of consumers, the arrival of Amazon will probably be well received.
The news came first from Daniel Tumiwa, President of E-Commerce Association of Indonesia. "Amazon has announced that it will open the e-commerce in Indonesia. They are ready to invest $ 600 million for the first year here in Indonesia," said Tumiwa, quoted by Kompas . But even if Tumiwa spilled the beans, Amazon remains coy about his plans for the largest consumer market in Southeast Asia.
Is Indonesia grow like China and India?
If the word of anyone in Indonesia can be taken to the bank on what is to come for the local e-commerce, it is of Tumiwa. That said, he admits that he just heard the news through the grapevine. Tumiwa believes Amazon will follow the same pattern as its previous extensions in other emerging markets like India. His only took two and a half years for Amazon to become the most visited site e-commerce in India, snapping up more than 50 percent market share in a country with 1.25 billion consumers. The company left two major players in the local e-commerce Flipkart and Snapdeal in the dust.
But Indonesia demographics in India. Many tech experts believe the space ecommerce Indonesia can turn into something akin to China in a decade. Currently, e-commerce represents less than one percent of all retail transactions in Indonesia. In China, the figure is around 13 percent. With that in mind, there are a couple of different results for online retail players being in Indonesia: get outspent - like what we see happening incumbents of India - and sell your operation before it is too late, or try to find a way to thwart Amazon and Alibaba in Jakarta.
One percent of the . retail sector seems low, but the number is actually quite large. SingPost projects Indonesians will spend $ 543.07 billion on retail sales and US $ 4.49 billion on e-commerce in 2016. Other key factors include the penetration of the Internet, the number of national mobile users and the growth of the middle class in Indonesia.
A recent survey of Indonesia Internet Service Provider Association, in 2014 there were about 80 million people connected to the Internet. That number has grown rapidly in less than two years. local Internet service providers such as Telkom Indonesia, Biznet, Ooredoo, and others become more aggressive in promoting the fiber optic broad band service for home users. This means a combination of faster Internet at more affordable prices and more people in the country connected to the Internet in general.
number of the archipelago of mobile users is also growing rapidly due to the market being flooded with affordable Android smartphones. Currently, Indonesians can buy a new smartphone for as little as US $ 80. feature phones (a term used to describe mobile phones that do not connect to the Internet) are still the most widely used in Indonesia, but it is changing in the coming years.
According to Standard Chartered, there were about 149 million middle-class Indonesians in early 2015. This figure is expected to climb to 171 million by 2020. With this in mind, Indonesian consumers are becoming more savvy in raising awareness of online shopping. All these conditions bundled together act as the main driver of the Amazon and Alibaba to take emerging market E-commerce in Indonesia deadly seriously.
A dominant player in five years?
Indonesia's e-commerce industry has developed rapidly in recent years. For those less familiar with technical terminology, there are two main ways to run an e-commerce operation. We can set up a market or choose to run a classifieds site. Indonesia marketplaces include Bukalapak, Tokopedia, Lazada, MatahariMall and Bhinneka, which can be considered the biggest fish in the pond. These sites handle payments and are responsible for ensuring that you get your goods. For classified ads, there are sites like OLX Jualo and Indonesia (formerly TokoBagus), which are essentially just people selling to another site without getting involved at the transactional level.
Each of these local e-commerce sites serving hundreds of thousands of active users with millions of orders each month. Bukalapak, for example, says it has 17 million registered users. On the other hand, the biggest competitor of the company claimed to be easier Tokopedia 6 million transactions per month with only 300,000 active users from 2015.
But companies like Amazon and Alibaba will not easily taken down. The two giants already become the winners in their home countries while expanding to new markets and deploy new services. In terms of maturity of the market, now is the perfect time for them to get in Indonesia, local actors have already forged a path and educated the market.
To glean more perspective on the issue, Indonesia Expat interviewed Madeleine Ong Guzman, director of marketing Elevenia, a joint venture between XL Axiata and SK Telecom. Elevenia is yet another heavyweight ecommerce Indonesia.
"If Amazon really comes to Indonesia, it will be good for the industry and also a good opportunity for everyone.
We all know them expertise and what they did in the past. If this can be done in Indonesia, this will raise all that is done in the country, "said Guzman.
But with immense expertise in warehousing, logistics and technology, the real question of local stakeholders are surely asking the other is: Does Amazon eventually dominate the market a year or two, such as what happened in India? De Guzman gives a confident response:.
"Indonesia is a very unique market and there is no dominant player at the moment In the next two to three years, I expect mergers and acquisitions, business model changes, adjustments of the strategy […] and a dominant player will probably be evident in five years. "
Since its creation in 2013, Elevenia was probably one of the fastest e-commerce sites growing in Indonesia, with . funding of approximately US $ 110 million. As a business-to-consumer e-shop, Elevenia currently claims approximately 300,000 vendors serving 3 million buyers, clock around 30,000 transactions per day.
Madeleine added: "existing local and international players will certainly survive against Amazon […] E-commerce is not only a platform or brand of play. It is more of an experience and it boils down to customer satisfaction. For he who can run consistently and more patience, these things will be essential. Another thing, if Amazon really does not come, it will actually increase the level of competitiveness all [local e-commerce] of the company, and sellers and buyers will ultimately be the winners. "
It's now or never for payments, logistics and infrastructure
Amazon will face the same problems that local e-commerce players are already struggling with Indonesia. the logistics and payments remain the two biggest. the country has complicated geographical layout, with nearly 17,000 different islands spread across Southeast Asia. transport packaging different islands is expensive and takes time, sometimes packages have not arrived at all for example, if someone wants to buy something Bali to Jakarta, it takes almost a week to the buyer to get its products. via the delivery option at low cost.
Indonesia has taken some concepts to help logistics cure headaches. some e-stores have launched their own delivery operations, while others place distribution centers in strategic locations around the archipelago to allow the collection online to offline for goods purchased.
Amazon will also deal with the fact that credit cards may not be the preferred method of payment online. According to the Indonesian Credit Card Association, there are only about 8 million credit card holders in the nation, which is 3.2 percent of the entire population. That means - unlike the developed markets of Western -. Amazon will hit the ground running with payment methods like cash on delivery, and traditional bank transfers