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<h4 style="text-align: justify;">In many ways, e-commerce in Indonesia is very much like the early days of the e-commerce boom in the US - customers are not sure that they trust online payments, the logistics infrastructure is not yet built out, and the clear online winners are yet to emerge. But in other ways, it is more like the early days of the e-commerce boom in China - a lively entrepreneurial base of sellers is clamouring to get online, users are placing great emphasis on social recommendations, and innovative payment systems are emerging rapidly to serve the coming wave of demand. Over the next few years, Indonesia is likely to create its own unique hybrid version of these two huge e-commerce markets.</h4>
<h5 style="text-align: justify;">A market with huge potential, as the barriers to growth get knocked down</h5>
<p style="text-align: justify;">The retail market in Indonesia is estimated at US$ 134 billion in sales per year, of which only 0.7% (US$ 1 billion) are facilitated online, compared with 5% in the US and China. In 2012, around 6% of all internet users in Indonesia made an online purchase.</p>
<p style="text-align: justify;">Note the word 'facilitated' in the above sentence. Many online transactions in Indonesia are paid for offline, either through a bank transfer to the seller or via cash on delivery. Even the CEO of online payment gateway Veritrans defines e-commerce in Indonesia as "transactions facilitated but not necessarily completed online."</p>
<p style="text-align: justify;">In 2012, 70% of e-commerce users made a payment via bank transfer, 35% via credit or debit cards and 30% via cash on delivery. So while payment habits will shift towards credit and debit cards over time, Indonesia's e-commerce market will also be about managing effective offline payment methods.</p>
<p style="text-align: justify;">As well as payments, the e-commerce providers are also steadily solving the logistics challenges of a country with 240 million people spread across 17,000 islands. This is being addressed in two ways:</p>

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	<li>Firstly, the logistics infrastructure as a whole is shifting towards the efficient delivery (and occasional return) of online orders, as local companies such as JNE and Tiki begin upgrading their IT systems and expanding their nationwide networks.</li>
	<li>Secondly, through the emergence of a number of e-commerce verticals, which tend to have a tighter geographic focus than the all-things-to-all-people sites like Lazada and Rakuten. As a perspective on the viability of verticals, remember that Jakarta alone has roughly the same sized economy as the whole of Malaysia.</li>
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<h5 style="text-align: justify;">A multi-faceted e-commerce market</h5>
<p style="text-align: justify;">Forecasts of the value of Indonesia's e-commerce market vary widely, from around US$ 1 billion in 2015 to nearer US$ 10 billion. This partly reflects the many unknowns in how the market will grow over the next few years, and also the vagaries in counting the value of offline purchases that originated with online activity.</p>
<p style="text-align: justify;">Redwing's weighted forecast suggests the e-commerce market is currently worth over US$ 1 billion, and will grow 250% over the next three years:</p>

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<h5 style="text-align: justify;">A huge base of small and medium businesses</h5>
<p style="text-align: justify;">The other factor that we believe will underpin rapid growth in the Indonesian e-commerce market is the business mix: small and medium businesses (SMBs) represent 99% of all companies in Indonesia, and there are over 40 million of them throughout the country.</p>
<p style="text-align: justify;">Right now only a few tens of thousands of SMBs are online. But with companies such as Google actively trying to bring them online through nationwide education programs, and with multiple e-commerce providers actively courting them, a rapid expansion is underway.</p>
<p style="text-align: justify;">The model most likely to be followed is the Chinese one, where sites such as Alibaba, Taobao and TMall have played a major role in facilitating the smaller companies to come online, while catering to the different needs of established and work-at-home traders.</p>
<p style="text-align: justify;">E-commerce in Indonesia will also need to include a very strong social component, reflecting the existing habits of Indonesian shoppers.</p>
<p style="text-align: justify;">So the winners will be those who can make it so ridiculously easy to get an online shop running online that the SMBs can overcome their general lack of technology expertise, while showing the users how buying online can be fun, sociable, safe and cheap.</p>

<h6 style="text-align: justify;">Sources: Bank Indonesia, AKKI, APJII, Frosy &amp; Sullivan, Bloomberg, US AID, Veritrans, Google, Menegkominfo.</h6>