Indonesia's E-Commerce Industry On The Cusp Of A 'Big Bang' Moment

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A person surfs the internet through a Blackberry in Jakarta, Indonesia.

Indonesia’s Internet retail business is projected to have a meteoric rise in the next two years, becoming a $10 billion industry from just $1 billion to $3 billion currently, as more consumers shop online and on smartphones.

The world’s fourth-most-populous nation will have doubled the number of Internet users to 125 million by 2017, and smartphone ownership will rise from 20 percent now to 52 percent in that same time period. That means its e-commerce business is expected to be approaching a “big bang” moment, said Ellyana Fuad, the Indonesia chief executive for Visa, the Financial Times reported on Friday.

At the moment, the Internet retailing business remains small and fragmented, as home Internet access is slow and expensive. However, the nation’s 250 million people are finding their company Internet a lot friendlier to online shopping.

“Our busiest time is still about 11 a.m., before traffic dips at lunchtime and then picks up again when people get back to their desks,” said Rio Inaba, the chief executive of the Indonesian division of Rakuten, a Japanese e-commerce group.

The rise of cheap smartphones and tablets is also helping Rakuten’s business, by allowing more people to access the Internet, despite significant challenges including poor infrastructure and payment systems.

“We’re seeing phenomenal growth in mobile transactions,” Inaba said. Order volume and revenue from Rakuten’s online sector in Indonesia are doubling every year, with gadgets, fashion accessories and toys especially popular with Indonesian customers, according to the Financial Times.

A number of foreign companies, including eBay and Sumitomo, as well as local startups and more established conglomerates like the Hartonos, owned by Indonesia’s wealthiest family, have entered the market, hoping to cash in on the market. 

“The market is growing faster than the industry,” said Natali Ardianto, co-founder and chief technology officer of Tiket.com, which sells airline and rail tickets, according to the Financial Times. “There’s a huge opportunity, so we don’t need to worry about eating someone else’s pie.”

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