Indonesia - E-commerce's new frontier market?
Along with many other Indonesians, 26-year-old Emerra Tioanda sees her smartphone as a "life-saver"; helping her negotiate the daily traffic jams in capital Jakarta by being an entertainment player and giving her access to retail websites where she buys everything from clothes to airline tickets.
"I first started shopping online when I was studying in Singapore. After I returned to Jakarta, I continued to do so because it's convenient and the fashion is more updated compared to the malls here," Tioanda told CNBC. "It's also time-saving... since I'm stuck in the traffic almost everyday, why not get something done right?"
Indonesians like Tioanda are part of the country's flourishing e-commerce sector which is projected to surpass $4 billion in total market revenue by 2016. According to Misty Agustini, general manager of Weber Shandwick Indonesia, the notorious traffic congestion in the Indonesian capital has spawned growth in the sector. "With busy lifestyles, Indonesians do not want to waste time on the road or travel just to shop."
In a report published in June, UBS said the Southeast Asian country's e-retail market is at an "inflection point," with high internet penetration and widespread smartphone usage providing the fertile environment for e-retailers to grow.
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Indonesia - the world 's fourth-largest country by population - has nearly 76 million online users as of 2013, the highest number in Southeast Asia. This figure is expected to rise to 93 million by 2015, according to eMarketer. The introduction of low-cost smartphones is also expected to give smartphone user numbers a lift to 71 million by 2015. With the availability of cheap mobile data plans increasing, analysts believe this will help boost internet usage — and consequently online shopping.
And these figures are what Asian online retailer Lazada is banking on.
"Indonesians spend on average 181 minutes on their smartphones a day - the longest time in the world - and that has been driving our growth for the past two years. The internet infrastructure has seen immense growth as well," Magnus Ekbom, managing director of Lazada Indonesia, told CNBC.
The firm — billed as the "Amazon of Southeast Asia" — expanded into Indonesia in 2012. One reason for Lazada's high expectations was the runaway success of the MI3 smartphone from Xiaomi, which sold out in 10 minutes on its website in June.
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However, recent reports suggest that challenges remain in the industry.
For one, Indonesia's poor logistics infrastructure creates a challenge for e-retailers to offer quick delivery services, wrote UBS analysts in a report. The lack of high-speed internet across the country could also limit the pace of growth.
A survey by marketing research firm Nielsen released in early September also showed Indonesian consumers being least likely in the region to make purchases online. Analysts cite a lack of trust and plastic that are keeping millions of Indonesian shoppers from buying the goods they see on the internet. 80 percent of Indonesians said they often look at products online before purchasing them in a store — far more than the global average of 60 percent — the survey showed.
Another reason that consumers aren't buying online is distrust. According to Nielsen, 60 percent of consumers in Indonesia do not feel safe giving out their credit card information online, more than in any other Southeast Asian country except the Philippines.
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But industry players believe that these obstacles can be resolved.
"Payment issues are not unique to Indonesia. Any consumer in any country is reluctant at first to make online transactions. [To counter this] we provide a wide range of payment options. We noticed that the first purchase is usually paid with a post-payment option which means cash on delivery. After which when customers are happy, they return and use credit cards for subsequent purchases. So we don't see that as a big problem - all you need is time to build trust." Lazada's Ekbom said.