Indonesia - Country Commercial Guide
eCommerce

Describes how widely e-Commerce is used, the primary sectors that sell through e-commerce, and how much product/service in each sector is sold through e-commerce versus brick-and-mortar retail. Includes what a company needs to know to take advantage of e-commerce in the local market and , reputable, prominent B2B websites.

Last published date: 2020-10-11

Indonesia has one of the highest rates of e-commerce adoption in the world in 2019. As many as 90 percent of internet users aged 16 to 64 years in the country have purchased products and services online. Indonesia’s eCommerce market was US$ 21.0 billion in gross market value (GMV) in 2019, fueled by changing behavior among tech-savvy customers who are willing to spend more for convenience. Despite increasing competition, much of the potential in Indonesia's e-commerce industry has not been achieved, especially in cities outside of Java.

Assessment of Current Buyer Behavior in Market

In a country of 266 million inhabitants with over 143.26 million internet users in 2017, mobile devices are the main means with which Indonesians carry out e-commerce.  Some online shopping platforms report that about 70% of the online shoppers shopped on their mobile devices rather than desktop computers. Air travel is increasingly being arranged through websites such as Tiket.com and Traveloka while accommodations are arranged through booking.com and even Airbnb. The Indonesian Statistics Agency (BPS) recorded a total of 16.1 million foreign tourist visitors to Indonesia during 2019, falling short of the government’s target of attracting 20 million tourists.  Another trend is for inhabitants in major cities to use applications such as Go-Jek to arrange for food delivery, cleaning services, massage, buying movie tickets, as well as its original purpose of ordering a motorbike or taxi for transportation.  

Indonesia online retailing is dominated by a number of local wholesalers selling products. Tokopedia.com,  Bukalapak.com, Lazada.com, and Blibli.com are some of the leading online marketplaces in the country.  However, some international merchants, such as Alibaba Group Holdings and the Trancent Group, have also entered the market. Local sites Tiket.com and Traveloka.com are major travel platforms.  The rapid growth in the online marketplace has also contributed to the development of B2B eCommerce startup companies such as ralali.com and Bizzy.com.

Local eCommerce Sales Rules & Regulations

E-commerce remains governed by a complex set of laws and regulations. Some laws and regulations that apply to the e-commerce sector include:

    • Law No. 11/2008 on electronic information and transactions (ITE Law).  This law, which was intended to promote open and fair electronic commerce, has been criticized as creating investor uncertainty by failing to define key terms.
    • Law No. 7 /2014 on trade.
    • Bank Indonesia Regulation No. 20/6/PBI/2018 regarding E-money.
    • Minister of Communications and Information Technology Circular Letter No. 5 of 2016 on the Limitations and Responsibilities of Platform Providers and Merchants in E-Commerce Using User-Generated Content Platforms.  This circular letter established safe harbor protections for, and obligations of, e-commerce platforms for user-generated content and product offerings.
    • Minister of Communications and Information Regulation No. 23 of 2013 regarding Domain Name Management.
    • Government Regulation No. 80/2019 on e-commerce and online trade.
    • Minister of Trade Regulation No. 50/2020 on Provisions of Business License, Advertisement, Development, and Supervision of Business Actors in Trading through Electronic System

Local eCommerce Business Service Provider Ecosystem

Although the Indonesian e-commerce industry is thriving, there is room for further growth. E-commerce sales are expected to reach 4.4% of total Indonesian retail sales by 2019. To build on this growth, issues with inadequate infrastructure, payment systems, and logistics should be addressed. In 2019, the most popular method for e-commerce payments in Indonesia was bank transfer, accounting for almost 30 percent of all e-commerce payments. The value of e-commerce payments in Indonesia is expected to reach over 400 trillion rupiah by 2023.   The second most popular e-commerce payment system is the preloading of cash value onto an e-payment application to pay for online purchases, recorded at 25 percent. OVO ranked first among the most used digital payment platform in Indonesia, followed by GoPay and Dana.   Credit card payment ranked third and accounted for 20 percent of the total. The Indonesian Credit Card Association reports that the number of credit cards in circulation as of September 2019 was 17.3 million, an increase of 1.3 percent from the previous year’s 17.2 million.

In keeping with this need, Bank Indonesia has begun implementation of its National Payments Gateway (NPG). Under this scheme, the Bank limits the participation of switchers to four domestic firms, though foreign companies may participate as minority shareholders. More importantly for e-commerce, the central bank hopes that NPG implementation will increase financial inclusion and promote greater use of electronic payments for in-person and online transactions. Cross border transactions are currently still conducted through conventional banks or credit cards.

Domestic transaction switchers, eager to expand their capacity to meet the fast-growing demand, are increasingly looking to tech startups to help close the technology gap in payment systems and e-wallets, hoping to steer consumers ever more in the direction of cashless transactions