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Indonesia’s E-Commerce Industry Grows Rapidly

The end goal is to certify e-commerce companies in Indonesia.

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Indonesia, e-commerce
Women use their smart phones at a cafe in Jakarta, Jan. 3, 2018. VOA

With more than 140 million Internet users, Indonesia’s e-commerce industry has grown rapidly in the past decade, leading to calls for more government regulation in the sector.

“It’s a new industry so it’s growing very fast. [E-commerce] started booming in 2010 and since then some of the players that started during that time have become unicorns,” said the chairman of Indonesia E-Commerce Association (IDEA), Ignatius Untung, referring to startup companies that are valued above $1 billion.

The Indonesian Ministry of Industry estimates the value of the digital industry at $100 billion, and in 2020 the government expects it will increase to $130 billion.

Creating new unicorns

Untung said the consumer base for the e-commerce industry continues to grow as there are a continuously increasing number of Internet users in Indonesia, although they are still concentrated in the cities. In a market conducive enough for digital companies to thrive, Indonesia has managed to establish several unicorns.

Phone, e-commerce
This picture taken in Jakarta on Dec. 12, 2018 shows a website of Tokopedia on a mobile phone selling tickets. VOA

One of them is Tokopedia, an online marketplace. In 2017, the startup company received a $1.2 billion investment from Alibaba, the massive online retailer in China. Priscilla Anais, the CEO Office Manager of Tokopedia, said the Gross Merchandise Volume or total sales value of goods sold through the marketplace has increased by four times in the past year.

“Now we have more than 90 million active users monthly and have reached 93 percent of all districts in Indonesia,” she told VOA via email.

But the value of Indonesia’s biggest online marketplace is still far below Gojek, a ride-hailing app, that has received $1.2 billion in investment from several companies, including Google and Tencent holdings. The Indonesian startup has a company value of $ 4 billion. Other unicorns include Traveloka, an online travel startup, and Bukalapak, an online marketplace.

Lack of regulation

Despite the digital economy in Indonesia growing rapidly and receiving support from the government, Untung said clear regulations are still needed. “For example for online payment, or e-wallet. There are players that have the platform and consumers but when they apply for a permit for e-wallet, it was declined. But there are others that don’t have the platform but received the permit. So we should make it clear, what are the criteria,” he said.

E-commerce, Indonesia
A man plays with his mobile phone in front of a cellular provider’s advertisement with a Facebook logo in Jakarta, March 22, 2018. VOA

Untung also mentioned the issue of online ojek (motorcycle taxi). Motorcycle taxis are especially popular in big cities in Indonesia, such as Jakarta, where traffic is often congested.

The former Transportation Minister Ignasius Jonan, issued a notification letter in 2015 banning online motorcycle taxis.

But in December 2015, President Joko Widodo, said online transportation cannot be banned because people need it.

“With so many people using ride-hailing app, and motorcycle taxi, who can ban it now?” Untung said.

According to the Indonesian Consumers Agency Foundation (YLKI), 84 percent of Jakarta citizens use the service of online transportation.

Nevertheless, Untung lauded the e-commerce roadmap that was established through the Government Regulation No. 74/2017 under the Coordinating Ministry of Economic Affairs.

Indonesia, e-commerce
Hasan (right), along with two Ojera riders, is at the base of the motorcycle taxi in Cibiru Wetan village, Bandung regency, West Java, Oct. 25, 2018. VOA

Samuel Pangerapan, the director general of informatics application at the Ministry of Communication and Information Technology said the roadmap was made to prepare an ecosystem that can transform the country to a digital economy era.

“We are addressing issues such as connectivity, infrastructure that can support digital transformation, and the regulations. President Jokowi has instructed us to conduct a study and find out all the things that can interfere with digital economy,” he told VOA.

Human resource remains a problem

Untung said one of the biggest problems many e-commerce companies in Indonesia are facing is human resources. “Supply is low, but demand is very high,” he told VOA. Untung added that some companies decided to import skilled workers from overseas or acquire companies to be able to use their service.

“So we’ve started to think how can we have good human resources. The association is thinking to start a vocational school, we also reach out to universities and tell the younger generation that a career in digital economy is possible,” he said. “A lot of young people still don’t know where they want to go after they finish high school. And many Indonesians are still thinking that becoming doctor, engineer, or pilot, is still the ultimate dream.”

Indonesia, e-commerce
Indonesian domestic workers attend a computer class during their day off at the Sekolah Indonesia Singapura (Indonesian School) in Singapore, Dec. 12, 2010. VOA

Pangerapan assured that the government will also tackle the issue of a lack of skilled workers. “We definitely need to prepare a workforce that will be able to handle digital transformation,” he said.

Also Read: Road Safety At The Core of Women Empowerment For This Indonesian Startup

Untung also mentioned that the e-commerce association has started a roadmap to provide better protection for consumers. The end goal is to certify e-commerce companies in Indonesia.

“So let’s say a grade A e-commerce is one that has enough resources, they have people to handle complaints and have a guarantee of service. And then we’ll start to educate the consumers, please shop at e-commerce that have better grades. After that we will encourage the players to improve their service,” he said.

He added that he has targeted the certification program to be launched in 2020. (VOA)

Next Story

Sellers Independently Set Their Prices on Our Platform and We Don’t Interfere: Amazon India

Amazon has more than 50 fulfillment centres in the country and provides several other facilities to the sellers

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Amazon
Amazon has the largest storage space -- 260 million cubic space available for any seller to use. Sellers continue to use Amazon's facilities so that they do not have to do the operational logistics to ship the product. VOA

Discarding allegations of deep discounting and predatory pricing, a top Amazon India executive on Monday asserted that sellers set their prices independently and the platform follows government rules very carefully in the country.

“Amazon is a 100 per cent pure marketplace in India. Sellers set the prices on their own. We do not interfere there at all,” Gopal Pillai, Vice President, Seller Services, Amazon India, told IANS in an interview.

“We have provided the tools and system needed for sellers to manage their business in an effective way,” he added.

The assertions come at a time when the Confederation of All India Traders (CAIT) has approached the government for its intervention regarding the “deep” discounts offered by e-commerce majors like Amazon and Flipkart during festival sales.

CAIT alleged that the two e-commerce majors flouted the norms for the foreign direct investment (FDI) by carrying out festival sales.

Following the complaints, the Department for Promotion of Industry and Internal Trade (DPIIT) sent questionnaire to Amazon and Flipkart over their adherence to the FDI norms. The responses sent by the e-commerce players are reportedly under examination by DPIIT.

“We follow government rules very carefully. We have been compliant… so we do not see anything to discuss there because we take compliance very seriously,” Pillai said.

“We started with 100 sellers six years ago. Today, we have more than 5.5 lakh sellers in India. Businesses continue to grow across the board,” he noted.

Amazon
Discarding allegations of deep discounting and predatory pricing, a top Amazon India executive on Monday asserted that sellers set their prices independently and the platform follows government rules very carefully in the country. Pixabay

In 2019, Amazon India launched close to 1.6 lakh sellers.

“This year alone, we were able to produce more than 18,000 millionaires and 3,500 crorepatis in the country,” Pillai informed.

Amazon India on Monday also announced that it would organise the second edition of its “Small Business Day” on December 14.

The event will offer customers the opportunity to discover and purchase unique and hard-to-find products from start-ups, women entrepreneurs, artisans and weavers under its various programmes such as Amazon Launchpad, Amazon Saheli, Amazon Karigar as well as enjoy other deals and offers extended by lakhs of SMBs and MSMEs .

“Amazon Karigar as a programme has more than 8 lakh artisans and weavers. Amazon Saheli has 30 partners and more than 2 lakh women entrepreneurs participating in it. Amazon Launchpad has more than 900 brands with more than 200 brands being crorepati sellers,” Pillai said.

Amazon India said it will organise e-commerce awareness workshops in five different clusters in the country in partnership with the Confederation of Indian Industry (CII). These workshops will guide how small and medium sellers can get online, what are steps to follow, etc.

“We are the largest marketplace in the country and we have been having more sellers and more selections consistently. We make sure that our experience on mobile is good, our website experience is seamless and we also focus on vernacular experience so that we can have sellers coming from every part of the country,” he elaborated.

Amazon has more than 50 fulfillment centres in the country and provides several other facilities to the sellers.

Amazon
Amazon India said it will organise e-commerce awareness workshops in five different clusters in the country in partnership with the Confederation of Indian Industry (CII). These workshops will guide how small and medium sellers can get online, what are steps to follow, etc. Pixabay

“We have the largest storage space — 260 million cubic space available for any seller to use. They continue to use our facilities so that they do not have to do the operational logistics to ship the product. Our backhouse can do it.

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“Similarly, we also have service provider network where we have 700 service providers across 100 cities and they continue to provide services in imaging cataloging and everything else. We have a lending marketplace through which sellers can get loan from Rs 50,000-Rs 5 crore with a very competitive interest rate,” Pillai said. (IANS)