Online retail in Indonesia has been formalizing rapidly

Published on: Jun 2019

Indonesian e-tailing has evolved from social e-commerce, on the back of high social media penetration. However, RedSeer research shows that the market is shifting to formal e-tailing rapidly, which grew to ~81% of all e-tailing in 2018 (USD ~13.5 Bn).

A combination of poor consumer experience in informal e-tailing, coupled with rapid growth in the selection and improved experience on formal e-tailers has been driving this shift to formal platforms, which surged ~111% in GMV from 2016-2018.

Formal e-tailing expected to reach USD 21 Bn by 2019 and poised to further grow to USD 58 Bn by 2023

The USD ~13.5 Bn Indonesia formal e-tailing market (2018) is likely to grow to USD 21 Bn by 2019 and then continue its rapid growth journey to reach USD 58 bn by 2023. By that time, our research shows that the market will hit ~11% in online penetration terms and turn into one of the most dynamic e-tailing markets globally.

What will fuel this growth? We expect that the market growth will be driven by a combination of category mix evolution, supported by ongoing changes in business models (C2C->B2C) and logistics models (3P logistics->Captive). Bringing a wide selection at fast speeds and low costs to the population.

Category mix expected to diversify rapidly, as the market evolves into a ‘high frequency’ e-tailing ecosystem

As the Indo e-tailing market evolves, we expect that the category mix will also evolve rapidly. While the market was heavy on the electronics category in 2018, we expect that the 2023F category mix will be materially different- with a significantly higher share of high-frequency categories like fashion, beauty, and FMCG.

We expect that a dramatic shift in category mix to be driven by a growing product selection, higher discoverability and higher user trust owing to B2C initiatives. All of which ultimately lead to higher conversions of app/website visitors to online shoppers.

What is the underlying driver of Indo e-tailing growth?

Indonesia e-tailing growth has been driven by a large online shopper base, which is ~45 Mn strong. However, this shopper base is still a minuscule fraction of the overall population and the internet using population. We expect this to change rapidly over next few years, as the internet using population grows as well as the share of online shoppers picks up rapidly- with many online shoppers coming onboard for the first time, attracted by the convenience, lower prices and general ease of access of online shopping across islands.

In the next editions of the newsletter, we will cover the demand side in much more detail, including what motivates the population to go online and what is their experience like. Stay tuned for more…








  • Rohan Agarwal has been a part of the Redseer Strategy Consultants journey for over six years. He is an expert in digital strategy for traditional corporates and start-ups.