Indonesia e-tailing offers significant growth headroom across categories, with current online % much lower vs benchmark

Published on: Jul 2019

Our research in the Indonesian online retail space makes it amply clear that the market has sufficient room for growth across categories ranging from Fashion to FMCG. As the chart below shows, most of these categories are highly underpenetrated online vs a benchmark country like China (6-7 years ahead of Indonesia).

Our research on consumers, sellers and players strongly indicate that Indonesian e-tailing is well placed to grow in the footsteps of China over next few years if players can solve the challenges around sourcing, payments, and logistics. Which will drive both rapidly trials amongst new consumers and high repeat purchases amongst existing online shoppers.

B2C model expansion will play a key role in driving category-wide e-tailing adoption in Indonesia over next few years

Indonesian e-tailing has evolved from a base of social e-commerce. Hence it is hardly surprising that the market currently is dominated by C2C-heavy players. Yet out consumer research brings out the point that for driving next wave of adoption and growth, players need to solve for better selection, product variety and product quality.

The above problems are being solved by B2C models of players (Malls and Official stores), a play which is poised to expand rapidly in Indonesia over next few years, and reach ~35% share of the market as per our forecasts.

COD will also likely be a powerful engine for ‘democratizing’ e-tailing in Indonesia

Our recent consumer research brings out the point that there is a strong underlying need for cash on delivery payments, amongst online shoppers in Indonesia- especially outside Jakarta. Currently a lot of this need is not been adequately met by e-tailers are they are yet to offer or scale up their COD operations (as shown below).

We believe this is a clear opportunity and e-tailers should leverage a combination of partnerships as well as in-house capabilities to steadily expand their COD infrastructure across Indonesia steadily. Which will readily enable a large chunk of first-time shoppers to join the market and thus give a big thrust to the total pool of online shoppers (45 Mn in 2018) and play a pivotal role in expanding the market to USD 58 Bn by 2023.

In-house logistics is a recent concept and limited in Indonesia, but poised to expand steadily and also drive e-tail adoption

In one of our charts from the last week’s newsletter, we brought out how ‘faster delivery’ is the biggest need for Indonesian consumers to drive both adoption and repeat purchase (per RedSeer research). In-line with this understanding, major e-tailers have started to build their in-house logistics infrastructure recently, starting with Greater Jakarta area.

We expect that in-house logistics will account for ~40% share of the market in next few years, and will play a key role in driving adoption, improving gross to net ratios and in also driving uptake of expensive/fragile/complex categories.



  • Roshan is a Partner at Redseer Strategy Consultants and is focused on Southeast Asia. He was ranked highly by key long-only and long-short institutional investors. He has organized several conferences, corporate events, and non-deal-roadshows.