Last year, we saw an abundance of progress and advancements in thee development of Indonesian e-commerce. Starting from Alibaba’s investments in Lazada and Tokopedia, the skyrocketing growth for newcomer Shopee in the mobile market, and the total transaction during Harbolnas 2017 (National Online Shopping Day) that reached Rp. 4 trillion in only three days.
These fantastic moments that occurred last year proves how much the online market landscape in Indonesia is heating up and surely this fast-paced growth won’t be diminished in 2018. In fact, we’re sure that the e-commerce game in the nation will be much more interesting to analyze due to all the players and their competitive nature.
The growth of e-commerce seems to be unstoppable as all the players are fighting to dominate the Indonesian market share. This is not a surprise as the country truly has one of the biggest potentials in the region, proved by the number of online customers that rises every single year.
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AgusMartowardojo, the current Governor of Bank Indonesia, declared that the money Indonesian Internet users spent in 2017 when shopping online can be totaled at Rp. 75 trillion. This was only achieved through 24.7 million users when the total of Internet users in Indonesia have surpassed 132 million in the beginning of 2017. Through the gap in these numbers, we can see just how big the e-commerce potential is in dominating the Indonesian market share.
Nevertheless, leading the Indonesian market is not as easy as imagined. There are still many obstacles that needs to be faced by all the e-commerce players starting from accessibility and Internet speed, geographical and typographical challenges, and payment methods.
Recently, iPrice released their first State of eCommerceWhite Paper research by gathering data from more than 1,000 e-commerce players in Southeast Asia from July 2016 till June 2017. This research contains interesting insights regarding consumer behavior in Indonesia when shopping online. which can certainly be beneficial for all e-commerce players and their marketing strategies to capture the hearts of online consumers.
More Consumers Prefer Using Smartphones
The increasing use of smartphones every year proves to correlate with the growth of mobile traffic on online shops. It’s apparent through the rise of mobile visitations with an average of 19% every year in the Southeast Asian region. Meanwhile, the data from e-commerce players that operates in the nation shows that mobile traffic has an average of 87%, proving that the mobile platform has quite a big potential in terms of gaining a higher traffic. E-commerce players can start improving their sites to be more mobile-friendly if they’re trying to increase traffic.
Evidently, this trend in consumer behavior has been predicted by Shopee who has directed their focus towards a mobile platform. This way, consumers can find products and shop online with ease. This trend in mobile traffic also pushed Shopee to invest a lot more in their mobile app.
Browse on Mobile, Buy on Desktop
Despite the high percentage of mobile traffic that reaches as high as 87%, consumers still prefer to complete their transactions through desktop, a unique practice that you can only see in consumers from Indonesia and other Southeast Asian countries.
The conversion rate, which refers to the visits that ends up in product purchases, of desktop visits is 200% higher than the conversion rate of mobile visits. This data shows the general behavior of Indonesian consumers who prefer to browse on mobile sites or applications but complete their purchases through their computers or laptops.
According to the Content Marketing Lead of iPrice, Andrew Prasatya, consumers are much likely to purchase products on desktop because of the comfort, ease of navigation, and the trustworthiness of desktop sites. The wide screen of a desktop offers a bigger purview where consumers can see all the features of the website within a page which will make it easier to select the desired products, a challenge that mobile sites must overcome.
Even though mobile traffic doesn’t instantly have a high conversion rate, this fact can be a great guide for all players of e-commerce, especially new players who are just starting to dabble in online trading. They can focus on increasing their traffic first before immersing themselves in improving the quality of their mobile sites.
Indonesian Consumers Spend Rp. 481 Thousand on Average
IPrice also analyzed the “basket size” of online consumers in Indonesia that counts the average expenditure of every consumer within a specific period. The basket size is structurally different among verticals and the market positioning of each merchant. Despite of that, the large sample of merchants from a variety of verticals is mitigating such factors, thus the average expenditure of Indonesian consumers when shopping online can reach US$ 36 or Rp 481,000.
If we look at this data through the regional perspective, it makes Indonesia the second lowest country in Southeast Asia in regard to their basket size, falling way behind Singapore’s US$91 average. This basket size value can also show the purchasing power of Indonesian consumers when performing online transactions, a fact that parallels the Gross Domestic Product (GDP) per capita.
From the perspective of an e-commerce player, this insight on basket size can be used to determine the target demographics, product prices, and promotional strategies.
Indonesian Consumers Shop on Weekdays
The perception that people shop more during weekends proves to be a big, fat myth. On the contrary, Indonesian consumers are more active with their online shopping during weekdays, predominantly in the afternoon. iPrice states that from the sample data, the peak activity for product orders occurs from 10 AM till 5 PM. Aside from that, the highest conversion rate also takes place during Wednesdays while the rate decreases by 30% during weekends.
Between Q3 of 2016 and Q2 of 2017, the total orders during 11 AM is 69% higher compared to other timeslots. E-commerce players also receive many orders during 4 PM when most employees are on their way home. These findings are similar with the findings on American consumer behavior as stated by CNBC who found out that 31.2% of online consumers perform their transactions during office hours.
Moreover, based on a Workarea report, consumers are generally offline during Fridays and Saturdays. Then, they will continue their product search on Sundays which they’ll add to their wishlists or bookmark list. Again, e-commerce platforms can turn these insights into a guide when planning a flash sale or a promotional strategy to pull more consumers.
Bank Transfer is the Preferred Payment Method
Compared to neighboring countries like Malaysia and Singapore whose consumers prefer to use credit cards, consumers in Indonesia are still more comfortable with a more conventional payment method when shopping online.
While the payment methods offered by e-commerce platforms vary, findings from iPrice shows 94% of transactions are completed through bank transfer. Additionally, the Cash on Delivery (COD) method is also popular since 43% of e-commerce players still offer that option.
This finding can be attributed to the fact that 150 million Indonesians still do not own a bank accounts. The penetration of credit cards in Indonesia is also still the lowest when compared to other ASEAN countries as how Codapay stated that the credit card penetration in 2015 in the country is only 1.6%.
Trustworthiness also plays a large part as to why COD is still the preferred method for consumers even though it’s not the most effective. Simultaneously, this data shows that there’s still a lot of improvements to be done regarding to the options of payment methods, a task that needs to be solved by all e-commerce players.
To download the full report of White Paper from iPrice, check ourState of eCommerce page.