For shoppers and investors alike, Indonesia’s weak logistics infrastructure is often seen as a reason for avoiding e-commerce. Investors fear that inadequate infrastructure will impinge the growth of the industry – a concern that is backed by the 25 percent of Internet users surveyed by Vela Asia who said untimely deliveries had caused them to think twice about shopping online.
No doubt, smooth logistics management is a critical hurdle for many e-commerce businesses in Indonesia, which was ranked 59th globally in the 2012 World Bank Logistics Performance Index, below most other countries in the region.
The Logistics Index is based on rankings of infrastructure, services, border procedures, time and reliability. Indonesia fared particularly poorly in the LPI’s customs and infrastructure rankings.
But the concern about Indonesian logistics obscures brighter signs about the market, and ignores the fact that choosing the right provider and managing them well can unlock new customers, while cultivating repeats. A closer look at the data generated by market research indicates some encouraging features of the growing online market, according to Vela Asia’s Online Shopper Survey, a poll of over 500 online shoppers across the region.
Similarly to that in China, where consumers from mid-tier cities are helping to drive e-commerce growth, over 40 percent of Indonesian online shoppers come from regional cities and rural areas, Vela Asia’s research shows.
Moreover, online shops are a way to get access to a bigger range for Indonesians, who are more likely than their regional rivals to cite the “wider range” of e-commerce as a reason to buy online. This is evidently so, from some nearly 50 percent saying that “there’s not enough choice where I’m from!”
That’s an important wake-up call for brick-and-mortar retailers, and it’s good news for the e-commerce and logistics industry.
But the report card for service wasn’t quite as pleasing. Although most Indonesian e-commerce sites aim for delivery to be made in two to six days in major cities, 37 percent of respondents waited a week or more. This is a big area of improvement for the local industry.
There’s also the question of payment methods, which affects logistics providers too. According to the survey, a critical 30 percent of online shoppers use Cash-On-Delivery as their preferred payment method, and yet only a few select couriers offer this service to their customers.
All these suggest a flourishing market for e-commerce, and one that’s going to continue to expand outside the major centers in Java and Sumatra. The key to success will be the careful selection and management of suppliers, especially those with demonstrated experience in e-commerce. It will still be sometime until Indonesia is a fully mature logistics market, but the underlying drivers are there for both innovation and demand.