E-commerce in Indonesia comes with a few obstacles, despite being a promising enterprise.
While consumer growth is projected to continue positively, with the Indonesian market expanding about the size of Singapore’s population at five million new urban consumers each year, geographical conditions and infrastructural disparity can pose as challenges for businesses that wish to conduct cross-border transactions (CBT) smoothly.
Apart from that, CBT to Indonesia has proven to be expensive and complicated with its customs clearance, high taxes and import permit regulations. For example, shipping a US$100 dress to Indonesia requires approximately 36 per cent of the product value itself, a sum that might scare away small to medium businesses.
He explained that Indonesia’s main export partners go beyond Southeast Asian (SEA) countries, extending to China, Japan, India and even the United States.
“But at this stage I still feel like it is tricky because there are government regulations that you cannot overcome,” Bittermann added, admitting that Indonesia is one of the most difficult places to ship to.
With more than 10 years of experience in logistics and cross-border transactions in Asia under his belt, Bittermann shares pro tips on how Indonesian e-commerce businesses can make CBT more seamless and gear them up for success.
Understanding your ground
The first thing that e-commerce entrepreneurs need to understand is how the customs process works in the country. Founders should know what categories their products fall under, and the regulations that will apply to the incoming goods. Understanding regulation can help companies cut down the hassle of customs clearance and speed up the distribution process.
Every partner is unique
Though Bittermann said that 74 per cent of Indonesia’s GDP is being produced in tier-one and tier-two cities such as Jakarta, Surabaya and Bandung, startups still need to pay attention to smaller islands where distribution can be tricky.
“In my experience, we do not always find a carrier that fits all. Sometimes you find one that has good links in Java, sometimes you have one that has good links in Jakarta, there really is no local hero that can reach all over the country,” he said. “I would really recommend investigating each partner’s strong areas and what kind of services they can offer,” he added.
Shipping consolidation is also another great alternative to achieve economies of scale and reduce shipping costs. Bittermann gave an example of cash-on-delivery (COD) services, which accounts for less than 50 per cent of transactions in the Indonesian market. The reason behind it is simply that not all carriers have the capability for COD.
This is the reason why in achieving the company’s objectives, aCommerce is partnering with several carriers such as JNE, First Logistics, Atri Express, Pandu Logistics, RPX and even the national post service Pos Indonesia, as each of them tailor their offerings to the company needs.
Back on the Internet
Last but not least, the Internet plays an important role in making things easier for entrepreneurs to choose the exact service that they need. Bittermann explained that aCommerce is currently working on a shipping management software called ShipHawk which allows companies to compare carriers.
“Such a system provides a huge advantage for smaller startups because it helps them to make decisions — whether it makes more sense to ship in bulk to Bali or to ship one-by-one,” concluded Bittermann.
Disclaimer: aCommerce is an Ardent portfolio company. Ardent Capital is an investor in Optimatic Pte Ltd, the parent company of e27.