Decoding the Online Shopper
Andi is a millennial who wants to purchase the latest gadget for his birthday next week.
He is a thoughtful buyer who loves to first learn everything about a product before buying it online.
He compares prices of products across websites, reads reviews from other customers and even compares ratings before making his purchasing decision.
After placing an order with a cash-on-delivery option, Andi also tracks the movement of his shipment until delivery.
Finally, the gadget reaches his home after three days. He is thrilled to get the product and wanted and shares his experience on his social media account.
Andi's story is common to millions of customers who participate in e-commerce in Indonesia. Every day, progressively more people take the leap into the world of digital shopping.
This has mainly become possible because of the increasing number of Indonesians enjoying Internet access, having increased to 38 percent last year from 32 percent in 2013.
Internet data usage also rose by approximately 19 percent in 2015, compared to 2013, with many companies wishing to capitalize on this momentum.
An increasing number of affordable smartphones and the availability of cheaper data plans have made technology more accessible to most people.
This has led to the number of people doing online shopping to increase to 11.6 percent in 2015 from 9.4 percent in 2013, representing a 23 percent jump. Although e-commerce is still in a nascent stage, it will not be too long to witness a turnaround in the industry.
The below data indicate that e-retailers are heavily spending on advertising to entice new users to buy online. They are also tempting existing buyers to spend more on their online purchases.
However, not all shoppers behave the same while shopping online. It is fair to say that there is a correlation between online shopping behavior and the technology adoption curve.
On one hand we have innovators, who will be excited about the latest upgrade or feature, while others will resist change. On the other hand, there is also a rift between early technology adopters and mainstream customers.
Information and measurement company Nielsen Indonesia recently conducted a survey among 5,000 respondents in five key cities in the country. This was an attempt to understand the behavior and purchasing dynamics for people doing online shopping.
This study was conducted in three separate modules during the early part of this year. It also collected data about online shoppers' purchasing behavior spread across 10 categories, including consumer electronics, fashion, travel, information technology and mobile phones.
Learning About Ecommerce Industry
- Indonesia's e-commerce industry is estimated to be worth more than Rp 70 trillion ($5.3 billion) per year.
- Consumer electronics and travel products contribute to more than 50 percent of the total market value.
- In terms of frequency, fashion/sportswear is the most popular category for online purchases (68 percent), followed by travel (35 percent) and cosmetics (29 percent).
- More than 20 percent are "exclusive click shoppers" who directly buy online without much of browsing.
- The average e-commerce shopper's profile is skewed towards those below 25 years of age.
- Females dominate in purchases of cosmetics, personal care products and groceries.
- Recommendations from family/friends and social networking sites are key influencers for purchases.
- Online shoppers mostly search and compare products and read product reviews prior to their purchases.
- Purchases are followed by so-called word-of-mouth testimonies, by sharing product experiences on social networking sites.
- Internet banking is considered a trusted and secure mode of payment for online purchases.
Challenges
Although more people are exploring online retail, there are growing concerns and trust issues over whether items for sale are the same as displayed on websites. Is the product genuine or fake?
Is there any guarantee of receiving the product once the order is placed and payment is made online?
Another issue involves the sharing of personal and banking details with third-party firms, who may send unsolicited e-mails to customers.
There are also inherent challenges for any country still in the growth phase of digital technology, such as slow Internet speeds.
Although it will take effort and long-term planning to build trust among shoppers, the latter can be partially resolved by developing an application or website compatible with varying Internet speeds, such as basic HTML and the full version.
Nielsen Indonesia managing director Agus Nurudin said: "It is critical for the e-retailers to build trust, which can be done through increased awareness and familiarity about cyber-security measures and secure payment services for online purchases."
Road Ahead
The convenience and comfort of comparing products across websites currently remain the bedrock of the e-commerce industry. However, in the near future the overall shopping experience in terms of comfort of finding products, a quick ordering process and secure payment services, will be the key to appeal to shoppers to make repeat purchases.
The Indonesian e-commerce industry is characterized by growing trust issues among shoppers, ongoing development of logistics and infrastructure, and a competitive landscape with no e-retailer having emerged yet as a market leader.
However, with a population of more than 250 million people and increasing smartphone adoption, Indonesia appears to have the potential to become a large e-commerce market.
Venu Madhav is executive director and Manish Singhal senior manager of consumer insight at Nielsen Indonesia.
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