President Joko Widodo has slammed a Transport Ministry ban on the motorcycle taxi hailing app GoJek. (JG Photo/Lidya Caroline)

Online Indonesia

BY :YANTO SOEGIARTO

NOVEMBER 25, 2015

Nur, a 46-year-old middle-class suburban housewife, no longer goes to the wet market for her vegetables and, when she’s looking for that adorable blouse, she shops at Zalora’s online fashion store.

Nicky’s relies on the Go-Jek service to get to his office on Jakarta’s Jl. Jend. Sudirman.

It’s cheaper, he doesn’t have to sit in Jakarta’s notorious traffic or pay parking fees and all the 35-year-old accountant has to do is tap on his smartphone.

If Nicky needs a car he uses the Uber application on his phone.

Ujang, a 40-year-old taxi driver, benefits from the Grab Taxi application for orders he doesn’t get from his head office.

That adds to his income.

In the villages, more and more people are online. They obtain small-scale credits from state-owned Bank Rakyat Indonesia which they pay back using mobile banking.

The bank is reaching out to people beyond big cities and teaches them how to use online payment applications.

Even the cooperatives are providing basic necessities such as fertilizers, seeds and loans with transactions and profits conducted via virtual accounts.

The internet has made life in rural areas more vibrant, especially after the government disbursed huge amounts of rural assistance funds to empower people and increase their buying power.

The youthful consumer population is huge in numbers. Practically every adult male and plenty of women own a motorcycle which they bought on credit.

How do they pay installments? Online, via smartphone. The financing companies provide payment gateway applications.

How do people pay taxes? Now the process is online. One only has to make a transfer via smartphone. Want to go overseas and obtain a passport? Apply online.

How about the lengthy process of extending a driver’s license? Apply online, requiring only a five-minute wait for a photograph.

In everyday life, families can now order food of their choice online and pay later. The Go-Food service has hundreds of merchants on its list. Whether it’s traditional nasi goreng kambing, a hamburger or a Chinese dish, the service pays first and charges you on delivery.

Now there’s Go Massage if you want a massage. And there’s a new motorcycle taxi service especially catering to ladies. If Go-Jek’s iconic color is green, the new service sports feminine pink and purple colors.

Flying to both overseas and local destinations is now very easy online. Want to book flights, hotel rooms or excursions? It’s very simple on Expedia, Traveloka and many others. They charge your credit card and confirm online and you’re ready to go.

The online revolution illustrates that a huge digital economy is in the making, potentially Southeast Asia’s largest.

The Association of Internet Providers (APJII) recorded 34.9% growth in the number of people connected to the internet to 88 million in 2014 compared to only 72 million the previous year.

The figures underline the potential of the digital economy, while the widespread availability of online services is contributing to shaping pragmatic attitudes on the part of consumers.

A survey by Brand and Marketing Institute carried out in 10 cities with 1,200 respondents aged between 18 and 45 found that average online spending per person reached Rp825,000 during 2014. In total that meant Rp21 trillion in online transactions. In 2015, the institute predicts a two-fold increase in transactions to about Rp50 trillion.

Jumping into the online market

Such growth potential is seeing business rushing to grab a share of the lucrative market. Online shopping companies blibli.com, Bukalapak, Elevenia, Tokopedia, MatahariMall.com, and Lazada are jockeying to sell their online products by  applying various strategies to win a slice of the business.

Bukalapak is targeting monthly transactions to increase eightfold next year, as it bets on rising internet use among Indonesians. Achmad Zaky, its chief executive, said that the company forecasts monthly transactions to rise to Rp240 billion a month from Rp30 billion today.

Bukalapak competes with OLX, previously known as Tokobagus, and Tokopedia, which received a $100 million investment from Japanese investors led by Softbank.

Elevenia, a joint venture between mobile provider XL Axiata and South Korea’s online marketplace SK Planet, has more than a million subscribers in just one and a half years since its establishment. The online marketplace posted Rp250 billion in total transaction value last year and in the first two months of 2015 had booked Rp60 billion.

“We achieved more than our business target so our shareholders are so happy with us,” said Elevenia CEO Jungsung Lee. The investors now plan an additional capital injection within the next two years, he added.

“The first thing is trust. The second is good products, then good prices and convenience. For the Indonesian market, trust is very important; it is the customers’ basic demand,” he said.

Some Indonesians doubt the security of online transactions but that is not the case with Kaskus and Elevenia, which both use an escrow system to guarantee the safety of transactions between the buyer and the seller. Online transaction fears have diminished rapidly as more and more trust-building has taken place while secure systems are continuously being developed.

Online business operators say now is the moment to build e-commerce and enter the hyper-growth era, predicting an annual 30% growth curve through the next five years. They are creative in promoting their products online including using social media such as Twitter and Facebook.

And of course, they provide the easiest payment schemes and offer discounted prices as part of their promotion strategies.

Classified ads are now online, For example, OLX sells used cars and motorcycles online. There are marketplace models which offer people space to promote their products as shown by Kaskus, long a favorite with younger consumers. It too uses escrow accounts, popularly known as “rekber,” for rekening bersama or joint account.

The newest online store is MatahariMall.com, the online department store backed by Lippo Group’s Matahari department stores and Hypermart. Founder John Riady says MatahariMall.com is targeting to book $1 billion in sales within two years.

“Our vision is to build a strong ecosystem that engages sellers and buyers so that they can conduct business anytime and anywhere,” he told a press gathering.

Facilitating the industry

“The world is now in your palm.” That saying may be true but it is also dependent on internet infrastructure and development of mobile applications. What are the internet providers and the big players doing to facilitate a booming e-market?

The largest internet providers, Telkomsel, XL Axiata and Indosat are key in building the digital economy. They are continuously building internet and mobile data infrastructure, together with 4G LTE cellular operators such as Bolt, Smartfren and HiNet. Together they form the backbone of Indonesia’s internet and mobile data industry which will move the digital economy to a higher level.

Firmly believing that digital businesses will be a leading trend of the future with the increase of smartphone penetration and the development of digital business in Indonesia, Indosat CEO Alexander Rusli said Indosat has a $50 million venture capital fund with Japan's Softbank, with both pledging in 2014 to support start-up companies across Indonesia over the next three years.

Communications and Informatics Minister Rudiantara said the government is providing strong support for the development of mobile applications to push the broadband industry further by promising easier rules of the game. “All you need is to register but you must have a legal entity.

That is for the safety of all parties,” he said during a recent conference.

In 2014, said Rudiantara, his office recorded 36 start-up companies, or three a month, which had received financing. That trend is positive but most of the financing originated from foreign venture capital. He questions why local investors are not putting their money into their own country.

He envisions raising around $1 billion for a financing institution to support development of the start-up ecosystem in Indonesia. He has also talked to Indonesian conglomerates, urging them to back start-up investments in the country.

“The target is this year. It’s a pledge not in the form of cash investment. The venture capital can either be selected government-owned or privately-owned institutions,” Rudiantara said.

ICT analyst Teguh Prasetya comments that Indonesians, just like people in other societies in developing countries, need time to adapt to digital economy technology. But with more cellular phones now out in the market than there are people, it is clear that the digital economy is ready to climb to the next level.

“Certainly awareness and readiness of the people must be supported with the right education and proper socialization to prevent manipulation, scams, etc. The role of the government, associations and digital economy players must contribute positively to a comprehensive adoption of technology in all parts of the people’s economy,” he told GlobeAsia.

Teguh is associated with the Indonesian Telematics Association (Mastel), a non-profit organization where all business players in telecommunications and multimedia, industry, manufacturers, associations, professionals, analysts and enthusiasts in the field of ICT share their thoughts and ideas, serving as a bridge to connect and unite all interests between the government and entrepreneurs.

The organization is a strategic partner of the Ministry of Communications and Informatics, the Ministry of Industry, House Commission I and the Coordinating Ministry for the Economy.

For success, underlines Teguh, “the key is availability of the service, speed, affordability and security in transactions and delivery.”

GlobeAsia

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