E-commerce firm MatahariMall.com returns with special promotions for the National Online Shopping Day, or Harbolnas, on Monday (12/12). (Photo courtesy of MatahariMall.com)

Changing Customer Behavior Is E-Commerce Industry's Biggest Challenge


MAY 29, 2016

Jakarta. Amid promising growth in Indonesia e-commerce market, online retailers say that changing customer behavior, especially with regard to preferred payment methods, presents companies with their biggest and most costly challenge.

Sidhi, a 24-year-old teacher living in Denpasar, Bali, said he previously used the mobile banking feature on his smartphone. However, since he changed to a new device, he opted to no longer use that feature because he found that he was more likely to make impulse purchases while shopping online.

"Now I prefer to use manual bank transfers or cash on delivery for online shopping instead of activating mobile banking. It helps me control my online spending. The easier it is to pay, the more money I tend to spend," Sidhi said.

Another regular online customer, Helena, who lives in South Tangerang, said bank transfers and cash on delivery are her favorite payment methods, yet for an entirely different reason.

Helena said she routinely shops at local online marketplaces, such as Bukalapak and Tokopedia, and taking the option of cash on delivery allows her to check the quality of products before parting with her money.

"It's been worked for me since the era of Kaskus," she said, referring to an online community that provides a transaction forum, which has been popular since the early 2000s.

Helena said she also prefers to rather go to the ATM several times a month to pay her online shopping bills, than activate mobile or Internet banking.

"At the moment, manual bank transfers and cash on delivery are still the most frequently used payment methods in Indonesia's e-commerce industry, followed by credit cards, mobile or Internet banking, and other financial technology solutions," said Hadi Kuncoro, chief executive of aCommerce Indonesia, an end-to-end solutions provider for e-commerce players.

According to Hadi, shifting to more advanced payment methods such as credit cards and electronic banking are important to accommodate the expected boom in the e-commerce industry.

"When the e-commerce industry grows much bigger, there will be a problem with capacity [...] so that e-commerce players most likely would not be able to deal with thousands or even millions of manual bank transfers. Shoppers will need to start using electronic payment methods and e-commerce players have a vested interest in educating them in this regard," Hadi said during a media discussion in Jakarta on Thursday (26/05).

Timothius Martin, head of online marketing at MatahariMall.com, explained that the growing number of financial technology solutions – such as Indosat Ooredoo's Dompetku Plus or also that of other players – is expected to help the e-commerce industry better serve customers.

"At the moment, customers are selecting the payment methods they are most comfortable with. But I'm optimistic that within a few years, there will be one financial technology solution that will be embraced by all. I imagine that we will have something similar to Paypal," Timothius said.

Mataharimall.com offers shorter delivery times to shoppers who use credit cards for payments.

"Changing customer behavior is the biggest cost for the Indonesian e-commerce industry," aCommerce research director Felicia Moursalien said. "It seems like all e-commerce players are competing against each other, but they are actually working together to encourage and educate customers to embrace more advanced payment methods."

Felicia said Indonesia is Southeast Asia's fastest growing online market, but with e-commerce only making up less than 1 percent of total retail sales, there are still huge opportunities for both established e-commerce companies and traditional retailers to tap into the remaining 99 percent.

The Ministry of Communication and Information Technology recorded more than Rp 150 trillion ($11 billion) e-commerce transactions in 2014, with 72 million Indonesians actively using the Internet.

President Joko "Jokowi" Widodo stated his optimism over the potential growth in the country's e-commerce industry, by issuing a new regulation that allows a 49-percent foreign ownership cap on small online businesses.

The government's target of establishing a $130 billion digital economy by 2020 is centered on e-commerce development and technology awareness.

Solutions provider aCommerce has established its ecommerceIQ business unit to focus on research and provide e-commerce marketing data to help equip retailers with the right tools to drive the online revolution.