Chinese e-commerce giant Alibaba Group sees “huge potential” in the Indonesian market as the government, through a recent e-commerce road map, pushes efforts in developing the sector to make the country the biggest digital economy in Southeast Asia by 2020.
Alibaba Group vice chairman Joseph Tsai said the diversified company — which has assets in e-commerce, technology, payment systems and logistics — saw “huge potential in Indonesia” for two reasons: The young population and a mobile phone savvy public.
“We acquired (Southeast Asia e-commerce platform) Lazada so that we could be in Indonesia as well as five other Southeast Asian countries — Malaysia, the Philippines, Singapore, Thailand and Vietnam, with Indonesia obviously being the largest market,” Tsai told a press briefing on the sidelines of the 11.11 Global Shopping Festival on Nov. 11. The 11.11 Alibaba Group Global Shopping Festival, more commonly known as Singles’ Day, is the world’s largest shopping event.
Alibaba Group acquired Lazada for US$1 billion earlier this year, its largest international investment ever. Lazada, which operates its own logistics and networks, is currently one of the fastest growing online shopping platforms in Indonesia.
“We see that consumers in Indonesia are even younger than consumers in China. Indonesia is very much a “mobile first” e-commerce environment. People are enthusiastic about mobile phone use,” Tsai said.
A survey of smartphone owners in Indonesia, who account for 43 percent of the population, showed that up to 57 percent of online shopping in the country is done on mobile phones, with average time spent on smartphones reaching more than two hours (136 minutes) per day, according to recent Google research.
“They’re skipping computers and instead using mobile phones as their premier technology device. That growth is extremely fast, and we’re extremely excited about that,” Tsai said of the Indonesian market.
Emerging Middle Class
Indonesia’s e-commerce transactions are expected to reach US$24.6 billion this year, three times the US$8 billion recorded in 2013, thanks to emerging numbers of internet users and middle class Indonesians.
The government even expects e-commerce transactions to reach US$130 billion in 2020 as it introduced the 14th economic stimulus package on an e-commerce roadmap covering support for funding, human resources training, logistics and telecommunication infrastructure, among other elements.
In tapping into the growth potential in Indonesia, Alibaba Group aims to localize its operations to make them relevant in serving domestic consumption, which accounts for more than half of the country’s gross domestic product (GDP).
“We want to be as local as possible to understand consumers locally through the Lazada platform,” Tsai said.
In doing so, Alibaba Group may introduce the 11.11 Global Shopping Festival in local platforms to capture more transactions from Southeast Asia.
“The service will also roll out to other markets, such as Southeast Asia, leveraging Alibaba Group’s investment in Southeast Asia e-commerce site Lazada, and markets that have a sizeable Chinese community,” the company’s press statement explained.