Indonesian e-commerce Market Predicted to Grow

Online shopping

Major data and analytics company, GlobalData has forecasted that the Indonesian e-commerce market is set to experience a 23.8 percent growth and reach a value of IDR420.8 trillion ($30bn) in 2022.

According to GlobalData’s E-Commerce Analytics, e-commerce payments in Indonesia can be expected to increase continuously at a compound annual growth rate of 22 percent between 2021 and 2025, reaching IDR753.8 trillion ($53.8bn) in 2025.

Over the last few years, e-commerce sales in Indonesia have sky-rocketed facilitated by rising Internet and smartphone penetration, rising middle class population, and proliferation of e-commerce merchants and payment tools. Furthermore, as a result of social distancing and lockdown restrictions amidst the COVID-19 pandemic, online shopping has become highly popular amongst consumers.

Statistics showing Indonesian E-commerce market growth

“Online shopping is popular in Indonesia, a trend that has become more prevalent amid the COVID-19 pandemic. The recent outbreak of the Omicron variant has further led to the resurgence of new cases, the highest in the last six months, which is likely to drive online shopping,” proclaimed Nikhil Reddy, Payments Senior Analyst at GlobalData.

In 2021, to encourage consumer spending and expand e-commerce sales, the Indonesian government partnered up with 72 e-commerce companies and launched a shopping event named ‘2021 Indonesia Made Shopping Day (BBI) Program’. Many discounts and cashbacks, as well as free delivery were offered to provide consumers incentives to shop online.

Together with the growth in e-commerce, usage of electronic payments has also increased, with alternative payments being the major beneficiaries. Statistics from GlobalData’s 2021 Financial Services Consumer Survey show that alternative payment tools collectively accounted for 46.7 percent share in the total e-commerce value in Indonesia, 15.8 percent higher than 2020. OVO, an Indonesian digital payment service, was said to account for 18.5 percent share alone.

The surge in e-commerce has also given birth to new payment models, such as buy now pay later. The Indonesian buy now pay later market is packed with banks and payment service providers offering this service; for example, Kredivo, Atome, SPayLater, and GoPayLater.

The latest to hop on this payment model trend was digital-only bank TMRW with the establishment of its pay later solution, TMRW Pay, in December 2021. TMRW Pay allowed consumers to make online purchases in installments up to nine months at partner e-commerce platforms.

“The COVID-19 outbreak has accelerated consumers’ shift from in-store to online payments. The uptrend in e-commerce sales is likely to continue over the next few years, supported by government initiatives, growing consumer preference and improvements in payment infrastructure.”