Indonesia Hits Its Stride in E-Commerce With China’s Collaboration

 

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An employee at online retailer Lazada fills an order at the company’s warehouse in Jakarta, Indonesia, on April 15, 2016.

 

By Yessica Sie

As one of the countries that stands to benefit most from China’s Belt and Road Initiative, the Indonesian economy is set to see rapid growth in the next few years. Not only will there be a boost in investments and partnerships with Chinese companies, but Indonesia is also bound to earn benefits in multiple sectors, including infrastructure, logistics, manufacturing and e-commerce. In a few years, thanks in large part to the Belt and Road Initiative, Indonesia will be more connected than ever with other ASEAN countries and China, and the prospect of improved connectivity across the archipelago is something that gives the citizens of Indonesia a strong sense of optimism.

June 2016 saw the launch of the ambitious nationwide “1,000 Digital Startups” movement, initiated by Indonesia’s Ministry of Communication and Information Technology (Menkominfo) in cooperation with KIBAR, a tech-startup ecosystem builder. The movement aims to have 1,000 digital startups across Indonesia’s 10 biggest cities by
the end of 2020. Undeniably, strong capital is still one of the biggest factors that decide the fate of a startup. Lagging behind neighbors such as Singapore and Thailand in providing monetary aid for startups, the Indonesian government vows to give loans for e-commerce players in the country. Until the scheme is finalized, KIBAR will have to find sponsors and gather massive financial support to be able to run the movement.

Indonesia has been fuelled with the ambition to make great strides and aims to be one of Asia’s best in terms of technology – but before then, we have a lot to learn from China’s tech giants.

Indonesia’s Unicorns

Despite strong interest and positive vibes from investors, not including an absence of support from the government, a lack of confidence and digital awareness in general, too, creates obstacles, holding these startup ventures back in early development, let alone allowing them to live up to their full potential. So far, out of more than 2,000 Indonesia-based startups, only a handful have reached Unicorn status. A Unicorn is a startup whose overall market valuation is at least US$1 billion. Indonesia’s Unicorns include GoJek, a motorbike taxi fleet and courier service, Traveloka, a flight and hotel booking site, and Tokopedia, the country’s biggest online shopping hub.

However, the case is not as problematic with older, well-established companies. Playing their part in economic innovation, many companies are already taking the initiative in preparing their human resources, looking for joint venture partners and potential acquisitions. In the logistics sector, J&T Express has emerged as a new player this year, offering better deals and features than their more senior competitors. The J&T user experience is very similar to that offered by Chinese delivery companies. J&T Express aims to be an internet-integrated delivery company operating not only within Indonesia, but also throughout Southeast Asia. The company was founded by Jet Lee, the former CEO of OPPO Indonesia, and Tony Chen, the President Director of Microsoft Indonesia from 2002 to 2009. Despite the concept itself being in its infancy, the people behind J&T Express clearly have the expertise required to establish an instant direct competitor to long-established delivery companies.

Earlier this year, China’s e-commerce giant Alibaba acquired the biggest e-commerce player in Southeast Asia, Lazada, with more than US$1 billion in investment, instantly making itself one of the biggest investors in Indonesia. Based on this acquisition, it only makes sense that more Chinese tech giants will soon follow suit, making their way into ASEAN, especially Indonesia. During an official visit to Hangzhou with Indonesian President Joko Widodo in September 2016, Menkominfo Minister Rudiantara remarked that the Indonesian government had been in touch with Alibaba, and expressed his government’s wish to appoint Jack Ma (Alibaba founder and chairman) as an adviser to the steering committee for e-commerce development in the country, a role that Ma later accepted. This will not be the first instance of collaboration between the two countries, since the Indonesian government has actually opened a store on Tmall – a prominent Chinese online shopping portal under the Alibaba umbrella – known as Inamall. Inamall sells Indonesian fast-moving consumer goods such as Kopi Kapal Api and Indomie, Indonesia’s most popular coffee drinks and instant noodles.

High-Tech Boom

Apart from e-commerce, another promising company in the technology sector has immersed itself in the Indonesian market. AR Group, a local company specializing in augmented reality, introduced their latest technology in October 2016 at the Indonesia Stock Exchange (IDX) building, aiming to communicate to the public about the presence of a company specializing in augmented reality in the country, as well as their plans to enter the stock market, since there is no tech-based company listed on the IDX at the moment. With offices in Indonesia, Singapore, Spain, USA and Malta, AR Group has been an international success for seven years. They even won the Auggie Awards at both the 2015 and 2016 editions of the Augmented World Expo in Silicon Valley. However, their home presence has been humble, with 70 percent of their projects coming from clients abroad. This year also saw them secure a deal with Alfamart, one of the country’s biggest convenience store franchises, allowing them to launch Alfamind, Indonesia’s first 3D virtual retail store network. Their groundbreaking collaboration will result in a more profound promulgation of both e-commerce and augmented reality technology for the Indonesian public.

 

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Logo of Indonesia’s 1000 Digital Startups program.

 

More than ever before, people feel compelled to create innovation in this interconnected economy, no matter what the approach is – whether it be starting up new ventures, partnering up or even acquiring companies with great potential. While Indonesia’s economy did eventually recover well from the 1997 financial crisis, it never kept up with neighbors such as Singapore, Malaysia, and Thailand – in fact, the contrast has been very striking. It is greatly inspiring to see that Indonesia has been fuelled with the ambition to make great strides and aims to be one of Asia’s best in terms of technology – but before then, we have a lot to learn from China’s tech giants. With the Belt and Road Initiative underway, there is no better time than now for Indonesia – the government, big businesses, small businesses, new startups and working-age citizens all need to play their part. There surely is no easy, quick fix to all the challenges that Indonesia faces. Yet, there is no reason for the country to hold back in investment or innovation, as the progress that we have been making shows all of the signs that the country is on the right track.

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