Online Shopping, Offline Payment

May 26th, 2012, in Business & Economy, Featured, IM Posts, Internet, by

Indonesians embrace online shopping, with some reservations.

Online Shopping Up...

Online Shopping IndonesiaIndonesians are shopping online more frequently, especially through portable devices like smartphones.

However, there is still plenty of room for growth. The value of internet-based sales in 2010 was $US230 million, only 0.1% of Indonesia's Gross Domestic Product.[1]

Some factors unique to Indonesia that make online shopping attractive to local consumers are:

- It's much easier and faster than driving to a store
It saves time and money to shop online; it avoids the country's notorious traffic jams, difficulty finding a car park, uses no petrol and is less stressful. Indonesian internet speed is also below average, but slowly improving.

- There is clear pricing
Prices in Indonesian stores for e.g. electrical goods are negotiable, with the price tag (if there is one) merely a guide or starting point. While some people like to bargain and get the best price, others with less time prefer the simplicity of fixed prices. Clear pricing also makes it easier to compare different brands with similar products.

- There is less time wasted
Indonesian shops seem to be prone to their items being frequently out of stock (kosong). If this happens on an online store, it is more likely to say so, or just not let you purchase the item.

...But Online Payment Flatlining

However, consumers only rarely pay for these products online.

logo-bhinneka Multiply Logo
Credit cards not accepted here

Many of Indonesia's large online retailers (above) also do not offer credit card payment. Why?

- Customers are slow to trust the retailer
Indonesia has earned a reputation for credit card fraud.[2] Customers therefore prefer payment on delivery, known locally as "cash and carry". This allows customers to pay after they have checked the product matches the description; they do not need to request a refund if the product is defective or not what they ordered.

- Relatively low use of credit cards
Less than 10% of Indonesians have a credit card. Indonesia is still very much a cash-based economy.

- Inadequate online payment infrastructure
Possibly related to the previous points, no major online payment system offers payment in Indonesian Rupiah.

Paypal logo Moneybookers logo
Rupiah pariah?

A company that wants to offer online credit card payment in Rupiah has few options; many put it in the "too hard basket" and only accept payment by bank transfer or ATM. As an example, many Indonesian domestic airlines only recently introduced online booking and payment, and even then only for Indonesian credit cards. Some smaller airlines still do not offer it at all.

Winners And Losers

Despite an unpredictable local postal service, Indonesian courier companies have struggled in the past; for example, TNT ceased domestic delivery in 2010. However, the growth of online shopping/offline payment has been a boon for couriers, increasing their revenue signficantly. Their employees not only deliver the items, but also collect payment from the client. [3]

Travel agents also often have their own "courier" who zips around town on his motorcycle, home delivering passengers' tickets and collecting cash payments.

However, a travel agent is also an example of retail companies that need to change to remain relevant and successful. Their clients used to need to visit a travel agency in person, but now their clients can book flights direct with an airline or online travel agency.

Another example is music shops. Around the world, digital downloading of CDs and DVDs is now more popular than physical CDs, even when excluding piracy. However, no such systems (e.g. iTunes, Netflix) are available yet in Indonesia.

In conclusion, there are still many business opportunities for e-commerce in Indonesia. With some local knowledge and understanding of local culture and habits, both foreign and local entrepreneurs have the potential to do very well.

For Indonesian residents, Google Indonesia recently set up a free web-hosting service: Bisnis Lokal Go Online. Companies that enrol get a free __.web.co.id address as well as free AdWords promotion and hints/tips for increasing traffic/hits.


8 Comments on “Online Shopping, Offline Payment”

  1. avatar David says:
    May 28th, 2012 at 7:40 am

    Is BCA “KlikPay” being used yet? It’s supposed to be similar to Paypal but I don’t know exactly how it works, I think it was just launched very recently though – http://www.klikbca.com/KlikPay/klikpay.html

    https://www.gudangvoucher.com/ is supposed to be one of the few KlikPay ‘merchants’… they seem to offer their own electronic voucher system for paying for things online, you top up the card or voucher at your bank, then can use it to pay for things online, seems a reasonable half way house if traditional credit cards can’t be used yet.

  2. avatar Chris says:
    May 28th, 2012 at 11:52 am

    Hi David,

    Is BCA “KlikPay” being used yet?

    I have seen brochures advertising it at my local branch, but I think it requires the merchant’s website to have the feature installed too.

    For example, Bhinneka offers it (plus the Mandiri equivalent, Clickpay):
    http://www.bhinneka.com/aspx/others/oth_carapembayaran.aspx

    By the way, this new system will face another issue: Indonesians are also not keen on Internet Banking; only 7% of Indonesian Internet users do any banking transactions online.

    “Internet banking is growing rapidly outside Indonesia, but apparently it hasn’t been a popular move here,” said Nielsen Indonesia director Dena Firmayuansyah.

    Source

  3. avatar irma says:
    June 4th, 2012 at 7:48 am

    di indonesia ini memang banyak sekali penjualan online,sehingga paypal indonesia sudah sangat populer dan sudah banyak di minati.

  4. avatar Adam says:
    June 9th, 2012 at 8:38 am

    In my experience, most online shopping payments are conducted through direct bank transfers. Mainly through the thousands of Facebook shops that exist. The other point about this whole thing is that the vast majority of Indonesians that work in the cash economy can’t afford things like flat screen TVs or frivilous shopping so even if they had bank accounts and a computer, they wouldn’t be shopping online.

  5. avatar Chris says:
    December 5th, 2012 at 5:16 pm

    If Apple can do it, why can’t anybody else?

    Apple launches iTunes Indonesia

    JAKARTA: Apple finally launched the long-awaited iTunes Store in Indonesia on Tuesday, after skipping the country when it rolled out its online store to several Asian countries last June.

    ……….

    According to DailySocial blog, a song’s average price ranged from Rp 5,000 (52 US cents) to Rp 7,000, while that of an album was between Rp 45,000 and Rp 65,000. In addition, a high-definition movie, such as The Raid, will cost up to Rp 149,000 to download.

    Source

    As a point of comparison, new DVDs cost about the same price, while CDs are a little bit more expensive at Rp75 000 ($US8).

    If the DailySocial blog is correct, this means CDs on Indonesian iTunes are cheaper than the equivalent product on e.g. Australian iTunes.

    However, before everybody from Australian iTunes decides to join Indonesian iTunes, prospective clients will need an Indonesian credit card. This can be difficult for non-citizens to obtain, even long-term Indonesian residents.

    If you want to download Indonesian iTunes, click here then click on “Get the latest iTunes software”.

  6. avatar Chris says:
    May 7th, 2013 at 10:56 pm

    UPDATE: Indonesian e-commerce and blogging site Multiply has suddenly ceased operations.

  7. avatar Chris says:
    October 20th, 2013 at 4:56 pm

    Previously:

    Indonesia has earned a reputation for credit card fraud.

    Now:

    Indonesia overtakes China as top source of cyber attack traffic

  8. avatar Roger says:
    December 7th, 2013 at 7:26 pm

    Worst stuff with indonesian sellers are they wants payment my banktransfer, and then they dont answer anymore…….of course money they get, but no items are shipped! Worst scam/fraud country i´ve tried to shop from!



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