The large-scale work-from-home phenomenon caused by the COVID-19 pandemic has led to an “extreme” increase in the number of people shopping through digital platforms. This translates to an acceleration of digitalization among Indonesia’s households and a potential boon not only for productivity goods, but also for consumer and leisure products.
In-app sessions among Indonesian users for e-commerce and shopping apps rose by up to 70% throughout the February - June 2020 period, according to a report from US, California-based analytic company AppsFlyer.
Released on September 17, the report noted that average purchasing rose by 5.7% in April 2020, leading the company to say that an even larger spike in consumption may occur from September to November 2020 – a date range where there have been a traditional 40% spike in online purchases due to various sale events held by the country’s myriad of digital platforms, such as the 10.10 or 11.11 sale event.
Indeed, in the January 2019 to June 2020 period, Android users caused an upward spike in the rate of retargeting conversions – meaning the number of times a user actually views or buys a product – of 2.3 times. Another 50% retargeting conversion rate occurred in the January to February 2020 period. The retargeting conversion peaked in the May to June 2020 period, surpassing the previous 2019 fourth quarter rate of 36%.
What this means is that businesses that have not yet adapted to the digitalization era or place their products in Indonesia’s various digital platforms have missed and will miss out on the country’s large population and its increasingly growing upper middle-income demographic.
This is because the COVID-19 pandemic has accelerated the process of digitalization in Indonesia. Indonesians are an already internet savvy bunch, what with an average smartphone penetration rate growing 10% annually – expected at 70% by 2020, according to Statista.
Shopee, the China-based e-commerce platform is aware of this fact, investing hard into the brand’s presence in various digital and physical sources, such as Indomaret, one of Indonesia’s largest convenience store chains. Very recently, the brand overtook Tokopedia, the largest local e-commerce platform in Indonesia, as the platform used by those who have bought something online in the last three months, according to a survey released by local consulting firm MarkPlus Inc. in September.
As e-commerce grows, so have digital transactions. LinkAja, a state-backed financial technology platform, saw top-up transactions among LinkAja users grow twofold since COVID-19 hit Indonesia. In terms of transaction volume, the platform recorded a 700% growth. This is an opportunity for PT Anabatic Digital Raya, which has partnered with Huawei Indonesia to offer Cloud services to companies looking to ensure the smoothness and security of their digital transactions.
Post COVID-19
Indonesia is the largest economy in Southeast Asia. The economy has maintained a stable growth rate of around 5% over the years. By the end of 2019, per capita GDP has risen to over 3,600 euros. The Indonesian middle class now comprises of 100 million households.
As in many other countries, the COVID-19 pandemic will bore a significant downward impact on that growth, with the most recent forecast being between minus 1.1 to 0.2% growth by the end of 2020, as announced by the Minister of Economic Affairs Airlangga Hartarto in mid-September.
It’s important to note however that Indonesia is still among the better performing country in Southeast Asia in terms of their expected economic growth as affected by the pandemic. The Asian Development Bank forecasted that Myanmar, Vietnam and Brunei Darussalam are the only ASEAN countries that could see positive growth – it forecasted a -1% growth for Indonesia. The OECD added Lao PDR to that list, while forecasting deeper cuts for Malaysia (-3.9%), The Philippines (-3.2%) and Thailand (-6.7%), as well as other SEA countries.
It is also promising thus that the aforementioned international institutions, as well as the other majors ones such as the World Bank, are also forecasting V-shaped recovery following the news of the rapid development of vaccines to be made ready by early 2021. This recovery is further supported by the various stimulus programs introduced by not just Indonesia, but also governments around the world. These stimuli will continue to be implemented in 2021 and further into the future in order to ensure global economic recovery.
The challenge for Indonesia is its relatively lackluster COVID-19 response. While its percentage of COVID-19 cases, 24.7%, remains below the WHO average 25.05%, its fatality and recovery are above and below the WHO average as well, at 4.1% compared to the world’s 3.24%, and at 71.2% compared to the world’s 71.7%, respectively.
To further discuss this issue, The German – Indonesian Chamber of Industry and Commerce (EKONID) will hold a digital trade mission with online presentation event and B2B meetings in Indonesia and Singapore from November 23 to 27, 2020. Our partners for this event are the German Association of the Toys industry (DVSI), the Spielwarenmesse e.G., the Southeast Asia Toy Association (SEATA), and the industrial partners Brandora GmbH and little big things GmbH.
Along with our colleagues at AHK Singapore, and supported by the German Ministry of Economic Affairs and Energy (BMWi), the webinar will see companies focusing on toys, housing, school supplies and sustainable products, among other industries, as well as potential business partners in Indonesia and Singapore, gather to discuss the latest development regarding the sector.
For more information, click here