New government regulations, an e-commerce roadmap and an abundance of local talent are just three of the many reasons why Chinese startups and investors should look to Indonesia for opportunities
Not only Indonesia has huge potential for e-commerce, with the sector predicted to grow to US$130 billion by 2020, the market itself continues to expand locally. While Jakarta and other big cities in Java remain the core target markets, e-commerce players such as Tokopedia and Berrybenka have plans to pay extra attention to Sumatra, Kalimantan and Sulawesi.
Indonesia has also been seeing Chinese e-commerce companies venturing in the last few years.
AliExpress marked its entry into the country in late 2014 with a partnership with local e-payment provider DOKU and Pos Indonesia.
JD.com has also been rumoured to have entered the market with the appearance of a JD.co.id site with services in the Indonesian language. As reported by DailySocial, the domain seems to have been purchased in April and updated in August. By far, there is still no confirmed information about a product launch, but we are keeping a close watch on the scene.
But, e-commerce is not the only sector that Chinese tech companies are exploring in the country.
Search engine company Baidu set up a Jakarta office in 2013, with Android marketplace Mobomarket as one of its key products. It has a partnership with Lazada Indonesia in the form of a ‘Baidu Special’ page. It also has a partnership with Convergence Ventures in the form of direct investment into Convergence’s portfolio companies, jointly organised meetups, and possibly a co-working space.
Mobile security company 360 Mobile Security entered Indonesian market in 2015 by launching Android-based security app 360 Security Lite. COO Yan Huang even mentioned the company’s plan to set up a Jakarta headquarters to complement its Beijing and Palo Alto offices — a strategic move to begin penetration in Southeast Asia.
Consumer electronic company Xiaomi also opened its first flagship store in Indonesia. Located at a high-end mall in South Jakarta, the store aims to build a community of Xiaomi fans by providing venue to gather and hold events inside the store.
So, what are the hottest trends in Indonesia’s tech scene at the moment?
Two things: E-commerce and O2O.
As a mobile-first market of 230 million people, the great potential of Indonesia’s e-commerce sector has received attention from investors, business owners and the government.
Growth in the e-commerce sector is likely to push growth in related sectors, such as e-payment. According to Indonesia’s Internet business pioneer Shinta Dhanuwardoyo, there is a strong demand from the public who are in need of reliable tools for all kinds of financial services. However, a different view stated that Indonesia is relatively slow to embrace new methods of payment, as the market still struggles with trust issues.
Blossoming tech startups in Indonesia also seem to show offline-to-online elements or vice versa. Technology is seen as a way to empower the poor communities, and if we look at the ways companies such as Go-Jek operate, they form partnerships with local motorbike taxi drivers and implicate a profit-sharing system. Many of these startups are partnering with workers on informal sectors to help them secure more customers, as is the principle of a sharing economy.
Also Read: Indonesian startups flooded with investments from Japanese investors
Opportunities? Plenty, we say
With the government’s recent announcement that it has finally settled the e-commerce roadmap, we can expect more Chinese startups to flood into the Indonesian market and an even bigger amount in the number of investments.
Though, no further details were mentioned, one of the highlights of the roadmap is the eradication of the investment negative list. Foreigners will have the opportunity for 100 per cent ownership of a local e-commerce company though it is limited only to ‘big’ companies.
The upcoming ASEAN Economic Community also opens up more opportunity, considering that China already has a strong trade partnership with Indonesia.
As the Chinese market gets saturated, expanding to Indonesia provides Chinese startups and investors more opportunities for growth for the following reasons:
- The market size is large, with plenty of untapped markets. There are projects attempting to open more Internet access to Indonesians living in rural areas, such as Google’s Loon Project with Indosat Ooredoo, and it means that there is an even greater possibility to reach a new audience.
- With the opportunity to fully own local e-commerce companies, Chinese startups have a greater possibility to merge, acquire, or start a joint venture with a strong local player, a more strategic move compared to starting over from zero by introducing a completely new entity.
- The abundance of local talent with creativity, eagerness to grow and strong local knowledge. Cities such as Jogjakarta have become synonymous with talented developers. So much so that French game developer company Gameloft also has a presence in the city.
- Though still not comparable to other countries, the Indonesian government is starting to become more aware of the importance of the digital industry, and is making efforts to accommodate for its growth. Bandung is a finalist for an international award for SmartCity development, and even smaller cities such as Malang are developing a tech industry hub. Located outside of the capital, businesses can cut down operating costs significantly in these two places.
Winning the Indonesian market certainly will not come easy. Chinese companies require comprehensive local knowledge and marketing efforts to introduce a new brand in a market that is ruled by local giants such as Go-Jek, Tokopedia and Bukalapak.
But the door has been opened, and your success begins with your decision to get inside.
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