The McKinsey report on eCommerce in Indonesia is a great read for anyone interested in how a logistical nightmare of a country is leapfrogging traditional commerce to move into the digital age. Have a read here.
This year I’m doing more comparative research between Asia and Africa. While Africa has made significant jumps towards digital business models, the fact is Asia is far ahead there. The proximity to China, where a lot of the new “mobile first” business models are being created, as well as where cheap smartphones are manufactured, has given Asia – particularly South East Asia – an edge. I think Africa will catch up quickly as those two advantages spread West, so it’s interesting to see what the new digital economies in Africa might look like.
Some of the takeaways from the article that I thought were good.
- Drop Shippers –these are intermediaries that connect people to goods they want to purchase online. If a customer doesn’t have a registered address, or a credit card, or a smartphone, they can meet a drop shipper, browse the internet with them, and make a purchase. The drop shipper charges around 10% of the transaction. It’s estimated
there’s over 1 million drop shippers in Indonesia. This idea could definitely work in Africa, and I’m curious if there isn’t already an informal drop ship market I haven’t seen. - Market Size – The 2017 eCommerce market in Indonesia was $8 billion. $5 billion was formal, with another $3 billion informal. That is massive. To compare, the 2017 eCommerce market in South Africa was estimated to be around $850 million. Even crazier is that McKinsey predicts the Indonesian market to grow to $65 billion by 2022. That’s 260% annual growth.
- Success Factors & Challenges – McKinsey addressed this section of their report by offering solutions that companies in other countries had success with. Almost all the companies and solutions presented were Chinese. It makes sense as China moved to mobile quickly, but it also reinforces the idea that China is going to be the big winner in capturing the value of these next growth markets.
It’s fascinating how Indonesia is leapfrogging a lot of traditional retail practices with new digital business models. For a country made up of over 18,000 islands, this is also probably a necessity. Traditional retail just can’t manage that type of logistics. The companies building these