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  • By: LazBeat Staff
  • Jan 18, 2021

ECommerce Powers Businesses in Indonesia’s Fast-Growing Digital Economy

Over the next five years, eCommerce will be a vital stimulant in pushing Indonesia’s digital economy to reach an estimated USD124 billion, and continuing comprehensive digital support, especially for micro, small and medium-sized enterprises (MSMEs) will be essential to maintaining rapid growth, according to a recent Lazada study.

These and other findings were shared last month as part of a two-month study, “Accelerating Indonesia’s Digital Economy through eCommerce.” The advisory firm YCP Solidiance was commissioned to conduct the study with the support of the Indonesian eCommerce Association (iDEA).

“Lazada’s vision is to accelerate economic progress in Southeast Asia through commerce and technology,” said Lazada Indonesia’s chief marketing officer, Monika Rudijono. “Through this study, we want to better understand the journey and the building blocks of companies and MSMEs towards digital transformation as well as how we as an eCommerce platform can support these needs.”

While Indonesia’s digital economy is already on a rapid upward trajectory because of the nation’s surging internet penetration rate and the rapid adoption of smartphones, the study found that there are still challenges that prevent smaller players, such as MSMEs, from fully benefiting from and contributing to this burgeoning market. All the large corporations have shifted from analogue to digitised systems, with 90% applying technology as a lever to improve core business processes, but only 13% of MSMEs have begun integrating technology into their operations.

The need to rectify this digitalisation shortfall is especially pressing because MSMEs are the backbone of Indonesia’s economy, accounting for more than 98% of its companies. In 2019, these small but powerful businesses contributed more than US$1,055 billion – or 58% – of Indonesia’s GDP and provided jobs for 85% of its working population.

While more than 80% of the survey’s MSME respondents acknowledge that embracing online technology is important, many businesses face roadblocks on the path to digitalising, such as the lack of access to digital infrastructure, financing and technology know-how. All these are reinforced by a reluctance to change.

This is why eCommerce platforms are so critical in helping Indonesian MSMEs to digitise and digitalise. Such platforms provide access to a variety of operational support and resources. These platforms offer help in financing, logistics, innovation, marketing and market access, thus enabling MSMEs to tackle everyday issues that stymie their inclusion and advancement in the country’s digital economy. The study found that 92% of Indonesia’s digitalised MSMEs agree that eCommerce helped ease their logistics operations while 94% said sales improved as a result of digital commerce promotions. All those surveyed also agreed that their presence on eCommerce platforms enabled them to reach a national audience.

Indonesian eCommerce Association Chairman Bima Laga said that the use of eCommerce has grown so much in the last few years and that the pandemic accelerated online activities and businesses’ shift to digital operations. Laga added: “With the right policy and execution, eCommerce holds a significant role in driving MSMEs to grow together with eCommerce. For us, eCommerce and MSMEs are one entity if we talk about digital transformation.”

Aside from providing a stable digital infrastructure, eCommerce platforms can offer key building blocks to spur on MSMEs that have begun digitising. They can also help large corporations looking to fully integrate digital technologies into their core competencies and business strategies.

For example, to help companies attain such digital growth and all-round transformation, Lazada not only provides onboarding orientation for new merchants but also advanced training for those wanting to leverage the platform’s many features. Sellers can use the platform to access peer learning, mentorship and networking events. The platform also automates customer and seller services, guide sellers on data utilisation and offline-to-online conversion, and other key building blocks, all in one centralised location.

Rudijono said: “Through Lazada Indonesia’s technology and eCommerce ecosystem, we are ready to provide support for businesses, both large companies and MSMEs, so that they can develop their business in a sustainable manner and reach the next stage of digital transformation. We hope that through the synergy in accelerating this digital transformation, Indonesia’s digital economy system will continue to develop rapidly and contribute to supporting the Indonesian economy.”

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