Digital Market Overview: Indonesia | RationalStat
Digital Market Overview Indonesia | RationalStat

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Introduction to Indonesia’s Digital Market

Indonesia's digital market has been rapidly growing in recent years, making it a key player in the global digital economy. With a population of over 270 million people, Indonesia is the world's fourth most populous country and the largest economy in the region.

Indonesia’s population was 258.7 million in 2016 and is expected to grow 4.8% to 271 million in 2024. Indonesia is the fourth most populated nation in the world after China, India, and the US, and is home to the world’s largest Muslim nation. Its growing middle class, increasing smartphone penetration, and expanding internet access have led to a booming digital market in Southeast Asia in recent years.

“Digital Transformation to Potentially Double Trade Sector Growth in Indonesia”

Internet Penetration and Usage

As per the RationalStat analysis, Indonesia's internet penetration has been on the rise, with an estimated 72% of the population having access to the internet. Internet usage is particularly high among the younger population, with a growing number of Indonesians accessing the Internet via mobile devices. Social media, online messaging, and e-commerce are among the most popular online activities in Indonesia which are discussed below:

E-commerce Market Landscape

E-commerce is one of the fastest-growing segments of Indonesia's digital market. As per the RationalStat market research report, the country's e-commerce market is projected to reach US$ 130 billion by 2028, with a compound annual growth rate (CAGR) of 21%. The pandemic has accelerated the growth of e-commerce in Indonesia, as more people turned to online shopping for safety reasons. In 2022, e-commerce sales in Indonesia increased by 65%, reaching US$ 40 billion. E-commerce is booming in Indonesia, driven by factors such as increasing disposable income, growing middle-class population, and improving digital infrastructure.

Major e-commerce players like Tokopedia, Shopee, Gojek, Lazada, and Bukalapak have gained significant traction, and the market is projected to continue its growth trajectory. However, challenges such as logistics, payment systems, and trust in online transactions remain areas of concern.  Tokopedia is the largest e-commerce platform in Indonesia, with over 100 million active users and more than 11 million merchants. The platform offers a varied range of products, including electronics, fashion, and groceries. Bukalapak, on the other hand, focuses on micro, small, and medium-sized enterprises (MSMEs), providing them with an online platform to sell their products.

Indonesia's dgital economy gross merchansise value | RationalStat
Source: RationalStat Analysis 2022, Temasek

Mobile Internet and Social Media

Mobile internet is a dominant force in Indonesia, with a large portion of the population accessing the internet primarily through smartphones. There are six mobile operatives in Indonesia, namely state-owned Telkomsel, Indosat Ooredoo, Hutchison 3 Indonesia, XL Axiata, Smartfren, and Net1.

As per the RationalStat market report identifies, mobile penetration is high, amounting to 150% or 388.04 million mobile subscribers. This shows that many Indonesians have more than one smartphone. Since fixed-line broadband penetration is less than 1%, the majority of people rely on mobile broadband to access the internet, hence the similarity between mobile broadband penetration and internet penetration.

Social media is another crucial aspect of Indonesia's digital market. The country has one of the highest social media penetration rates in the world, with over 160 million active social media users. Facebook and its subsidiary, Instagram, are the most popular social media platforms in Indonesia, followed by YouTube, WhatsApp, and Twitter.

Indonesia Cloud Services Market

Indonesia’s cloud services market is set for rapid growth due to growth in online media consumption and the demand for cloud-based disaster recovery solutions. Indonesian cloud computing spending was approximately US $1.2 billion in 2022. Private clouds are favoured by large enterprises and multinationals such as banks and telecommunications providers. These companies are prepared to pay a premium for cloud services due to concerns over data security. Some of the leading cloud service providers in Indonesia include Indonesia Cloud, Zettagrid Indonesia, CBN Cloud, Datacomm Cloud Business, ViBiCloud, Wowrack Indonesia, Cloudmatika, Telkomtelstra, Lintasarta, and IBM, among others.

Payment Systems and Fintech

Digital payment systems and fintech are gaining momentum in Indonesia, with the government's push for financial inclusion and the adoption of digital wallets. As per the RationalStat analysis, the country's digital payment market is projected to reach US$ 540 billion by 2028, with a CAGR of 25%.

The dominant players in the digital payment market are GoPay, Dana, and OVO. GoPay is Gojek's e-wallet, while OVO is owned by Lippo Group, one of Indonesia's largest conglomerates. Both e-wallets offer a range of services, including bill payments, mobile top-ups, and online shopping. However, regulatory compliance, interoperability, and consumer trust remain areas of focus for the industry's growth.

Overview of Startups and Innovation

Indonesia's startup ecosystem is thriving, with a growing number of innovative startups across various sectors, including e-commerce, fintech, logistics, health tech, and more. The government has launched initiatives to support entrepreneurship and innovation, and the country has become a hotbed for startups attracting significant investments. However, competition, talent retention, and scaling remain challenges for startups.

Opportunities and Challenges

Indonesia's digital market presents numerous opportunities, such as a large and growing consumer base, increasing internet penetration, and a vibrant startup ecosystem. However, challenges such as regulatory complexity, infrastructure limitations, and cultural diversity can pose obstacles for businesses operating in the Indonesian digital landscape. Understanding and navigating these challenges is key to unlocking the market's full potential.

Future Outlook

The future of Indonesia's digital market looks promising, with continued growth expected in e-commerce, mobile internet usage, fintech, and startups. Rapidly evolving technology, changing consumer behavior, and government support for the digital economy are expected to shape the landscape. Businesses that strategically position themselves and adapt to the changing dynamics can benefit from the enormous potential that Indonesia's digital market offers.

Bottom Line

Indonesia's digital market is rapidly growing, with e-commerce, ride-hailing, digital payments, and social media being the key sectors. The pandemic has accelerated the growth of the digital market in Indonesia, and the country's young and tech-savvy population presents a significant opportunity for businesses looking to enter the market.

To know more about the current market scenario for the latest trends in the Indonesian digital market, contact us.

Divyanshu Sharma | RationalStat Director and co-founder

Divyanshu Sharma

Co-founder and Director at RationalStat

Divyanshu is an experienced market research consultant. He helps growth-driven organizations and entrepreneurs understand market entry prospects, industry assessment, and grow their revenue strategically. 

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