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Digitimes Research: Mobile application service, e-commerce growing rapidly in Indonesia

Benson Wu, DIGITIMES Research, Taipei [Tuesday 15 August 2017]

While the mobile network infrastructure in most countries of the Association of Southeast Asian Nations (ASEAN) has reached above the global average, the 4G LTE mobile user market in the region, with the exception of Singapore, has been growing relatively slowly. Meanwhile, mobile Internet has served as a growth driver pushing the development of Internet networks in the region, and the use of community applications has played a key role to push up the demand for mobile applications.

The number of network community users in Indonesia is growing rapidly, which has driven indirectly the development of mobile application service and e-commerce business in the country. With its enormous domestic consumption potential, Indonesia has become a major focus within the ASEAN market.

As of the end of 2016, Indonesia had a total of 133 million Internet users, representing a penetration rate of 51% and making it the largest Internet user market among the 10-member ASEAN countries.

Due to the preference for community application services by Internet users in Indonesia, the Special Capital Region of Jakarta has optimized this foundation to develop smart city applications. After extensive success, the central government of Indonesia has decided to adopt this operating model and plan to promote the smart city applications to the nation's top-100 cities. Local Internet service provider Telkomsel and application service provider Go-Jek both have also utilized the feature of high dissemination of community networks to rapidly promote their mobile services.

E-commerce will also become a promising segment along with the growing popularity of Internet networks in Indonesia, Digitimes Research believes. While the penetration rate of e-commerce in Indonesia was below 10% in 2016, the average consumption per e-commerce user reached US$228, the second highest level in the e-commerce market in the ASEAN region trailing after Singapore.

With on-line sales accounting for only 2.2% of total retail sales in Indonesia in 2016, the country's e-commerce market is full for growth potential. However, the segment still faces a number of challenges including government regulations and administration efficiency, payment tools, and immature logistics infrastructure.

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