E-commerce here like a baby learning to walk

Mahendra Gautama, Contributor, Jakarta

E-commerce in Indonesia was pioneered by Sanur online bookstore website, at www.sanur.co.id. Mimicking the business ideas and strategies of Amazon.com, Sanur is the vanguard for e- commerce here and is paving the way for other companies wishing to enter the business.

Its latest data indicates that with its collection of 30,000 titles, Sanur has enjoyed about 2,500 transactions from its 11,000 customers.

One significant factor that boosted the establishment of e- commerce here in its early stages several years ago was a phenomenon often referred to as "the gold rush of the Internet world" or "Internet crazy".

The phenomenon was based on the successful businesses of dotcom companies, whose prices of shares went up skyhigh on the Nasdaq stock exchange. This also led to many businesspeople or entrepreneurs here to start up their own e-commerce sites, albeit a few years later. Unfortunately, the golden days did not last long, as in April 2000 the price of shares crumbled and soon warning bells of impending death started ringing worldwide, including here.

One high profile e-commerce company here, Lipposhop.com, although equipped with the latest technology and manned by professionals, also had to close shop at a loss. Others followed suit, such as ojolali.com and indomall.com.

Among the remaining e-commerce players here it seems that they mostly deal in products and services that are largely related with computer hardware and the like. Bhinneka.com and palingmurah.com are in this category, while indokado.com and indoflorists.com supply gifts or giveaways and flowers respectively. Electronic equipment and products to a certain extent are offered by glodokshop.com, agissuperstore.com and tokolog.com

E-commerce in Indonesia is basically divided into three categories.

The first category is usually called a merchant or an online seller or, in the Internet lingo, e-tailing. The websites mentioned earlier as well as Radioclick.com are grouped into this type.

The second one is called the payment gateway, which is usually a bank or a company affiliated with financing companies. Commerce.net.id is one example that fits this description. However, at the end of the Internet gold rush, this company also went belly up.

The technology provider is the last in the category, which includes, as the name implies, companies that provide the technology required for e-commerce such as hosting, shopping carts, designing and security. Here, Techscape.com, Indoglobal.com and indosite.com are some of the leading names in this category.

Technology- and design-wise, e-commerce here is relatively advanced. However, with the limited funds invested and the comparatively smaller market in Indonesia vis-a-vis even neighboring countries let alone the Western ones, like the giant Amazon.com, the country's e-commerce looks much paler.

On the level of technology utilized by domestic companies, the use of SSL by Twathe or Verisign for consumers' data protection during online transactions shows that the companies here have kept up with most of the recent developments. Some websites, like tokolog.com or indokado.com, even have features like the shopping cart, which is a navigational function for customer convenience when shopping online.

Still, most of the e-commerce companies here have yet to adopt the marketing strategies effectively used by their counterparts in Western countries, such as maintaining customer loyalty, by, among other means, offering consumers with reward points or other promotions. In order to be successful, e-commerce, like any other business today, has to be based on marketing savvy that includes smart and creative advertising and promotional activities.

Compared to the global turnover of e-commerce, Indonesia's is currently only a small fraction. Forrester Research, one of the world's leading research companies, reported in 2000 that the country's total figure, US$100 million, was a mere 0.026 percent of the world's e-commerce transactions.

The figure for 2003 saw a substantial increase, $1.2 billion, which is still a far cry from the world's e-commerce mindboggling total of $6.6 trillion.

The low figure of e-commerce transactions here may be attributed to several factors.

First and foremost is consumers are extremely concerned about the security aspects of online shopping. Research conducted by Ipsos Public Affairs reveals that 70 percent totally distrust this mode of shopping. Some 72 percent fear that their private information might be transferred or sold to a third party. About 66 percent think that their personal data might be stolen that may give away all the secure data of their credit cards. Lastly, more than 57 percent worry about junk mail that they will most probably receive.

Telecommunications infrastructure, meaning telephone lines, dial-up systems mostly used here and so forth, is another problem that affects the Internet users in Indonesia. To date, high-speed connections for the Internet, such as cable or ADSL, are available in business districts or luxury apartment buildings and housing complexes.

Given that the cost of such connections (far higher than Western countries or other ASEAN countries for some reason) are only affordable for high-income people. Hence, the report issued recently by Gartner Research comes as no surprise. It said Indonesia -- the world's fourth most populous country -- has the lowest penetration of the Internet: only 6 percent of 220 million people.

Next critical factor is associated with the lifestyle, attitudes and mindsets of Indonesians, in fact, very much related to their culture.

While for decades consumers in developed countries have been used to mail-order or purchasing through catalogs, shopping for Indonesians is totally another type of activity.

Shopping is regarded by many here to include a real form of recreation. They prefer the physical element, using all their senses before deciding on a purchase. Add to this their preference of watching and listening rather than reading, one can easily understand why e-commerce still faces various obstacles, especially this basic one.

Based on the continuous growth enjoyed by e-commerce worldwide, like other kinds of lifestyles, it is correctly estimated by many observers that the success elsewhere will be contagious here as well. Some of the players say that the situation is like "a baby taking its first few steps". Further growth is certain and it is not too far away, they add, as long as they can match the requirement of the market here along with some of its peculiarities.