E-retailers still need offline outlets

JAKARTA (JP): Indonesian e-retailers still need to blend their new, modern virtual marketing system with the conventional offline shopping approach to boost transactions, an analyst with a global consulting firm said here on Tuesday.

Makoto Ozawa, a senior consultant with McKinsey & Company, said it was not easy for Indonesian e-retailers to entice local customers to buy and pay for goods on the internet.

"In Indonesia, physical presence, which is the essence of the conventional way of shopping, is also important for e-customers," he said in a statement.

He said local online retailers know that many Indonesians are still very much accustomed to conventional shopping practices.

The low credit card penetration is also a reason why many local e-retailers allow customers to pay for the goods purchased on the internet in cash at the time of delivery, Ozawa said.

He said many local online shoppers still prefer to order goods through the internet, but pay for and pick up the products at a certain location.

He said that since online shopping is still new here, many people are more likely to trust a site that is supported by an established retailer.

Ozawa said a recent study by the company found that mixing traditional offline methods with modern online shopping is very helpful and effective for online retailers in Indonesia.

"The offline mechanism helps the e-retailers build brand awareness, trust and support for product delivery," he said.

He said Indonesian online retailers had learned a lot from the bad experiences of many major American e-retailers and they will likely introduce some different marketing approaches.

For example, he said, unlike many American on-line retailers, Indonesian e-retailers will probably not offer big discounts in order to attract customers to their web sites.

He said local e-retailers had learned that cutting profit margins in the race to attract customers, like had been done by many American e-retailers, would only lead to financial destruction.

He said many e-retailers in the U.S. were forced by fierce competition to sell their products at a loss. On each order, many American e-retailers lost between US$2 and $12, excluding marketing, overheads and web site development costs, he added.

Ozawa said the shakeout in online retailing in the U.S. would probably discourage many prospective entrants to online retailing in Indonesia.

"Consequently, competition here will not be as intense and the pressure to cut prices will be lower," he said.

Ozawa suggested local e-retailers pay attention more to particular product categories that have proven to be the most lucrative in online retailing in the U.S.

He said the product categories that produced the highest yearly purchases per customer was groceries, followed by prescription drugs, clothing, books and toys. (cst)