Sun, 19 Aug 2001

Few takers for online shopping

By Christ Tumelap

Despite the high expectations on the country, which has been praised by Internet analysts as a enormous potential market, the growth of e-commerce in Indonesia has been slow.

JAKARTA (JP): The number of people who use Internet might double to four million this year, thanks to the mushrooming of cheap Internet kiosks. But only a few actually make online transactions with virtual or "brick and mortar" shops on the Internet.

A recent survey of 1,500 people in 10 major cities across the country who are familiar with the Internet showed that 88.4 percent of the respondents, who knew about Internet transactions, only 16.3 percent had ever bought or paid for things online.

The survey, jointly conducted by the Association of Internet Service Providers (APJII) and the Indonesian Internet Business Community, found the rest of the respondents were unwilling to do online transactions because they were afraid their credit cards might be misused or that the paid goods would never arrive on their doorsteps.

Arifudin, acting secretary-general of the Indonesian Telecommunications Society (Mastel), conceded that the growth of e-commerce in Indonesia was still unsatisfactory.

"Its not quite like we expected and its mainly due to the absence of adequate infrastructure," he told The Jakarta Post.

"A bloody expensive stuff that does not work," that is perhaps the most common expression you may hear from many computer owners and Internet users here on the quality of Internet access in this country.

They cannot be blamed for being sarcastic because the quality of Internet connection here is indeed expensive and unsatisfactory. Indonesia's Internet access fee is among the highest in the world.

In APJII's survey, nearly three-quarters of users complained about access difficulties, long browsing or downloading times, and frequent line disconnection.

The poor Internet connection is due to the bad quality of telephone lines in this country. Most telephone lines here are still the old-fashioned copper cables, whose transmission speed is limited to 144 kilobytes per second.

Only a few areas in Jakarta use fiber optic cables, which can boost transmission speeds to 4.8 gigabytes per second.

Worse, with the copper cables, telephone users are charged painful usage costs on top of the monthly subscription fee. In the United States and many other countries, telephone users are only charged the monthly subscription fee.

Although they are a basic infrastructure, there are not enough telephone lines here. Indonesia only has two to three telephones per 100 people, while Malaysia has over 20 telephones, Thailand eight to nine telephones and the Philippines two to four telephones per 100 people.

While not many people in Indonesia have access to or can afford telephones, there are even fewer who can afford computers or Internet access. PC penetration in the country today still sits in a single digit. In big cities, there may be five PCs for each 100 households, but in rural areas, it is doubtful whether even one PC is available in each of the villages.

Faithless market

For most Internet users, the security of payments made over the Internet is the most sensitive issue. Many still don't trust the online security system nor the Secure Electronic Transaction method which claims to guarantee the security online transactions.

Although experts insist that credit card payments made via the Internet is far safer than a direct credit caard transaction where the sales person has direct access to the card, many people are still not confident of conducting online payments.

There is no need to look further for examples of online crimes as Indonesians are also notorious for credit card fraud.

American person-to-person auction payment service company BidPay.com announced last year that it had uncovered a large Indonesian group using stolen identities to defraud users of online auction sites such as eBay.com , Yahoo.com, Amazon.com and MSN.com.

"It is believed that the Indonesian fraud ring consists of about 20 people who run the scam on a full-time basis. The group is hiding behind phony domain registrations and is using stolen credit cards to target various websites," BidPay said.

Local mobile telephone trader Global Teleshop last year started selling their goods through the Internet but asked customers to pay by cash on delivery. The company said it preferred cash payment to avoid fake or overdue credit cards.

The immediate enactment of a cyber law will be the most effective way to lessen customers' hesitancy to engage in online transactions. Without any legal framework, e-commerce will move slowly.

Internet players and experts want the government to apply a somewhat "hands-off" policy in dealing with Internet use in order to motivate the growth of online communities. But on the other hand, they insist that a proper cyber law must be implemented to provide the online community legal protection.

The House of Representatives (DPR) has been mulling over several laws on e-commerce, such as the Computer Misuse Act, Electronic Protection Act, and Electronic Payment and Certification Authority.

However, the government has been taking a laid back attitude, insisting that the current criminal laws are sufficient to handle e-crimes.

The lack of a security system and the absence of adequate legal protection have prompted many trade-related websites to turn to the conventional method of payment to cater to demands.

Cash on delivery payment is the most commonly used, while for big purchases, payments are made through bank transfers.

According to Joseph Widyanta SA, head of sales and marketing department of GlodokShop, operating as a semivirtual shop may be the best solution for local online traders to cope with the payment problem.

"It is not only the customers who fear being cheated, traders have the same problem," Joseph told the Post.

Currently, where the e-commerce market is still relatively small, investing a lot of money in the security infrastructure is not feasible.

President and CEO of Lipposhop Teddy Setiawan said recently that most of the company's 200 individual customers and 5,000 corporate customers made their orders via telephone.

"Only 20 percent of our customers both make orders and pay for them online," he said.

B2B

Corporate users have benefited more from e-commerce than individuals because they are mentally and technologically ready. Companies understand the importance of adopting Internet and online payment to make their businesses more efficient.

According to e-commerce expert Onno W. Purbo, the small and medium enterprises (SMEs) have been enjoying the most of e- commerce's advantages.

"SMEs find e-commerce very helpful in cutting advertising and communication costs, and at the same time, nailing more customers," he said. "The way I see it, the B2C online transactions undertaken by e-retailers will continue to see a slow growth while the B2B e-trading done by SMEs will keep increasing rapidly."

There is currently more business-to-customer (B2C) e-commerce providers than business-to-business (B2B) players. B2C players include Sanur.co.id, Gramedia CyberStore and Lelang2000.

The B2Bs include textile e-trading nexiaonline.com, pulp and paper network epulpaper.com and Sinar Mas Group's tradealliance.com.

Most of B2C and B2B providers are actually brick and mortar companies, meaning they first started as physical companies and later expanded their sales and distributions through the Internet.

Given the slow response from the market, the revenue volume from online transactions gained by e-traders is low.

Forrester Research said e-commerce transactions in Indonesia last year amounted to only US$100 million, compared to global transactions of $390 billion. The B2B transactions contributed to most of the figure.

He believes that if the country can work harder to fix the infrastructure problems, Indonesian e-commerce can stand at an equal level with other emerging Asian e-markets in the next five years.

Today, the most popular e-commerce used here is probably e- banking. Several banks, including Bank Central Asia (BCA), Bank Internasional Indonesia (BII), Bank Bali and Bank Mega, have started e-banking as an alternative way of banking.

Their e-banking services, however, are still very limited and can only be accessed by their own customers. BCA said nearly half of its customers used e-banking facilities to check their account balance and only fewer used it for payments or transactions.

Many experts predict e-banking will be boom within the next two to three years as by then the public's confidence in e- commerce would have grown. However, that can only come true if more customers can overcome their fear of making transactions online.