FOR MARKETING PERSPECTIVE -- APril 6

FOR MARKETING PERSPECTIVE -- APril 6

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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.