More producers open on-line shops to reach foreign buyers

Hendarsyah Tarmizi, The Jakarta Post, Jakarta

Many local furniture companies have turned to the Internet to increase sales. Although they mostly operate in remote locations, in e-commerce, they are ahead of companies in other business lines.

By opening on-line outlets, the furniture companies not only reduce sales promotion costs but also reach buyers all over the world.

The number of local on-line furniture outlets could reach over 50. Internet portal Indonesia-furniture.com has more than 30 vendors. Dozens of other furniture companies have their stores installed at other websites such as EastJava.com.

Vendors featured on the website have production facilities based in various locations in West Java, Central Java and East Java. Several others are based outside Java such as in Bali and Toraja in South Sulawesi.

The type of furniture they sell also varies. PT Cahaya Sakti Multi Intraco, which is based in Bogor, West Java, for example sells knock-down furniture through its olympicfurniture.co.id.

At the Indonesia-Furniture website, Graji Furniture, a specialist in rattan furniture based in Surakarta, Central Java, sells a wide range of rattan furniture using materials such as banana leaf and the outer layer of rattan.

Others such as Old Java, a teak furniture producer based in Bogor, West Java, sells its products through its own website at oldjava.com. The company displays indoor and outdoor teak furniture on the website.

Old Java has reaped benefits from its website, which was launched in August 2000 as a Business-to-Business (B2B) site to allow customers in over 25 countries to order on-line.

In addition to an on-line order system, the company also has an on-line inventory. The company plans to upgrade the site by adding on-line production, on-line shipping and on-line billing to the website.

"This will enable us to fully automate all our business processes and make us much more efficient and accurate, saving time and money," said Eko Sonata, who is in charge of the website.

According to him, a large number of the furniture company's customers have used the on-line order system since the launch of the website.

"Apart from its use by customers to process orders, we also frequently receive enquiries from around the world from prospective customers, so in this way the site also acts as an advertising and marketing tool, although this is not its primary purpose," Eko said.

The company, which produces over 400 models of chairs, beds and dining tables from reclaimed old teak, sets a minimum order of one container for its customers.

The Old Java website, which costs the company less than $1,000 per year to maintain, does not receive payment on-line. "We do not plan to introduce on-line payment. We do not sell furniture on a retail basis and therefore credit card payments are not appropriate for our business," he said.

Like other local online shops, the furniture companies' on- line outlets could still be categorized as semi-virtual marketplaces. They function merely as a medium to promote products and to receive orders and to tell potential customers about the company. None offer on-line payment facilities.

Despite these weakness, the furniture companies are, however, among the first to take advantage of the Internet in selling their products.

In Indonesia, the security of on-line financial transactions is one of a major problems in the nascent e-commerce industry. The slow growth of the industry has been blamed on the government's slow response in providing practical guidelines and regulations.

But analysts believe that the long-term prospects for e- commerce are quite promising.

B2B e-commerce trade transaction in Indonesia is estimated to increase in volume 10 fold to US$500 million by 2003 from about $50 million last year. The business-to-customer (B2C) transactions are projected to reach US$600 million by 2003, according to unofficial data.

With the lack of legal protection, many trade-related websites in the country have turned to conventional methods of payment. Cash on delivery payment is common, while for big purchases, the payment is settled through bank transfer.

Credit card payment is also used but the authorization is made after the goods reach the buyers. On-line shops which receive payment in cash or through bank transfer are often referred as a semi-virtual companies.

In the real world of e-commerce transactions, payment alternatives commonly used are generally in the form of on-line credit cards and on-line checks.

However to use such a payment system, the on-line shopping operators have to invest a lot of money to procure reliable technology to ensure secure transactions.

In industrialized countries such as the United States, on-line shopping has become part of people's lifestyle.

According to an e-commerce report issued by CSIL an Italian- based international furniture research institute, the Internet is expected to play a mainly informative role in the furniture industry in the next five years.

In fact, retail furniture sales through the Internet (business-to-consumer) are not expected to grow significantly. Forecasts up to the year 2003 predict that on-line home furniture sales will reach about 2 percent of the total furniture market in the U.S. and only 0.5 percent of the European one.

In most industrial sectors the value of B2B turnover is much higher than that of B2C and the expectation is that the B2B area will claim at least 80 percent of the total value of future transactions in various sectors.

In the furniture sector as well, the Internet will have an ever more important role in the business-to-business area, both for the purchasing of raw materials, semi-finished products and components and for the furniture retailing system. As evidence of this trend some American websites, which were initially business- to-consumer oriented, are now moving in the business-to-business direction.