Some online shops make good progress
Hendarsyah Tarmizi, The Jakarta Post, Jakarta
Almost not a day passed without the launching of a new dotcom company in early 1999 as local investors tried their luck in e- commerce following the success of the online business in the United States.
The boom, however, did not last long. Reports of the collapse of many American dotcom companies in the following year dealt a blow to nascent online companies.
Internal factors, such as poor Internet connectivity, costly telephone charges and the low rate of personal computer (PC) use, are other reasons why many online retailers had to shut up shop.
LippoShop, one of major local online stores and the first company to introduce the online shopping concept to the country, has been forced to quit its Business-to-Customers (B2C) service due to the lack of response from customers.
Since August of this year, the online shopping company has focused only on Business-to-Business (B2B) operations.
Executive director Mia Lukmanto said that low Internet penetration remained a major handicap for the B2C online services in the country.
Although the development of the online business is not so encouraging, many online stores are still able to survive the difficult conditions.
For those who are often too busy and have not enough time to go to conventional stores, the surviving online stores still offer a wide range of goods and products.
GlodokShop.com, which started operation in January of last year has, for example, become more popular with electronics lovers. It sells a wide range of electronics products ranging from home appliances to a complete home theater set.
On the website, at least you can see the latest models of electronics goods, or check out the prices before you go and buy in a conventional electronics shops.
Joseph Widyanta SA, the head of the sales and marketing department of GlodokShop.com, said that the customer response to the electronics online shop was quite positive.
He said that the website, which last year booked 2,000 transactions, had received orders not only from Jakarta but also from other cities.
"We hope that this year the number of transactions will increase by 300 percent," he told The Jakarta Post in a recent interview. More and more people have been entering the electronics good portal, which at present has more than 200,000 page views per day.
"Although the profit margin is small, the income is sufficient to cover operating costs," he said.
Other surviving companies include the Surabaya-based Kakilima.com, which specializes in selling cakes, puddings, cookies, flowers, fruit baskets, gifts and toys.
Weeny Ika Candra, a senior executive of Kakilima.com. said that the website, which was established in 1997 with an initial mission of helping Indonesians living overseas to find and send gifts to their parents, relatives or friends back home, has received a good response from the public, particularly after two years of operation.
At present Kakilima.com has delivery areas covering most major cities in the country, mostly in Java, with orders reaching 200 per day.
"Kakilima.com is the only online shop in Indonesia which has delivery areas covering most of the country's cities," she told the Post.
Like GlodokShop.com and Kakilima.com, Indomall.com has also managed to survive thanks to its ability to provide a good service to its customers.
The number of orders received by Indomall.com, which specializes in selling flowers, cellular phones, children's toys, sports equipment and apparel, keeps increasing, albeit not exponentially, said Veronica, a sales executive of PT Indonesia Inti Internet, the company which operates the website.
According to Veronica, competitive prices and on-time delivery are important factors which have enabled the website to remain afloat.
Although the market for online shops in Indonesia is still confined to the well-off, the prospects for e-commerce in the country remain bright.
"The online stores, which are relatively stagnant at present, will see their businesses growing rapidly in the next three to five years," Veronica said.
A lack of transaction security is another problem facing the nascent e-commerce industry. The government's slow response in providing practical guidelines and regulations has also been blamed for the sector's slow growth.
Given the lack of legal protection, many trade-related websites have turned to conventional methods of payment. Cash on delivery payments are most commonly used, while for big purchases, payments are settled through bank transfers.
Forrester Research said e-commerce transactions in Indonesia last year amounted to only US$100 million, compared to global transactions of $390 billion. B2B transactions contributed most of this amount.