Crossing the chasm: e-commerce in Indonesia

Photo by Eric Jones
Photo by Eric Jones

Crossing the Chasm, written by Geoffrey Moore and considered to be one of Forbes’ 20 most influential business books, talks about the challenges that technology marketers face in bringing new technology to wide-spread acceptance. It’s relatively easier to get new technology in the hands of innovators and early adopters. The hardest part is crossing the chasm between early adopters and early majority. Successfully crossing the chasm means profitable commercialisation at scale, while failing to cross means that the technology will pass as immemorable invention. Recent examples abound for the failure to cross the chasm, including tablet PC based on Windows XP Tablet PC Edition, Wi-Fi network subscription, and mobile web site converter.

Birth of e-commerce

Photo by Dolf Bakker
Photo by Dolf Bakker

Though multiple attempts have been made to make buying and selling process happen electronically through multiple networks, e-commerce only began to grab real hold on the mind of shoppers after internet was born to connect the whole world. The promise was very enticing. By shortening the typical supply chain of manufacturer to importer to wholesaler to distributor to retailer to consumer, the margin enjoyed by the cut portion of the chain can be removed, and the consumers save money as a result. For example, if an on-line book store imports directly from manufacturers and sell the books directly to consumers, then the margin associated with wholesaler, distributor, and retailer can be largely reduced and passed on as savings to the consumers. “E-commerce would revolutionise everything,” they said in the .com bubble era in late 1990s. Some of the first e-commerce that still survives til today are the on-line book store, started by a Wall Streeter Jeff Bezos in 1995, and the on-line auction portal eBay, started by Pierre Omidyar as AuctionWeb in the same year.

Despite the hysteria that was .com bubble, there were hurdles in getting e-commerce off the ground. For one thing, the widely used payment intermediaries in brick & mortar commerce at that time, Visa & MasterCard, didn’t have the technology to securely provide payment intermediation in the internet when and eBay started. Passing credit card number to e-commerce merchant at the time was very risky proposition, and credit card information stolen from internet data communication was a repetitive occurence. With the advent of Secure Socket Layer (SSL) 3.0 in 1996 and its subsequent usage in HTTPS (Hyper-Text Transfer Protocol Secure) internet communication, sending credit card numbers over to e-commerce merchant became slightly safer. To provide secure payment intermediation on internet, Confinity launched PayPal in 1999.

Aside from security, another factor was inhibiting wide-spread acceptance of e-commerce at that time: the internet access speed. High speed home internet connection were scarce in late 1990s, and it wasn’t cheap. That would change in early 2000s with proliferation of Asynchronous Digital Subscriber Line (ADSL)

Early Indonesian e-commerce & trust building in 2000 in 2000

Hendrik Tio, who was managing a struggling Indonesian computer & printer seller, decided to give e-commerce a try in 1999 and set up, initially just as a web catalog. Understandably, trust of the security of on-line shopping as well as internet access speed were quite low in Indonesia and much of everywhere else at that time. So in 2001, set up a brick & mortar shop to add credibility to its operation. Up to this point, payment for goods purchased in wasn’t done through internet yet.

Surprisingly, the trust of buying anything on-line in Indonesia was built by a foreigner from completely different industry: air line. In 2005, Awair was acquired and changed its name to Indonesia Air Asia. As regional Low Cost Carrier (LCC), one of the way that Air Asia was using to cut cost and pass it as savings to its passengers was through direct sales of its ticket through its web-based reservation system. Secured by the latest internet payment technology, airline customers in Indonesia began to put their trust in buying air ticket on-line using credit cards and other payment methods, especially since they’re very tempted with the low-cost of flying that Air Asia was offering. As more air lines adopt direct selling through web-based reservation system, customers trust began to increase in on-line buying.

More Indonesian e-commerce players arrived

TokoBagus in 2005
TokoBagus in 2005

In 2005, Arnold Egg, a Dutch technopreneur in Bali, launched as on-line market place. In 2006, Facebook opened its doors to anyone aged 13 and above. As Facebook users in Indonesia ballooned, some users were actually using the social media as medium to advertise the goods that they’re selling. It’s apparent that social media is not really a proper e-commerce platform, but what the users needed was some simple ways to advertise their goods freely to as many of their acquaintances as possible. Response was quite good too, as people started buying stuffs from their Facebook friends. Order capture, payment processing, and delivery were all manual processes in this Facebook selling, but it sufficed for many of the small-time sellers.

In 2008, Saratoga Capital, backed by magnates Edwin Soeryadjaya and Sandiaga Uno, launched as on-line property market place. They followed the act a year later by launching for cars. There were already few other on-line car market places in Indonesia at that time, but they were all primitive compared to what was available 5 years earlier or so in developed countries. with its adequate funding made sure that Indonesia’s on-line car market place had the same quality as those in developed countries. In 2010, Jason Lamuda & Ferry Tenka launched, on-line discount coupon seller similar to GroupOn (it was acquired by GroupOn the next year). It’s well to note that pretty much all e-commerce transactions happening in Indonesia up to this point didn’t involve internet payment.

Indonesian e-commerce comes of age

In the end, it must be said that true e-commerce acceptance in Indonesia (which has to include on-line payment) was largely driven by inroads of foreign players with regional or even international recognition. Maybe because those players have been accepted in other countries that led Indonesians to accept that buying on-line from these players are secure. Air Asia was soon followed by Agoda then Groupon DisDus and later on by Lazada. By now, many Indonesians have no problem using on-line payment for stuffs that they get from well-known e-commerce sites.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s