E-Commerce
E-commerce has taken the local retail industry by storm since its inception. The sector has grown dramatically in the last decade, thanks to the rapid development of the internet and mobile technology. In general, e-commerce necessitates significantly more logistics space than traditional retail because most retailers’ inventory is stored in the warehouse rather than spread out between warehouse and stores. Furthermore, online retailers typically stock a broader range of products, necessitating larger and more comprehensive storage that can accommodate and easily adapt to changing business trends.
Despite the tremendous growth of e-commerce, Indonesia’s current supply-chain ecosystem remains poor, and the sector lacks a number of key factors to support continued growth. According to a World Bank report from 2018, Indonesia’s Logistic Performance Index was only 3.2 out of 6. The main reasons for Indonesia’s low ranking are a lack of transportation infrastructure, as well as red tape and complicated regulations that result in a high-cost environment.
As a result, in terms of competitiveness and efficiency, the nation’s logistics sector lags behind those of its neighbors, like Malaysia, Thailand, and Vietnam. On the other hand, Singapore, the top-ranked nation in ASEAN, had a score of 4, with the biggest points going to its ability in terms of punctuality and logistics. Infrastructure connected to trade and transportation, as well as the effectiveness of the clearing procedure, are some factors that require some improvement. The timeliness of Indonesia’s logistics, on the other hand, is comparable to Vietnam, which ranks third among the ASEAN nations with a score of 3.67. The timeliness rating for Indonesia increased from its rating in 2016.
However, the expansion of Indonesia’s e-commerce continues to fuel demand for improved logistical space, leading to more new construction. This prompted a number of local businesses to compete fiercely for the first-mover benefits, as well as investors and developers from abroad. Large institutional investors like GIC and regional logistics builders like LOGOS and ESR have expanded to Indonesia in recent years. The logistics industry should benefit from Indonesia being considered the next big thing in Asia’s e-commerce business after China.
To execute numerous delivery and shipment-related operations, the logistics process is very well-structured and thorough. These systems are the ones that guarantee that the clients receive the appropriate product at the appropriate time each and every time a product is ordered. The logistics process has been significantly improved thanks to the advancement of technology and e-commerce. However, such a convoluted logistics organization would never be put in place without e-commerce.
As Indonesia’s logistics industry developed, new supply chain management companies began to spring up to assist online marketplaces in organizing their merchandise. An e-commerce enabler, which offers complete business administration for online shops, is one particular kind of supplier. The need for warehouses will rise as more e-commerce businesses, including Lazada, Shopee, and BukaLapak, expand their warehouse requirements. The value of e-commerce was projected to climb by 88 percent between 2015 and 2019 to a total of US$21 billion as Indonesia’s internet penetration kept rising.
Indonesia’s GDP was estimated to be $1.1 trillion in 2019. Household spending accounted for 57 percent of GDP, higher than Singapore’s 36 percent and Thailand’s 50 percent. With the continued growth of e-commerce, there will be an increased demand for faster and more efficient logistics. The number of online shoppers will continue to grow, and the logistics industry must find a way to meet the needs of the country’s 270 million people.
Furthermore, Indonesia has attracted a slew of tech titans. Alibaba, the Chinese e-commerce giant, for example, entered the Indonesian market through Tokopedia in 2020. Amazon has also expressed a desire to expand its presence in Indonesia. According to Google and Temasek, the figure will quadruple from $21 billion in 2019 to up to $82 billion by 2025.
To meet the needs of e-commerce and FMCG companies, many industrial property developers are racing to build integrated modern logistics properties. Trends and investment preferences are likely to shift in the market, and more logistics developers will build new modern and sophisticated facilities.
Overall, the rise of e-commerce will push the logistics sector to accelerate modernization, and with the uncertainty surrounding the global health issue, we are confident that Indonesia’s logistics property will undergo significant change in terms of quality, infrastructure, and capacity in the coming years.
Advanced IT facilities that speed up the handling and management of goods are one of the most important features that an e-commerce company looks for in warehouses. Rapid technological advancement is closely related to high e-commerce utilization. In 2020, technological advancements will have increased Indonesia’s internet penetration to 73 percent, up from 43 percent five years ago.
Furthermore, internet penetration is expected to reach 89 percent of the total population in the next five years. As a result, the number of internet users in Indonesia has increased dramatically over the last decade. According to statistics from 2018, approximately 65 percent of Indonesia’s population was active users, a 25 percent increase from 2010.
Consumers in Indonesia can now fulfill their needs online, thanks to the rapid development of the internet. As the ASEAN region’s frontrunner, Indonesia is expected to grow even faster over the next five years, cementing its position as the heart of Southeast Asia’s internet economy.
The marketplace (B2C and C2C) is the most popular medium with the most users among existing e-commerce platforms in Indonesia, followed by online travel and ride-hailing services. Fashion and electronics are the most commonly traded items in the local market. This market has been steadily expanding.
On the back of a strong demographic and significant expansion in domestic retail and e-commerce, Indonesia’s growth in the logistics sector is expected to accelerate faster than that of many other countries in the region.
However, the government’s role in assisting the development of the logistics sector is critical. The logistics sector is heavily reliant on infrastructure because it involves the distribution and movement of goods and services across the country. As the authority, infrastructure development and government policy at both the national and provincial levels are critical.
Furthermore, to ensure that corporate operations and activity may increase steadily without encountering many issues, a robust regulatory environment that can support the sector’s continual dynamic is also necessary. The government must be able to distribute resources and put a strong emphasis on developing the local logistics sector because domestic consumption, which involves the distribution of goods and services, is the main driver of economic growth in Indonesia.