Reported by Xinhua News Agency | Leveraging the strong supply chain of Chinese e-commerce, Indonesian small and medium-sized enterprises are experiencing vigorous development
2024-08-08
In recent years, the development momentum of e-commerce in Indonesia has been rapid, and it occupies an important position in Southeast Asia and even the world with its huge market volume. It is reported that the Indonesian e-commerce market is expected to reach $100 billion by 2025. In 2022, Indonesia's online consumption expenditure in the Asia Pacific region accounted for 64%, only 2% lower than China's. According to data from 2023, among Indonesian consumers with online shopping habits, 10% shop online almost every day, and 37% shop online regularly every week. Among them, Indonesian small and medium-sized enterprises play an important role in promoting the development of e-commerce. In Indonesia, any enterprise with an annual revenue not exceeding 50 billion Indonesian rupiah and assets not exceeding 5 million Indonesian rupiah is considered a small and medium-sized enterprise. In March 2024, Indonesian President Joko Widodo stated that there are currently approximately 65 million small and medium-sized enterprises in the country. These enterprises have made significant contributions to 61% of the gross domestic product and solved 97% of the employment rate, which deserves special attention from the government. There are numerous small and medium-sized enterprises in Indonesia, and they are increasingly inclined to expand their supply sources from areas outside their home country. According to Indonesian customs data, as of May 2023, the top five countries or regions in terms of import value are mainland China (24.3%), Hong Kong (15.2%), Singapore (14.4%), the United States (8.3%), and Japan (7.1%). In 2023, Teten Masduki, the Minister of Small and Medium Enterprises and Cooperatives of Indonesia, revealed that 80% of Indonesian small and medium-sized enterprises are distributors of imported products in the e-commerce field. And most of the imported products come from Chinese e-commerce. Indonesian President Joko Widodo attended an event in Jakarta on March 7, 2024, emphasizing the importance of small and medium-sized enterprises to the Indonesian economy. Chinese e-commerce has attracted widespread attention and discussion from Indonesian small and medium-sized enterprises, as well as various sectors of society. This is not only reflected in Indonesian news and social media, but also in academic papers and research reports in Indonesia. The rapid development of the Internet makes it more convenient for Indonesian small and medium-sized enterprises to understand and purchase various products from Chinese e-commerce platforms, and also allows them to draw inspiration from the development trend of Chinese e-commerce to build and improve their own business systems. Therefore, with the increasing familiarity of Indonesian small and medium-sized enterprises with Chinese e-commerce and the growing demand for Chinese products in the Indonesian market, China has become the preferred country for Indonesian small and medium-sized enterprises to import products. This article will delve into how Chinese e-commerce has become the main supplier of goods for Indonesian small and medium-sized enterprises, and its impact on the development of Indonesian small and medium-sized enterprises themselves. The current situation of Indonesian small and medium-sized enterprises in the e-commerce field. Why has e-commerce emerged in Indonesia? Around 2010, the number of smartphone users in Indonesia grew rapidly, and e-commerce became a new means of conducting economic trade. In 2009, 2012, and 2015, Indonesian e-commerce platforms such as Tokopedia, Zalora, and Shopee were established, greatly expanding the influence of e-commerce in Indonesia. In 2019, the COVID-19 broke out globally, and the penetration rate of Indonesian e-commerce also increased year by year, from 23% in 2019 to 32% in 2023, and is expected to grow to 46% by 2028. During the epidemic, Indonesia entered a state of "massive social restrictions" (Pembatasan Sosial Berskala Besar), which restricted the operation of schools, workplaces, shopping malls, cinemas, and other public places. The Indonesian government has only approved the continued operation of some physical industries, which has led people to turn to online business activities. This has prompted a rapid transition of the Indonesian economy from traditional models to modern digital systems. Luhut Binsar Panjaitan, the Minister of Maritime Affairs and Investment Coordination of Indonesia, stated that from May 2020 to June 2021 alone, 6.5 million small and medium-sized enterprises entered the e-commerce sector. The Indonesian E-commerce Association (idEA) mentioned that from May 2020 to February 2022, 9.9 million small and medium-sized enterprises have decided to digitize their businesses. In 2024, the Indonesian government explicitly encourages 30 million small and medium-sized enterprises to achieve digital transformation. In addition, the Indonesian government is currently rapidly promoting the "UMKM naik kelas" program, collaborating with other institutions to provide training guidance, technical support, policy support, financial assistance, etc. for small and medium-sized enterprises, helping them achieve mechanism innovation and income growth, including digital transformation and upgrading, and contributing to the rapid development of the Indonesian economy. Although digital business has brought many benefits to enterprises, such as reducing operating costs, improving efficiency, and expanding market share, it also poses many new challenges for enterprises. One issue is payment. Although applications such as Gojek and Grab provide online payment services and financial products, issues such as delayed payments in remote areas still plague many businesses. The second issue is the supply of raw materials. In fact, small and medium-sized enterprises find it difficult to find high-quality resources to supply their own production locally in Indonesia, which leads to a market demand for high-quality materials and triggers price competition, resulting in cost increases. In order to solve this problem, some financially sufficient enterprises have hoped to build their own supply chains. However, the high cost of raw materials and labor brought about by independent production has made these enterprises hesitant. In addition, even as production entities, many companies are still unable to obtain a complete supply chain that meets production needs within Indonesia. Therefore, for various reasons, many small and medium-sized enterprises have decided to change their supply chain strategy - that is, to connect with the international supply chain and obtain diversified product resources. In this situation, China, with its mature e-commerce system and close geographical distance, has become the first choice for small and medium-sized enterprises in Indonesia. The importance of Chinese e-commerce as a supply chain for Indonesian small and medium-sized enterprises has been recognized for over a decade. China has become the fastest-growing e-commerce market in the world, with complete transportation and logistics infrastructure, advanced support technology, high-quality labor force, and high-end talents. In terms of infrastructure, China's diversified transportation infrastructure such as high-speed railways has greatly improved logistics efficiency, which is crucial for the development of e-commerce. China's highways, waterways, and air freight have become very accessible, allowing people to shop freely on e-commerce platforms even in rural, remote areas, and abroad. This not only allows merchants to shorten delivery times, but also greatly reduces transportation costs. In terms of technological innovation, the rapid development of Chinese technology has enabled its e-commerce industry to master a large number of core technologies. For example, Chinese e-commerce platforms run smoothly and with high precision, with very few malfunctions or delays. The application interface is also very user-friendly, providing a comfortable and convenient user experience for both mobile and computer users. At the same time, the improvement of China's digital payment system not only truly realizes "one click" shopping, but also ensures transaction security, allowing e-commerce to quickly enter the public. In recent years, the high participation of artificial intelligence in Chinese e-commerce has also revolutionized the industry. In terms of human resources, China has a large number of skilled laborers and valuable high-end talents. High quality labor resources have created China's leading global manufacturing industry, enabling its products to balance cost and quality well. China's talent in product design, marketing, and digital operations also enables China to quickly adapt and even lead the market, continuously providing a variety of high-quality products for global consumers. In addition, the large team of IT technical talents has also effectively promoted the development and innovation of e-commerce technology in China. At the same time, China has systematically deployed warehouse workers, logistics coordinators, and delivery personnel both domestically and overseas, greatly improving logistics transportation efficiency. These conditions make Chinese e-commerce highly competitive and establish a firm foothold globally. Based on the above advantages, Alibaba Group's 1688 Alibaba Procurement and Wholesale Network, Taobao, Aliexpress, Pinduoduo's Temu and other large Chinese e-commerce platforms have gained a large number of users in Indonesia. The innovation, diversity, and price advantage of products are important factors in attracting Indonesian small and medium-sized enterprises to import Chinese goods. Among them, products such as magnetic false eyelashes, 3-in-1 smartwatches, smartphones, and wireless headphone chargers have very high sales in the Indonesian market. Indonesian small and medium-sized enterprises have thus identified business opportunities and embarked on a "treasure hunt" journey, developing new product supply chains in China. Firstly, enterprises purchase finished products from Chinese e-commerce and resell them directly in the Indonesian market. Usually, these small and medium-sized enterprises may be just starting out or operated by families as a unit. Secondly, companies choose to purchase raw materials or auxiliary component products from Chinese e-commerce, combine them with local materials in Indonesia for processing or assembly, and finally sell them to customers. Thirdly, enterprises purchase the necessary mechanical equipment for the production process through Chinese e-commerce platforms for independent production. With the increasing frequency of trade between the two countries, some Indonesian companies have even actively sought cooperation with Chinese companies to become their distributors in Indonesia, achieving a win-win situation. Taking Iridium Shop as an example, this local digital store in Indonesia has been selling over 250 products including acrylic products, die-casting miniature models, and customized 3D printed items on e-commerce platforms such as Shopee, Tokopedia, and Bukalapak since 2017. At present, Iridium Shop has achieved good revenue. Founder and CEO, Irham Mulkam, who is also the head of Telkom's Metaverse Research and Experience Center, said that in order to manufacture 3D printed products, he chose to directly purchase mechanical hardware such as laser cutting machines from Chinese e-commerce platforms. He also shared a video online of himself unpacking the device and demonstrating the operation. These equipment make it possible for enterprises to produce independently, and their progressiveness has also greatly improved the efficiency of commodity production, achieving the effect of cost reduction and efficiency increase. Another inspiring story comes from 53 year old Lily Chandra, who spent 25 years as a sales and operations manager in a traditional TV antenna factory. After retirement, she realized the enormous potential of e-commerce development in Indonesia and started her gift basket e-commerce business by purchasing goods from the local Indonesian market in early 2022, but the results were not ideal. When she was almost giving up, she decided to try importing goods from Chinese e-commerce platforms. Finally, her online store successfully achieved profitability, and her entrepreneurial career gradually got on track. In January 2023, Lily also opened a new online store specifically for reselling finished products purchased from Chinese e-commerce platforms. For someone my age, it's unlikely to run a store that can produce independently, "Lily shared." Fortunately, Chinese e-commerce platforms have given us many choices. Expanding the foreign supply chain of products through e-commerce is much easier than I expected. "Currently, she runs two online stores in Indonesia, one focusing on the accessories business on the Shopee platform and the other on the electronics business on the Tokopedia platform, both of which are experiencing rapid revenue growth. The accessories sold by Lily on the Shopee platform are considered when purchasing products through Chinese e-commerce. Irham Mulkam once shared his experience of importing goods from Chinese e-commerce platforms on social media: browsing products on the platform, selecting suitable suppliers, and finally choosing suitable products. The whole process is "as simple as trading in the Indonesian market." After determining the desired products to purchase, Irham suggested cooperating with Indonesian companies and import freight forwarders or international logistics companies.
Edit：Chen Xinyan, Lyanna Yee Responsible editor：Li Nian
Source：Outlook New Era
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