Indonesia has significant growth potential as an emerging market, particularly in e-commerce. For European companies aiming to expand into East Asia through digital sales, entering the Indonesian market could prove a wise long-term investment. In this article, we explore what makes Indonesia an appealing expansion target, where its potential lies, and what unique aspects businesses should consider.

Facts and Figures About Indonesia

Indonesia, the world’s largest archipelagic state and the fourth most populous country globally, is located in Southeast Asia. It consists of thousands of islands stretching over more than 5,000 kilometers, with a population of around 276 million. Over 17 million people live in the capital Jakarta. Interestingly, due to frequent flooding in Jakarta, the country is building a new capital city called Nusantara. As of late 2024, it is still under development.

Indonesia gained independence from the Netherlands in 1949. It is now a presidential republic with a constitution that guarantees freedom of speech and the press. Although there are concerns about restrictions the country has a vibrant civil society and independent media advocating for press freedom.

Indonesia maintains a neutral foreign policy and was a key member of the Non-Aligned Movement during the Cold War. It is now part of ASEAN, the United Nations, the International Monetary Fund, and the World Trade Organization.

Indonesia ranks 112th globally on the Human Development Index (HDI), with a score of 0.713. Its GDP is approximately USD$1.37 trillion, with a GDP per capita (adjusted for purchasing power) of just over USD$15,612.8. The rupiah (IDR) is the national currency, and the country spans three time zones, with no daylight saving time.

Language and Localization

Indonesia is a linguistically diverse country. The official language is Bahasa Indonesia, which is based on the Malay dialect and spoken by the majority of Indonesians. However, the country’s various ethnic groups use over 700 regional languages and dialects. Key regional languages include Javanese, Sundanese, Madurese, and Balinese. Other languages spoken in Indonesia include Minangkabau, Betawi, Batak, Bugis, Minahasan, Toraja, and Papuan languages.

Bahasa Indonesia is also widely used outside Indonesia as a second or trade language. In Singapore, it is one of the four official languages and is commonly used in media and commerce. Similarly, in parts of southern Thailand, Bahasa Indonesia is often used for trade purposes.

Foreign languages are also spoken in Indonesia. Dutch was prevalent from the colonial period until 1945, but English is now the most widely spoken foreign language, followed by Mandarin Chinese due to growing economic ties with China. English is taught in many schools and universities and is the preferred language for cross-border trade and tourism.

Nevertheless, for successful market entry, it is still essential to translate your e-commerce content into the local language is essential. In fact, the best choice is localization—adapting your website functionality and the text—to reflect cultural nuances and the preferred currency, payment providers, etc.

Key Economic Data and Trade Information

Indonesia is one of Southeast Asia’s fastest-growing economies, with impressive economic growth in recent years. As of 2024, its GDP is currently around USD$1.37 trillion, up from just over $900 billion a decade ago. The GDP grew approximately 5% between 2022 and 2023, and Indonesia remains classified as a lower-middle-income country in transition from a developing to an industrialized nation. According to Statista, in 2022, 29% of Indonesia’s workforce was employed in agriculture, 22% in manufacturing, and 49% in the service sector.

Indonesia exported around US$258.86 billion worth of goods in 2023, of which approximately US$70 billion was agricultural products.  Key exports include raw materials and agricultural products such as oil and gas, coal, palm oil, coffee, tea, cocoa, rubber, tin, and copper. Other significant exports include textiles, apparel, and electronics. Imports primarily consist of machinery, chemical products, electronics, transportation equipment, iron and steel, plastics, and textiles. Popular consumer imports include cars and cosmetics.

Indonesia’s main export partners in 2022 were China (21%), the United States (10%), Japan (8%) India (8%), and Malaysia (5%), while its main import partners were China (31%), Singapore (10%), Japan (6%), Malaysia (5%), and Thailand (5%). European countries account for only a small percentage of imports, but that doesn’t mean that there is no hope for e-commerce companies to expand their reach here.

Internet Usage Trends

According to Statista, Indonesia had 224 million internet users in 2024, equivalent to roughly 81% of the population. That number is predicted to increase to 269 million by 2028. While internet coverage is not as widespread as in other East Asian countries like China, Japan, or South Korea, Indonesia’s e-commerce market is still the largest in Southeast Asia.

Internet usage has grown rapidly in recent years as more people acquire computers and smartphones. Young people and young adults are the most active internet users, but older demographics are increasingly going online, including for shopping. The number of internet users in Indonesia is expected to increase continuously, driven by smartphone adoption and increased digital literacy among older populations.

Mobile internet usage dominates over desktop usage. For most Indonesian consumers, smartphones are the primary means of accessing the internet and shopping online. This makes mobile optimization crucial for e-commerce advertisers.

Social media is extremely popular in Indonesia. Leading platforms include YouTube, Facebook, Instagram, and Twitter, along with local favorites like Path, Line, and Kaskus. Men tend to use social media more than women, and men are also more likely to use mobile devices. Cultural factors may contribute to this gender gap, as women in some regions have less freedom and time to use the internet and social media.

E-Commerce Trends

Statista reports that Indonesian retail e-commerce sales are currently valued at around US$65 billion in 2024 and are predicted to grow to around US$150 billion by 2030. This is a massive increase compared to pre-pandemic numbers. While many countries experienced an e-commerce boom during the pandemic, it seems to have truly changed the way of life in Indonesia.

Local companies dominate Indonesian e-commerce, with clothing, electronics, and travel being the most popular categories. Major platforms include Tokopedia, Shopee, and Lazada with Shopee ranking number one by monthly traffic in 2024. Approximately 33.5 million Indonesians shop online, and that number is expected to increase in the coming years.

Search engines remain a key tool for finding products, but social media and mobile apps are increasingly popular alternatives. Google Chrome dominates as the preferred browser with a 70% market share, followed by Mozilla Firefox (13%) and Safari (6%).

Unlike many countries where credit and debit cards dominate, Indonesians often prefer bank transfers, cash-on-delivery, and digital wallets for online payments. In 2023, digital wallets accounted for 40% of all e-commerce payments. A 2022 survey indicated that the e-payment service OVO had been used by 78% of respondents.

Import and Customs Regulations

Importing many goods into Indonesia requires import licenses or product registrations, typically arranged by the Indonesian importer before shipment. Indonesia is part of the ASEAN Free Trade Area (AFTA), which aims to lower trade barriers among member states. Since the ASEAN Economic Community (AEC) was established in 2015, most products can be traded duty-free within ASEAN.

Indonesia is a member of the World Trade Organization (WTO) and uses the Harmonized System for customs tariffs, with duties calculated based on the CIF value. Importers must provide documentation in English; translations may be required for other languages.

In addition to customs duties, a 10% value-added tax (VAT) applies to imports. Certain products may also incur an income tax of 2.5% (for importers with an identification number) or 7.5% (for those without). In 2020, Indonesia reduced the threshold for import taxes on cross-border e-commerce purchases from USD$75 USD to USD$3 USD to make domestic products more competitive.

Conclusion

As an emerging market, Indonesia offers significant growth potential. Companies considering expanding here should be aware that their target audience may initially be made up primarily of affluent, young, digitally savvy urban residents. However, the increasing popularity of e-commerce and the expanding middle class make Indonesia an attractive long-term investment. With the right strategy, businesses can capitalize on this growing market by getting a foot in the door early on.



 

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autor_eurotext_100Author: Eurotext Editorial Team

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