Analysis of e-commerce in Indonesian market on business-to-business (B2B) commerce
According to Deputy Trade Minister Jerry Sambuaga, B2B e-commerce in Indonesia is estimated to have a market size as big as USD 21.3 billion in 2023. The significant figure of the market size means there is a huge opportunity, volume as well as competitiveness in the market. The government had been using the B2B marketplace to drive the micro, small and medium enterprises (MSMEs) participation in public procurement. He also said that the B2B marketplace will not only help MSMEs sell their products, but also provides them access to loans and mentoring.
Director at payment gateway company Xendit Group, Mikiko Steven, pointed out B2B marketplace’s promising potential in Indonesia. The market has been about businesses providing for the consumers or business-to-consumer (B2C). With B2B in trend, business has never been more transparent and more efficient. He said that B2B possesses immense potential because there is still huge room for growth and many gaps in the market, particularly among MSMEs. B2B marketplace offers transparency in costs by taking out the middleman in the transaction chain. It also enables efficient logistics. Businesses have more options and can easily source their supplies from anywhere in the archipelago.
The Indonesian economy is the largest in the whole of Southeast Asia. The country’s GDP annual growth stood at 8.4% in 2017 growing from USD 932.45 billion in 2016 to USD 1,010.94 billion in 2017. In 2022, the GDP is expected to reach around USD 1,580 billion.
The strong demand for internet services over the past several years is the cause of a sudden increase in Internet penetration, such as mobile-based data services. Digital services come with advantages that make the new system so easy and seamless, unexceptionally in retail businesses. One of the trends in digital services that we know of is e-commerce. The presence of e-commerce has made it possible for consumers to buy something in large quantities at once without having to go anywhere and can be done just by looking into a computer, tablet, or phone.
The Indonesian e-commerce market is estimated to be USD 21.2 billion and is forecasted to grow at a CAGR of 37.4% to reach USD 104 billion, with the B2B segment representing 26.4%.
E-commerce business models, among them B2B, have rocketed in 2021. E-commerce business alone has garnered an increase of more than 50% in sales amounting to IDR 429 trillion in 2020 compared to last year’s sales or an increase of 9 times compared to 2015.
The B2B eCommerce market in Indonesia is considerably smaller compared to its regional peers such as in Singapore, Malaysia, and Thailand, but larger compared to that in Vietnam.
By region, the global B2B E-Commerce market is divided into Asia Pacific, Europe, North America, Middle East & Africa, and South America. The Asia Pacific region accounted for the largest market share and also witnessed the fastest growth rate owing to the rising number of B2B companies adopting e-commerce platforms for growth in the region.
The South American region is anticipated to hold a market size of about USD 700 billion by 2027. Similar growth is expected to be registered in North America and Europe as well owing to the rising adoption of technologically advanced products in the region. Major players in the global B2B E-Commerce market include Alibaba, Amazon, Inc., ChinaAseanTrade, DIYTrade, eBay Inc., EC21, world trade, Flipkart, and other prominent players.
Rising B2B Platforms in Indonesia
The B2C e-commerce revolution is optimizing last-mile deliveries. Meanwhile, the B2B online marketplace is improving the mid-mile delivery ecosystem. The rising B2B platforms in Indonesia are Ula, Ralali, Mbiz, Bizzy group, and GudangAda. These start-ups in B2B e-commerce are introducing innovative solutions to shorten the long supply chain problem. A shorter supply chain and fewer intermediaries mean fewer delivery delays.
Ula is an Indonesia-based wholesale B2B e-commerce marketplace that provides working capital and inventory sourcing for small business owners. The company offers solutions such as supply chain, inventory, and working capital for retailers. Ula was founded by Nipun Mehra, Derry Sakti and Riky Tenggara in 2019 and the position of CEO is held by Mehra. Ula is headquartered in Jakarta and currently has raised a total of USD 140.6 million in funding. They have around 300 employees and an estimated annual revenue of USD 15.6 million. About twenty months since their launch and in the midst of Covid, Ula has grown 230x, currently offering over 6,000 products and serving more than 70,000 traditional retail stores on its platform. With teams spread across 3 countries, it is one of the fastest-growing startups of its kind in the region. Ula’s previous funding includes a USD 10.5 million seed round in June 2020 and an additional USD 20 million Series A round in January 2021.
Ralali is an Indonesian-based online B2B marketplace for local trade connecting sellers and buyers, starting with industrial and MRO categories. The company was established in 2013 and is based in Tangerang, Indonesia. It is a marketplace that allows users to sell and buy products such as building materials, health equipment, industrial machines, and office supplies. Ralali has received a total of USD 22.5 million in funding with an estimated revenue of USD 5 million. Ralali raised USD 13 million in a series C funding round led by Zigexn founder Jo Hirao and Singapore venture capital firms Arbor Ventures and TNB Aura. Through its platform, Ralali connects 12,000 suppliers such as Unilever Food Solutions, Asus, and Siam Cement Group to over 500,000 micro, small, and medium-sized enterprises (MSMEs) in Indonesia. the company claims to have attained 5x growth in gross merchandise volume last year. Ralali also said it is on track to grow another 3x to 4x across 25 cities in Indonesia this year.
GudangAda is an online B2B marketplace for fast-moving consumer goods (FMCG). The Indonesian-based company connects manufacturers and wholesalers to sell their products to retailers. The platform empowers the FMCG supply chain by bridging a technology gap, enabling traders to become both a seller and buyers in conducting multiple transactions concurrently. This way, businesses can sell products at cheaper rates and expand their reach. GudangAda was founded in 2019 and headquartered in Tangerang, Banten with an estimated annual revenue of USD 2.8 million. The company has raised USD 35 million in funding, gained over 1 million transactions, and on-boarded over 300,000 merchants in 500 cities since their launch. Despite being in operation for just over two years, the company has grown at rocket speed since inception. Our revenue has increased 28 times compared to our first month of operations, and we have achieved an increase of 30% in monthly transactions and a strong 50% customer retention rate.
The Future Prospects of Online B2B
The future of B2B has a lot of promising potential as the world is moving to be more digital. With the industry apt to double in value compared to B2C, reaching nearly USD 2 trillion, the importance of expanding to reach businesses where they are is necessary for a piece of that growing revenue pool. This means thriving platforms for B2B e-commerce.
- Online Marketplace is Dominating
There are over 3.5 billion smartphone users globally, which make up 45% of the world population. By 2025, over 1.74 billion new users are expected to be added.
The impact of digital transformation, coupled with the rise in numbers of smartphone users, is the first reason why online marketplaces will dominate the future.
Around 97% of consumers say they have canceled a purchase because the service was inconvenient to them. When you make purchases over online marketplaces, you save potential time wasted pondering over unnecessary buys. We stave off pointless buying temptations because we are more focused on fulfilling our intent. Other than that, when you surf an online marketplace, you get access to thousands of products you have yet to discover in comparison to your local stores. There are more products to suit consumers’ needs.
Reliance on the internet has also increased many-fold when it comes to news, health-related information, and digital entertainment. For example, the coronavirus has forever changed the way people view shopping. Many people now prefer to stay indoors, and that trend seems likely to continue for the foreseeable future. Due to this, online marketplaces are expected to grow at a phenomenal rate of 14% until 2023.
- Better Prices
The reason why online marketplaces are popular among consumers is that sometimes they offer better prices. Sellers can discount their products due to the low cost of selling, they don’t have to buy real estate for their business, hire cashier staff, or pay any utility expenses.
This positive impact of lower prices trickles down to the consumer and shifts their perception of online marketplaces. Therefore, as more and more consumers take advantage of better pricing, positive consumer perception will only strengthen, which is why marketplaces will grow in the future.
BRIGHT Indonesia as Your Local Partner
With the constant shift of consumer behavior and demands, it would need a lot of in-depth research about Indonesian B2B e-commerce. Therefore, to enter the Indonesian market, you would need the right local partner to assist you.
BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.
BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:
- Assist you in expanding and developing your business by identification of potential partners through comprehensive market research regarding client’s request.
- Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arranging business meetings, and acting as a liaison.
- Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
- Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.
For more information, email email@example.com.
*This article is written by Nadia Syailendra