INDONESIA INDONESIA MARKETING MARKETING REPORTREPORT

Author: Natasha Morla Tanuputri, Indonesian Market Specialist of STARTBOARDNatasya Febrina, Indonesian Market Specialist of STARTBOARD

Contents

I. Indonesia At A Glance 5

1. Facts and Figures 6 2. Indonesian Population Structure 6 3. Indonesian Economic Overview 7

II. Indonesia E-commerce Ecosystem 14

1. Internet Penetration Growth 14 2. Gross Merchandise Value (GMV) Indonesia 17 3. Industry Growth 18 4. Sector Growth 18 5. Investment in E-commerce Industry 19 6. Challenges in the Indonesia’s E-commerce Industry 20 7. Government’s Support and Regulation for 21 Indonesia’s Economic Ecosystem 8. The Top Players of E-commerce Industry in Indonesia 26

III. Marketing Strategies 31

1. Tokopedia’s Marketing Strategies 32 2. Shoppee’s Marketing Strategies 34

IV. Tips for Taiwanese Entrepreneurs Interested in Indonesian Market 36

1. Visa Application 37 2. Target Audiences 37

Introduction

Indonesia is believed to be one of the world’s fastest growing consumer markets. In fact, Indonesia was the second fastest growing economy behind China in 2012. With over 277 million of population and its impressive growth in the numbers of GDP growth rate, Indonesia is surely one of the most targeted markets for industries to start investing or building businesses in.

Indonesia has continuously shown impressive growth in the digital ecosystem. Ever since the COVID 19 pandemic started, the E-commerce Industry has bloomed tremendously. Various lockdown restrictions have limited people from moving around places, forcing them to do activities inside their own houses. This made a considerable influence on Indonesia's shopping behavior and further enhanced the growth of the E-commerce Industry. Food and Personal Care items grew rapidly in this period. The country has earned its spot as the 11th largest market for e-commerce with a revenue of US$33 billion in 2020.

With around 202.6 million active internet users as of January 2021, Indonesia has become a country with the highest numbers of internet users in the world. Even so, Indonesia has not reached its highest point. The rising numbers are predicted to grow even further with around 75 million of the population still untapped making it the perfect destination for entrepreneurs to grow their digital e-commerce. The main objective of this paper is to assist Taiwanese Entrepreneurs to get an overview of the overall Indonesia Market and Marketing Strategies to apply to this economy. The paper shows the market’s potential based on research on the country’s demographic, economic, and industry growth. Informations from various sources have been gathered and market research has been conducted through SWOT methodology. We have also gathered additional research on Tokopedia and Shopee’s business and marketing strategies alongside with its business case.

I. Indonesia

At A Glance

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1. Facts and Figures

Source: Embassy of Indonesia

2. Indonesian Population Structure

Indonesia is the fourth most populous country globally with a population of 277 million and grew 2.73 million people on average per year.1 Indonesia has a composition of 67.8% from the working age population (15-64 years old) and 32.22% from the non working age population. Indonesia has 49.7% of the female population and 50.3% of the male population2.

Being one of the most religious countries in the world, Indonesia’s religious structure consists of 86% Muslims 7.6% Protestant Christian, 3.12% Catholic Christian, 1.74% Hindu, 0.77% Buddhist, 0.03% Confucians, 0.04% others3. It has more than 300 ethnic groups and almost half of the population consists of Javanese ethnic. Indonesia has urban areas with 57% of its population living there and the remaining 43% lives in the rural area4.

1　World Population Review : Indonesian Population 2　Statista. Indonesia : Age structure from 2010 to 2020 3　Wikipedia - Religion in Indonesia 4　Embassy of Indonesia - Facts and Figures

3. Indonesian Economic Overview

According to World Bank 2021, Indonesia is the largest economy in Southeast Asia and the world's 10th largest economy in terms of purchasing power parity. Despite COVID-19, Indonesia’s economy has shown continuous growth. The President of Indonesia once gave a speech in which he mentioned the continuation to change and make changes by innovation amid today’s disruptive world.

Indonesia achieved positive economic growth by Q2 2021. It expanded to about 7.07% in the second quarter of 2021, a tremendous growth as opposed to the previous quarter with a contraction of 0.71%. This was Indonesia's strongest pace in economic growth since Q4 of 2004 1, due to a low base effect from 2020. The numbers exceeded the economic growth of huge economies in the world like India with 1.6% of economic growth, Korea with 5.69% of economic growth, and Japan with -1.6% of economic growth. The impressive figures explains the country's successes in implementing strategies, like the Social Assistance (known as Bansos or Bantuan Sosial). The social assistance provided by the Central to State Government has brought about the growth of the economy. It has slowed down the increasing number of poverty in rural areas.

Indonesia’s consumer spending behavior has always been the major contributor of the economy. The CPI grew all the way up to 102.27 by the end of Q2 of 2021 from previously only 82.74 in the first quarter of 2021. The growth was due to the rise of the Food Industry, Clothing Industry, Tobacco Industry, Spare Part Industry, Accessories Industry, Vehicle Fuel Industry, and other goods. Indonesia’s annual inflation has risen up to 1.6%, though a little bit below the forecasts of 1.69%.

As of Q2, the GDP of each 5 major islands in Indonesia grew. Java Island’s GDP grew to 57.92%, continuing with Sumatera growing to about 21.73%. Other areas in Indonesia like Maluku and Papua also recorded the highest growth of about 8.75%.

1　Pertumbuhan Ekonomi Indonesia Kuartal II - 2021 tertinggi sejak tahun 17 tahun

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According to Investment Coordinating Board Indonesia (BKPM), Indonesia's FDI has shown growth 19.6 percent year-on-year to IDR 116.8 Trillion in Q2 2021 vs. 14 percent in Q1 20211. The Trading Economics also reported that the status of Indonesia FDI in the long term will reach around IDR 150 Trillion in 2022 and IDR 160 Trillion in 2023. For 2021, the government is targeting IDR 900 trillion total investment. With the expectation to reach 120.00 IDR Trillion by the end of this quarter, about 73.3% of the target has been achieved in the first nine months of the year.

The biggest source of investment came from Singapore, followed by Hong Kong, the Netherlands, Japan and China, while base metals and transportation, warehousing and telecommunications and utilities were among the sectors taking beneficiaries2.

1　UOB - Indonesia : 2Q21’s FDI increased by 19.6 per cent year-on-year 2　Trading Economics : Foreign Direct Investment

3.1 Regulations for Foreign Entrepreneurs

● Visa Regulation

There are different regulations and procedures when obtaining a visa as it comes in many different types. Due to the pandemic, all visa applications must be done online by the Indonesia Immigration portal. Electronic Visa (E-Visa) allows foreigners to easily apply for Indonesian visas online without enduring long border queues. In order to obtain it, foreigners must fill out the online form and pay the online visa fees before submitting the form. Currently, foreigners who hold valid Visas (excluding the Free Visit Visa and Visa on Arrival) or Stay Permits can enter Indonesian Territory with certain conditions applied.

However, if there’s any intention to stay in Indonesia for a certain period of time, it’s advisable to apply for a Limited Stay Visa (KITAS/ITAS) or Temporary Residency Permit Card. Generally, the maximum validity of a KITAS/ITAS is for one year and is extendable. There are various types of KITAS/ITAS but these are the most common types presented in the table below.

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The Covid-19 pandemic has had a significant effect on the ease of travel to other countries. In the case of Indonesia, there are new regulations for entering the country and please keep in mind that the subject can be changed depending on the situation.

Foreigners who are planning to come to Indonesia must be fully vaccinated, showed negative results through the PCR test (D-3 departure) and filled out the Indonesian International e-HAC through the PeduliLindung application1.

1 ASEAN Briefing - What are Indonesia’s Latest Guidelines on International Travel?

● Free Trade Zones

Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. FTZ is a policy exempting facilities from some customs rules, including the taxes and levies. In this area, trade is governed by a wide range of regulations1.

The FTZ in Indonesia has become a great place for businesses to operate and the main incentives that are available as follow:

○ Biggest Zone with Strategic Benefits Since 2009, Batam along with the neighboring Bintan and Karimun islands officially declared BBK FTZ as a free trade zone or an FTZ. BBK FTZ is Indonesia's largest FTZ and is located just south of Singapore. Specifically for Singaporean-based companies, they can benefit from the Singapore-Indonesia expropriation protection and upgraded double taxation avoidance agreements along with the access to Indonesia's huge 270 million strong domestic market2.

1　Investopedia - Free Trade Agreement (FTA)2　ASEAN Briefing - Indonesia’s Batam Receives Two New Special Economic Zones

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○ Biggest Zone with Strategic Benefits

○ Fast Approval Process of Application

For investment procedures, Batam has a one stop-policy to allow a company to do all its business transactions through a single office and for the approval process of applications will only take no longer than 20 days.

○ Tax Exemption

Import duty, income tax, VAT and sales tax exemption on imported capital goods. Moreover, if an entrepreneur makes products in the region, they will have a lot of export incentives.

a. Exemption on corporate income tax

In an SEZ, the business stakeholders are divided into two types of taxpayers: badan usaha (business entities) and pelaku usaha (businesspersons). Both types are eligible for a 100% reduction in corporate income tax (CIT) provided that their investments are conducted in SEZs and with a minimum investment value of 100 billion rupiah (US$7 million), for a period of 10 years.

b. Corporate income tax allowanceTaxpayers that invest 100 billion rupiah (US$7 million) are also eligible to receive several CIT allowances such as: ➢ Reduction of 30 percent in net income on the total investment;➢ Accelerated depreciation allowances;➢ A WHT rate of 10 percent; and➢ Tax-loss.

c. Import and excise duties

Import duties, tax on the importation, and excise duties are all exempted on the following dutiable/taxable goods:➢ Capital goods used for the construction or development of SEZs;➢ Consumable raw materials for service industries (for tourism SEZs); and➢ Entry of goods (for tourism SEZs).

d. VAT and sales tax on luxury goods

VAT will not be collected if: ➢ The import of taxable tangible goods into an SEZ by a business entity;➢ The delivery of taxable tangible goods from another Indonesian free trade zone, customs area, or bonded storage facilities to a business entity;➢ The delivery of taxable services or goods, including land or buildings by a business entity in an SEZ to another business entity in the same or another SEZ; and➢ Etc.

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II. Indonesia

E-commerce Ecosystem 1. Internet Penetration Growth

Indonesia is ranked 3rd in the world with the biggest share of internet users in Asia with over 202 million of its active internet users. Indonesia has reached a significant growth in the number of internet users1 of about 27 million between 2020 and 2021. Internet penetration has grown exponentially since 1990. The graph shown above is to show the incredible exponential growth of individuals using the internet in Indonesia.

1　Statista - Internet usage in Indonesia - statistics & facts

Graphs on Average Time Spent Using Online Media in Indonesia in Q3 2020, by activity according to Statista 2021

Graphs on Individuals using the internet (% of population) according to the World Bank

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On average, Indonesia spent 8 hours 56 minutes using the internet as of Q2 2020. Moreover, they spent an average of 3 hours and 14 minutes on social media every day. These figures show how the internet has been well incorporated into the daily activities of the population in the country.

The internet penetration in Indonesia has grown from 53.7% and now stood around 70% of the population. Although the numbers are a little behind Indonesia's neighbouring countries, Indonesia has a growth acceleration of around 20%, the speed exceeded those of the other countries.

There are around 170 million of Indonesia’s population using social media users in Indonesia in 2021. Indonesia’s number of social media users has risen by 10 million between 2020-2021. Popular online activities include mobile messaging and social media. The most popular social network in Indonesia is YouTube, with around 94 percent of the online population using the platform.

Mobile internet usage is undergoing double-digit growth rates and currently stands at over 124 percent among the population. There are 345.3 million mobile connections in Indonesia in January 2021 with an increase of 4 million between 2020-2021.

2. Gross Merchandise Value (GMV) Indonesia

Indonesia's online shoppers were reported to be 85 million people during the pandemic. The gross merchandise value (GMV) in Indonesia reached over 30 billion U.S. dollars and was expected to reach 83 billion U.S. dollars by 2025 according to the 2020 e-commerce economy SEA report by Google, Temasek, and Bain & Company.

Indonesia is seeing a lot of startups with tremendous innovation breakthroughs. For instance, Indonesia’s e-commerce unicorn startup that recently merged with Gojek, Tokopedia lets owners of small businesses like grocery stores and warungs sell digital essentials like data packages, electricity tokens, and video game vouchers. This allows the growth of MSMEs in Indonesia which accounted for more than 60% of the Gross Domestic Product of Indonesia.

Due to such rapid growth in the E-commerce Industry, many big traditional retail companies like PT Matahari Department Stores joined in the digital transformation. Following Matahari, other big players entered the online market platforms to boost their market base.

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3. Industry Growth

Indonesia has earned its spot as the 11th largest market for e-commerce with a revenue of US$33 billion in 2020. During the COVID 19 pandemic in 2020, the e-commerce sector grew significantly and reached 72% of the online market sales in Indonesia. The share of e-commerce to the total retail market in Indonesia was 8.2 percent according to data from 2019, and the share has risen to more than 15 percent between 2020-2021. The rapid revenue growth of Indonesia’s e-commerce has contributed to the worldwide growth rate of about 29%.

4. Sector Growth

According to Statista, the Indonesian e-commerce market’s generated revenue is expected to accelerate at a CAGR of 9.28% from 2021-2024, resulting in a projected market volume of US$56,191m by 2025. However, the data does not reflect the whole E-commerce Industry, it excludes earnings from several segments like the digital media, digitally distributed services, B2B markets, resale of used goods, sales between private persons.

According to Data Reportal, the largest segment growth of the industry in the beginning of 2021 is the Food and Personal Care with an increase of 61.3%. Followed by Toys, DIY, and Hobbies with an acceleration of 51.5%, Fashion and Beauty 50.7%, and the Furniture and Appliances 47.8%.

5. Investment in E-commerce Industry

Back in 2016, Indonesia announced to remove the E-commerce Industry from the Negative List through the Presidential Decree No. 44/2016. The Negative List is a set of business sectors that is made to protect the Indonesian economy while also letting investors know which ones are prohibited or allowed to invest in (along with regulation), especially regarding shared ownership. The updated list permits 100 percent foreign ownership of e-commerce businesses and companies approved by the country’s Investment Coordinating Board (BKPM). However, it’s important to note that the foreign e-commerce business must invest at least 100 billion IDR (US$6.67 million) in the business; or, create at least 1,000 new employment positions for local workers through the foreign investment. If they do not meet the requirement of US$6.67 million, another option would be to set up investment below the IDR 100 billion with a limit of a maximum 49 percent stake for a joint venture with a local partner.

E-commerce businesses are divided into two categories on how much percentage that can be owned by foreigners:

In the newest update of the Negative List in 2021, there’s only 6 business lines that are still in the Negative List while the rest would be open for investors along with the restrictions and conditions for certain aspects. The purpose for the extended line is to simplify the investment requirements in Indonesia and create jobs to offset the impact from Covid-19. Recently, the technology, media, and telecommunication sector is one of the sectors that is fully open to foreign investment. With the various liberalization and investment incentives offered, the government expects to boost growth in these sectors, both encouraging local players as well as attracting foreign investors.

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6. Challenges in the Indonesia’s E-commerce Industry

The e-commerce in Indonesia so far has been an increasing trend but still faces various challenges like logistics infrastructure, inequality of internet access, low adoption of cashless payment.

a. Logistics infrastructure

The cost of inter-island shipping is still high due to the fact that Indonesia is an archipelagic country with thousands of islands. Before making transactions in e-commerce, consumers would consider the cost component which explains the intensive offers of free shipping promotions. The problem also lies with the traders who import goods from abroad. They have to deal with dwelling time due to the complexity of the distribution chain and bureaucratic processes1. Last but not least, the production and delivery activities were still concentrated in Java Island while the consumers were spread across other islands2.

b. Inequality of internet access

Compared to neighbouring countries like Malaysia and Singapore, the internet user penetration in Indonesia still remains low as there are many rural areas that have poor or non-existent access to the internet. Even if the government has built the Palapa Ring broadband network which is a billion-dollar fibre-optic development programme, the impact is still quite small due to the lack of role of telecommunication service providers3.

c. Low adoption of cashless payment

Even as the number of credit card users jumped by 60% between 2015 and 2020 to 15m, Indonesians are still wary of the security factor in online payments. Other than the preferred e-commerce transactions such as direct bank transfer or cash-on-delivery, there is also a high number of unbanked customers as the bank penetration is still low at 48%. However, there is recent development with the alternative use of electronic payment mechanisms as it is slowly gaining a foothold in the country and e-wallets such as Go-Jek, T-cash, Doku, GrapPay, and Veritrans are gaining popularity among consumers.

1　 Ekrut - Begini Tantangan E-Commerce Di Indonesia2　Ekonomi Bisnis.com - Tren Positif Bakal Berlanjut, E-Commerce Tetap Hadapi Tantangan3　Kompas.com - Melihat Besarnya Kesenjangan Internet antara Indonesia Barat dan Timur

7. Government’s Support and Regulation for Indonesia’s Economic Ecosystem

7.1 Economic Policy Package XIV: E-Commerce Roadmap

Indonesia’s government has the vision to place Indonesia as the country with the largest digital economy capacity in Southeast Asia by 2020. Currently, Indonesia ranks 4th largest internet user in the world with a number reaching 202 million people or 73 percent of the total 274 million population in 2020.

For the vision they had to come true, the government decided to create an E-Commerce Roadmap in 2016 with the aim of providing convenience for e-commerce players throughout Indonesia. It also strives to increase the expertise of human resources while protecting the national interest, especially for MSMEs and start-ups.

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There are 8 regulatory aspects of the E-Commerce Roadmap:

1. Funding a. KUR (People’s Business Credit) for platform developer tenants b. A grant for a business incubator who will guide/assist a start-up c. USO Fund for digital MSMEs and e-commerce platform startups d. Angel capital for startups that are still at a loss e. Seed capital from Foster Father System (a form of linkage between large or medium industries and small businesses ) f. Crowdfunding

2. Taxation a. Tax reduction for local investors investing in start-ups. b. Simplification of tax permits/procedures for e-commerce start-ups. c. Equal tax treatment between foreign and domest ic e-commerce entrepreneurs.

3. Consumer Protection a. Government Regulation on Trading Transactions through Electronic Systems b. Harmonization of regulations c. Payment system for trade and government goods/services spending through e-commerce.

4. Education and HR a. Increase e-commerce awareness campaign b. Designing the national incubator program c. Preparation and improvement of e-commerce curriculum d. Increasing e-commerce education to consumers, actors, and law enforcement

5. Logistics a. Utilization of the National Logistics System (Sislognas) b. Strengthening local/national courier companies c. Development of outsourcing of MSME logistics facilities. d. Logistics development from village to city

6. Communication Infrastructure through the development of a broadband network.

7. Cyber Security a. Formulating a model for the national supervision system in e-commerce transactions b. Increase public awareness about cybercrime c. Preparation of SOPs related to consumer data storage, certification for consumer data security

8. Establishment of Implementing Management by monitoring and evaluating the implementation of the E-commerce Roadmap.

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7.2 E-commerce Regulations

The Indonesian Minister of Trade ("MOT") released a regulation to address the issues with doing e-commerce business in the country while also imposing new requirements on both foreign and domestic e-commerce companies in Indonesia. This new regulation is MOT Regulation No. 50 of 2020 regarding Provisions on Business Licensing, Advertising, Guidance and Supervision of Businesses Trading Trade through Electronic Systems ("MOT Reg. 50/2020"). It is an implementing regulation for Government Regulation No. 80 of 2019 regarding Trading through Electronic Systems ("GR 80/2019").

There are certain conditions that every party must accomplish before doing any e-commerce activities such as, E-commerce Organizers, Merchants, and Intermediary Services Organizers.

1. E-Commerce Organizers

Domestic e-commerce organizers must obtain an E-Commerce Trade Business License (Surat Izin Usaha Perdagangan melalui Sistem Elektronik or "SIUPMSE").

Foreign PPMSE's are required to appoint a Foreign Trade Company Representative Office in the field of Trade through Electronic System (Kantor Perwakilan Perusahaan Perdagangan Asing di bidang Perdagangan melalui Sistem Elektronik or "Representative Office") upon the fulfillment of certain criteria.

2. Merchants

Domestic e-commerce merchants must obtain the appropriate Trade Business License for their activities. If a domestic merchant has its own e-commerce facility, such as a website or online platform, it must procure a SIUPMSE.

Foreign merchants must register their valid business license from their country of origin with a domestic PPMSE with electronic communication facilities for foreign merchants, which, in turn, will store the submitted registration data.

3. Intermediary Services Organizers

PSPs generally are required to obtain a SIUPMSE. However, a PSP may be excluded from this requirement if (i) it is not a direct beneficiary of the e-commerce transactions or (ii) is not directly involved in the contractual relationship between the parties conducting e-commerce transactions.

4. Electronic Advertising

MOT Reg. 50/2020 permits e-commerce business actors to create and/or distribute electronic advertisements for marketing or promotional purposes. E-commerce businesses may distribute an e-advertisement directly or through a third-party e-commerce application facility provider while also ensuring that the substance or material of the advertisement does not contravene applicable laws. The electronic advertisement must follow the Indonesian advertising code of ethics as well as all relevant laws and regulations.

5. Prioritization of Local Products

All e-commerce business actors (foreign or domestic) are required to support government programs by prioritizing locally produced goods and services, increasing the competitiveness of local goods and services, and, specifically for domestic PPMSEs, providing space to promote locally produced goods and services.

What these provisions mean is that foreign-owned online retailers that want to do business in Indonesia will have to take steps to support local UMKM, which typically do not have as large a reach as foreign online retailers.

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8. The Top Players of E-commerce Industry in Indonesia

8.1 Tokopedia

Tokopedia, founded by William Tanuwijaya and Leontinus Alpha Edison, is one of seven startups in Indonesia that has reached unicorn status in 2021. The company is valued between $1 billion to $2 billion after merging with Gojek. Indonesia is the most valuable. Tokopedia was built upon the passion to solve complex problems caused by lack of economic infrastructure. In the past, merchants had to move to big cities in order to sell in a better market and consumers were only limited to goods provided in specific areas where they live. This has then caused unnecessary urbanization, in which goods are more likely to be clustered in bigger cities.

Their business line ranges from online marketplace (with tokopedia,tokopedia salam), selling digital goods (with mitra tokopedia), providing business and financial solutions (toko cabang and dhanapala, tokopedia keuangan), to providing services in local areas (tokopedia wedding, tokopedia print, tokopedia parents). The company was the first Southeast Asia internet company to raise capital of $100 million from SoftBank and Sequoia Capital in 2014. Tokopedia is passionate to help small businesses, even as small as warungs (a type of small family owned business in Indonesia) to prosper in the market by solving problems.

● Competitive Advantage

1. Personalized Customer Experiences:

Due to slow adoption of the e-commerce app in Indonesia, Tokopedia decided to create a 1:1 personalized experience for new application users to engage and encourage them to make the first purchase. By identifying the different stages in the customer usage of the application, they could guide customers from installation to first purchase by sending the right messages to eliminate ambiguity in communication.

2. Increasing Loyalty of The Customer

Tokopedia identified the importance of increasing customer retention by advancing their technology. This is achieved by updating its features to help and make it easier for Tokopedia to meet the users’ needs. Recently, Tokopedia relaunched its loyalty program called ‘TokoPoints’ where the users can earn points through purchasing physical products by using any form of payment. With no limit to how much the users can redeem their points, TokoPoints can also be combined simultaneously with other promos and free shipping.

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8.2 Shopee

Shopee, launched in Singapore in 2015, by CEO Chris Feng alongside COO Terence Pang is the leading e-commerce platform in Southeast Asia and Taiwan. It is a platform tailored for the region, providing customers with an easy, secure, and fast online shopping experience through strong payment and fulfillment support.

The mission is to make online shopping accessible, easy, and enjoyable. Sea, a holding company for Shopee,SeaMoney, Garena, etc., is a leading global consumer internet company which has already been listed on the NYSE under the symbol SE. Shopee's growth is the result of its dynamic work module and strategic expansion plan in the Southeast Asian region. Its presence over the social media channels and the user-friendly languages have made it more. Shopee has a wide selection of product categories ranging from consumer electronics to home & living, health & beauty, baby & toys, fashion and fitness equipment.

● Competitive Advantage

1. Shopee’s International Base

MSME represents 99% of all business in Indonesia and accounts for 60% of the total GDP , so getting the right incentive for MSME sellers to choose their selling platforms should be the main priorities of any e-commerce platforms to focus on. The Indonesian market represents Shoppe’s biggest market share (with a GMV of 14.2 billion people). However, Indonesia only represents 27% of the overall market share. Outside Indonesia, Shopee has also managed to build market access to six other market bases, such as Vietnam (59.8M), Taiwan (55.9M), Philippines(53.4M), Thailand(50.7M), Malaysia(42.8M), Brazil (40.7M) by providing a cross-country service where shoppers can buy goods and services from countries outside of their own. This translates to opportunities for MSMEs to tap into a bigger market and customers to experience a wider range of products.

2. Shopee’s E-wallet Offering

The Indonesian market has a unique preference of transferring money to sellers. In the past, Indonesian buyers would avoid purchasing goods online because scams are easier done online. Purchasers would be asked to send their money first to these scammers before receiving goods,to come to a realization after that their goods would never come to them. Shopee offers a solution for consumer protection against fraud. They created a streamline in which buyers have to transfer money to a designated virtual account, which will then be released to the seller once buyers confirm that they have received the product. The platform has created a sense of safeness for their buyers to transact online. They do not have to worry about being scammed because Shopee has built that trust for them.

Studies done by IPMI on “Indonesian Consumer Trust on Online Transaction” discovered that the Indonesian buyers love to shop online due to its convenience, this is one reason why finance technology providing convenience in Indonesia prospers. In order to increase the transaction satisfaction of its buyers, Shopee has also created their own e-wallets, Shopee Pay, which has now become widely accepted in Indonesia. Consumers are able to deposit their money into their e-wallets and make purchases through them, instead of transferring money to a virtual account. Not only convenient online, e-wallets are also useful for offline purchases. Buyers can scan QR code to transact,

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3. Shopee’s Shipping Strategy

Shopee has a strong supply chain strategy. Indonesia is famous for its congested traffic, however Shopee managed to offer instant delivery with a little amount of cost which is achieved by partnering up with Gojek and Grab. By working with Gojek and Grab, Shopee is able to tap into their network of riders, which are constantly available across the nation. Riders would then be assigned to deliver goods to customers in a matter of time with their ability to maneuver their ways through heavy congested roads.

III. Marketing Strategies

There are several large regional markets and many other niche and micro-niche markets within Indonesia where the consumer market is scattered over around 17,500 islands. Due to the differences in tastes, preference, and price, a unified marketing strategy just won't work in a challenging market such as Indonesia. Indonesia is considered by many to hold enormous potential for local startups and foreign enterprises looking to break into the market. With the rising numbers of internet user penetration, the e-commerce growth in the country has been escalated and many e-commerce platforms such as Tokopedia and Shopee managed to make a breakthrough into the market amidst the Covid-19.

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1. Tokopedia’s Marketing Strategies

1. Active on Social Media

Tokopedia's marketing strategy in developing its business is to use social media as a means of promotion and interaction with consumers. Tokopedia's social media admins are active on Instagram, Facebook, and TikTok creating interesting content, sharing promotions, and regularly holding live events.

2. Giving loyalty gifts to the consumers

As a form of appreciation for loyal customers, Tokopedia often provides loyalty gifts. Usually in the form of cashback and giveaways that are given regularly which results in consumers will shop more often and be interested in doing online shopping again.

3. Using brand ambassador

One of Tokopedia's brand ambassadors is Chelsea Islan. The use of brand ambassadors as a marketing strategy can influence many people to use a product and is effective in making the company look more trusted. Tokopedia is very selective in choosing its brand ambassador and the chosen ones are selected based on the image of the artist or celebrity that is most suitable and best in the eyes of the public.

4. Active following the important events

The secret to Tokopedia's success is actively participating in important events and celebrating them with special events. One of these events is Harbolnas (National Online Buying Day) which is celebrated by giving exciting promos, flash sales, cashback and gifts.

Tokopedia occasionally makes entertainment events as well as in order to provide promos to customers. Some of Tokopedia's big events even often collaborate with Korean idols such as BTS and Blackpink which can attract the interests of enthusiastic Kpop and Korean fans.

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2. Shoppee’s Marketing Strategies

Shopee is known for making aggressive marketing in order to get a large consumer base. There are three main marketing strategies Shopee used to capture its buyers : Influencer marketing, monthly promotion, and user generated content in social media platforms.

1. Monthly Promotion

One of Shopee’s most impactful strategies is their monthly promotion. They have created a marketing strategy that has successfully ingrained in the minds of Indonesian buyers. Thanks to Shopee’s monthly sales events jingle and easy to remember date format(i.e, 1.1, 2.2, 3.3,...,), everyone in Indonesia now knows what date they have to look for every month for sales events. Sellers have reported 6 times higher in the number of orders during that period.

2. Influencer Marketing

Shopee is also known for making user acquisition campaigns by working with small to big influencers in social media. Shopee has attracted millions of viewers in the Tiktok platform with different social media advertising ranging from encouraging partners of Indonesia social media influencers to sing and dance to localized Shopee jingle to making a high quality branded music video advertising with Korean K-pop girl band, Blackpink.

a. Local Influencer and Localized Marketing Strategy

Shopee Mantul Sale (SMS) is one of shopee’s localized marketing contents. Inspired by Indonesian folk song, “Cublak Cublak Suweng”, Shopee created their own jingle and gained market attention. In tiktok, Shopee gained more than a million views from this video related to SMS sales events because of its catchy melodies and its ability to relate to local audiences.

b. Korean Pop Singer Marketing Strategy

“Beli semua di Shopee” , one simple sentence from Lisa that blew the Indonesian internet. Shopee gained 1 million views in Youtube when it first started to partner with Korean pop girl group singers, Blackpink, to make advertisements for the Indonesian market. Shopee is quick to capture the Indonesian market preference, Kpop.

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III. Marketing

Strategies

III. Marketing

Strategies

IV. Tips for Taiwanese

Entrepreneurs Interested in

Indonesian Market

Under the “New Southbound Policy” introduced in 2016, the Taiwanese government aims to develop reciprocal trade deals by offering credit guarantee funds and renewing bilateral investment protection agreements with 18 nations in South Asia and Southeast Asia to mitigate Taiwan’s economic reliance on China. These countries are also expected to be the next growth driver for the global economy.This report shows the large online market base Indonesia has to offer, which is exactly around 202 million, and is yet to be fully uncovered. Moreover, the Indonesian government is all very welcoming and supportive towards the advancement of the startup and e-commerce in Indonesia. Therefore, some Taiwan-based online services already plan to tap into Indonesia’s digital economy, especially in e-commerce markets.

During the pandemic times, it is still not too late for Taiwanese entrepreneurs to expand their businesses in Indonesia. Here are the useful tips before starting your dream on a great horizon like Indonesia.

1. Visa Application: The Investor KITAS is suitable for foreign investors who want to invest or set up a business in Indonesia as it is designed to alleviate the application process and waive the work permit fee. Please make sure you are eligible to apply for it.

2. Target Audiences: Indonesia is the fourth most populated country in the world with a rapid rise of +20% internet penetration rate since the pandemic started. Indonesia’s high GMV is serving as one of the key measurements of the successes of 7 local unicorn startups in Indonesia. Indonesia spends twice more time on the internet than those in the United States. Indonesia is undoubtedly an interesting market for new startups to venture into, especially if your startup fits the category mentioned in the Sector Growth section (Foods and Personal Care, etc.)

3. Targeted Businesses: Aside from traditional businesses like the CTBC bank and Xing Fu Tang who expanded their business to the huge market, predicted to become Taiwan’s first unicorn startup, Gogoro has also announced partnership with ride-hailing service company, Gojek. Gogoro x Gojek is in the pilot stage in which they are still testing the waters with their product in this new market however the product is expected to succeed due to its plan to be able to reduce fuel cost for riders. Based on our research, startup companies like Gogoro which offer convenience at a cheap price could serve a great business to the market.

4. Marketing: Indonesian audience loves localized contents. This is shown by the impressive numbers of Shopee’s views on their SMS sales event advertisement in which they assimilated Indonesian folk music into their own jingle. The Indonesian audience also loves entertainment, this is one of the big reasons why companies would invest a huge amount of money on high branded content advertising.

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IV. Tips

Appendix. REFERENCES

Asialink Business. n.d. Asialink Business - Marketing in Indonesia. Accessed 2021. https://asialinkbusiness.com.au/indonesia/sales-and-marketing-in-indonesia/marketing-in-indonesia?doNothing=1.

Barone, Adam. n.d. Free Trade Agreement (FTA). https://www.investopedia.com/terms/f/free-trade.asp.

Benu, Bang. 2019. Foreign investment in Indonesia’s e-commerce sector. https://fmbpartner.com/foreign-investment-in-indonesias-e-commerce-sector/.

Carl, Michael S., and Asri Rahimi. 2020. Indonesia Introduces New Requirements For E-Commerce Companies. https://www.mondaq.com/corporate-and-company-law/956332/indonesia-introduces-new-requirements-for-e-commerce-companies.

Cekindo. 2013. Indonesia’s Free Trade Zone: Batam. https://www.cekindo.com/blog/batam-free-trade-zone-in-indonesia.

Embassy of the Republic of Indonesia in Singapore. 2021. FAQ During Covid-19 Outbreak : For Indonesian citizens and Foreigners who want to go to Indonesia. https://kemlu.go.id/singapore/en/read/faq-during-covid-19-outbreak-for-indonesian-citizens-and-foreigners-who-wants-to-go-to-indonesia/1047/important-information.

Mursid, Fauziyah. 2021. Kominfo: Pengguna Internet Indonesia Terbesar Ke-4 di Dunia. https://www.republika.co.id/berita/qv56gb335/kominfo-pengguna-internet-indonesia-terbesar-ke4-di-dunia.

Neill, Aaron O. 2021. Indonesia: Age structure from 2010 to 2020. https://www.statista.com/statistics/319214/age-structure-in-indonesia/.

Onlinevisa.com. 2020. Indonesia e-Visa Information. https://www.onlinevisa.com/indonesia-visa/.

Pardede, Daniel, Adhika Wiyoso, and Bimo Harimahesa. 2021. Indonesia: Building Up Regulations to Support Digital Economy. https://www.globalcompliancenews.com/2021/04/03/indonesia-building-up-regulations-to-support-digital-economy-18032021/.

Pertiwi, Wahyunanda K. 2020. Melihat Besarnya Kesenjangan Internet antara Indonesia Barat dan Timur. https://tekno.kompas.com/read/2020/11/10/20020087/melihat-besarnya-kesenjangan-internet-antara-indonesia-barat-dan-timur?page=all.

PR Team Tokopedia. 2021. Tokopedia - Tokopedia Relaunches Loyalty Program ‘TokoPoints’. https://www.tokopedia.com/blog/tokopedia-relaunches-loyalty-program-tokopoints/.

Sofian, Riyado. n.d. Shopee: A Perspective From Indonesia. https://seekingalpha.com/article/4391750-shopee-perspective-from-indonesia.

Tanuwidjaja, Enrico, Haris Handy, and UOB. 2021. Indonesia : 2Q21’s FDI increased by 19.6 per cent year-on-year. https://www.uobgroup.com/asean-insights/markets/fdi-increase-indonesia.page?path=data/ai/54&cr=segment.

Tempo.co. 2021. Pertumbuhan Ekonomi Indonesia Kuartal II-2021 Tertinggi Sejak 17 Tahun. https://nasional.tempo.co/read/1491810/pertumbuhan-ekonomi-indonesia-kuartal-ii-2021-tertinggi-sejak-17-tahun.

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Who we are

STARTBOARD is a startup incubator for International entrepreneurs from ASEAN countries and India who wish to start a business in Taiwan. We provide one-stop service to help them pursue their dreams and also we can assist startups to venture into ASEAN and Indian market by cooperating with overseas accelerators.

https://startboard.co/ STARTBOARD

Author

｜ Natasya Febrina ｜ Indonesian Market Specialist of STARTBOARD

｜ Natasha Morla Tanuputri ｜ Indonesian Market Specialist of STARTBOARD