Championing Locals

The wave of social commerce is enabling inclusive digital economies beyond urban areas.

- Marella Putri

Following on from the success of the trend in China and India, social commerce has gained traction in Indonesia as a means of expanding into markets that giant ecommerce platforms have been unable to fully penetrate, particularly those located outside of the main urban areas. As Indonesians are socially active online, spending an average of three hours per day on social media, social commerce, which leverages social interactions to generate online transactions, has plenty of room to grow. It is also an interesting opportunity to target as competition in urban areas is becoming saturated and thus more expensive to penetrate and acquire.

This strategy is also viewed as a means of reaching out to the populace in lower-tier cities and rural areas, where ecommerce penetration is relatively low but still have enormous potential. According to Alpha JWC Ventures and Kearney, lower tier cities contributed 46% of Indonesia's GDP in 2020, compared to Jakarta's 17%. As economic activities in these lower-tier cities expand, their contribution to GDP is expected to reach 51% by 2025, reducing Jakarta's share to 11%. Additionally, their digital adoption is expected to catch up to that of contemporary urban areas within the next five years.

While a lack of infrastructure is one factor, rural areas also have markedly different purchasing habits than urban areas. Due to their lower digital literacy, they are not as accustomed to making online purchases, and trust is a critical factor when making a purchase.