Strategy Note /

Indonesia's digital economy: An archipelago awakes

  • Indonesia is a vast archipelago of 280mn people

  • It is on the cusp of a major expansion in its digital economy. GoTo, Shopee and Bukapalak are the major players

  • We expect its GMV to rise by a CAGR of 20% in the next 5 years

Indonesia's digital economy: An archipelago awakes
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
28 April 2022
Published byTellimer Research

Largest e-commerce economy in Southeast Asia

Indonesia has the largest digital economy in Southeast Asia with c40% of the total regional market share. It is home to four ‘unicorns’:

  1. GoTo (on-demand services, fintech, and e-commerce).

  2. Bukalapak (e-commerce).

  3. Traveloka (ticketing).

  4. OVO (digital payments).

Untapped potential

The digital industry in Southeast Asia had long been an untapped market, but it now has a total of 440mn internet users, with 80mn new users in the past two years.

In 2020 alone there were 40mn new internet users, with 70% of the total population having access to online platforms. Online consumption accelerated due to Covid-19, with education, groceries and lending sectors being the key beneficiaries.

% of new digital consumers out of total service consumers (SEA aggregate)

Exponential growth prospects

The Southeast Asia internet economy is expected to achieve a GMV of US$363bn in 2025, rising at a CAGR of 20%.

South East Asia Internet Economy GMV (US$ bn)

Indonesia is the largest economy in Southeast Asia

The Indonesian digital economy is estimated to have had a GMV value of US$70bn in 2021. Industry forecasts suggest that a CAGR of 20% will lead the industry to a GMV of US$146bn in 2025.

Indonesia Internet Economy GMV (US$ bn)

Indonesia has a population of almost 280mn, with 56% of the new consumers of digital services in 2020 coming from non-metro areas.

% of new digital consumers to services, by geography

Investor interest in Indonesia's internet economy has been heating up in recent quarters, with deal activity in H1 21 surpassing the deal values in each of the past four years.

Indonesia - Deal Value (US$ bn)

In 2021, the e-commerce industry in Indonesia grew 52% yoy (from US$35bn to US$53bn).

Indonesia – e-commerce GMV (US$ bn)

The digital space grew at an astounding rate during the pandemic, with 37% of total internet consumers in 2020 being new users.

Indonesia - New consumers to Internet economy services

In 2020, e-commerce and online media were able to drive their overall GMV upwards. We think there is still plenty of room for further growth in the digital economy space, with EdTech and HealthTech emerging during the Covid-19 lockdowns and representing future growth possibilities.

Competitive landscape

The major players in the Indonesian e-commerce industry include: Shopee (37% market share), Tokopedia (35%), Lazada (11%), Bukalapak (7%), and Blibli (3%).

  1. Shopee, the e-commerce arm of Sea Ltd – a Singaporean multinational company launched in 2015 with expanded operations in Malaysia, Thailand, Taiwan, Indonesia, Vietnam and the Philippines – has the leading market share.

  2. Tokopedia, a local Indonesian e-commerce marketplace launched in 2009, has the second-largest share. The company merged with Gojek in 2021 to form the GoTo Group, and now has exposure to segments including on-demand services, fintech, and e-commerce.

  3. Lazada was founded in 2012, and was later acquired by the Alibaba Group in 2016. The platform actively operates in Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam, and has the third-largest share in Indonesia.

  4. Bukalapak is a local Indonesian platform that was founded in 2010. The platform has engaged with millions of Warungs – the small family-owned businesses such as stalls, shops and restaurants – enabling them to gain exposure to online services. The platform has 6.6mn online sellers, 8.7mn Mitra Bukalapak, and more than 100mn users. The company offers multiple services, including a B2B procurement line named Buka Pengadaan Indonesia, and Buka Investasi Bersama, a digital-based mutual fund selling agent.

Market Share Retail Sales (Indonesia)