5 unique challenges all ecommerce firms will face in Indonesia

People talk a lot about Indonesia’s burgeoning ecommerce market, and how Jakarta may very well be on the cusp of an online retail revolution. Over the past 12 months, we’ve seen more activity in the sector than ever before, with new firms emerging and big-league investment coming in simultaneously.

Naturally, these are all positive signs that point toward a maturing market in the region; hopefully one that can push Indonesian ecommerce into the mainstream conversation in Asia. It would be great to see online shopping reach five percent or more of the nation’s overall retail sector, but for now we can only speculate on the future.

Like any market, Indonesia has its own set of challenges, caveats, and peccadillos that all ecommerce founders are forced to cope with. In the past, we’ve cited the archipelago’s hellish logistics landscape, weak payments infrastructure, and a fragmented market as some of those limitations. However, there is a second layer of challenges that all estores will face in the gauntlet that is Indonesia.

This is a set of generally accepted idiosyncrasies that newbie e-tailers — and especially foreigner founders — will run into on a daily basis in Jakarta, so take notes. In no particular order, here are five cultural challenges all ecommerce firms, new or seasoned, will face in Indonesia.

See: How to cope with Indonesia’s murky business culture

Price-sensitive shoppers

It’s true, Indonesia has one of the most attractive emerging middle-classes in the world. By 2030, an estimated 90 million people will have joined the consuming class. That said, Indonesians are, to put it mildly, true suckers for sales and discounts. Locals have a strong proclivity toward finding the best prices at all costs.

This is no secret to anyone who lives in Jakarta, as it’s extremely common to see hundreds (sometimes thousands) of locals waiting in line at the mall just for a 50 percent off sale to happen at Bershka or the Samsung store. Nevermind the time, energy, and fuel spent to get to the store across town or the fact that folks may not have felt compelled to buy anything in the first place, had there not been a sale.

Boston Consulting Group says Indonesian shoppers actively seek out promotions and hunt for deals. At the lower half of the income pyramid, this is a function of family dynamics. Men typically give their wives a monthly budget for the family. The more money these women can save on groceries, the more they have to splurge on small indulgences for themselves. However, the bargain-hunting drive spans the wealth spectrum — more than 60 percent of the overall population says they enjoy searching for discounts and promotions, and more than 70 percent of the country’s affluent population says they enjoy doing so.

This might seem like more of a blessing than a curse at first glance, as demand can be easily created so long as merchants temporarily lower their prices. But in the end, competition often becomes a race to the bottom and profit margins suffer if you don’t plan your discounts as if you were going into brain surgery. Anyone thinking about opening an estore in Indonesia needs to firmly understand the lowest price they can offer while still being able to turn a profit. If it’s not in the same ballpark as the nation’s big competitors, both online and offline, new web firms will need to rethink their strategies.

See: 10 things you need to consider before investing in Indonesia

Risk aversion

Deep-pocketed competitors

An increasingly frothy market

A preference toward brick-and-mortar