How Amazon could make its move in Indonesia

Amazon is doing pretty well in India and Japan, it’s plodding along in Singapore, and it’s toast in China. We all know that. So what comes next for the firm in Asia?

The answer – surely the only sensible answer – is Indonesia.

With Amazon rumored to be in partnership talks with homegrown ride-hailing app Gojek, it’s worth pondering how the US giant could make a go of it in the Southeast Asian nation, with a population of 264 million people.

Big problems

The first challenge for Amazon is that it’s far behind the curve in Indonesia.

The nation’s online shoppers will spend US$13.2 billion this year, according to eMarketer data provided to Tech in Asia. That’s 20.6% more than the previous year – well ahead of the 14% rise in the US. And by 2023, Indonesia’s ecommerce industry is also slated to be worth US$23.6 billion.

Image credit: eMarketer

As the chart above shows, there’s plenty of potential growth ahead, as ecommerce is currently just 4.3% of the archipelago’s total retail expenditure.

On top of that, Amazon will also come up against a raft of well-funded tech firms either originating from Singapore or Indonesia itself. Here are the main marketplace rivals:

• Lazada
• Tokopedia
• Shopee
• Bukalapak
• Happyfresh (groceries only)

But the situation gets even more complex. In the past few years, Gojek has been pushing into online sales and an array of localized services, such as groceries and meal deliveries and on-demand cleaners and masseurs. This makes it an unavoidable ecommerce rival, along with Grab, which runs the same model.

Optimal Prime

While Amazon will need to address major hurdles, the US behemoth has shown that it’s not afraid to do things differently when expanding.

When it scaled to Singapore in 2017, the firm didn’t launch its full marketplace. Rather, it began by leveraging its same-day delivery service Prime now. The move was a tacit acknowledgement that it couldn’t just take its marketplace and apply it to the city-state, where Alibaba-owned Lazada, Garena’s Shopee, and a few other local apps have a firm grip on shoppers.

With Prime Now, Amazon instead focused on a small selection of products – mainly grocery items – that it could deliver within two hours across Singapore. It’s the same idea that it pioneered in New York in 2014.

Indeed, Prime Now is surely Amazon’s top candidate for a gradual launch in Indonesia, where it could start with the country’s capital, Jakarta, a city of over 30 million people.

Cup of Java