Evelyin Wu Shares Trends of Driving Up the SME Digitalization in Indonesia

Heaptalk Team, expert talk . 05 May 2021
Evelyin Wu, General Manager of Genie Indonesia,

Heaptalk, Jakarta — Covid19 pandemic in Indonesia has accelerated the digital transformation among Indonesia’s small and medium enterprises (SMEs). In a 2020 report, UNDP and the University of Indonesia estimated that SMEs contributed nearly 60% of the country’s total GDP.

It also surveyed 1,180 SMEs across 15 provinces in Indonesia and found 44% had joined online marketplace or e-commerce platforms during Covid19. The Indonesian government is also providing financial assistance to over 9.1 million SMEs amid a broader digitalization push to revitalize the Indonesian economy.

As cited from Genie Indonesia, Nearly 8 in 10 internet users in Indonesia, or 150 million people, have an e-commerce app on their phone and buy online Province with most online shoppers: Depok, South Jakarta, Sleman, Padang, Yogyakarta. 92 million of these users are Gen Z or millennials. 75% of them regularly shop online.

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Respond to this, Evelyin Wu, General Manager of Genie Indonesia, brings system management for the marketplace that allows online sellers to integrate multiple marketplace accounts with omnichannel. Including managing orders, stocks, products, buyer chat, promotions, and accounting easily in one system.

More to this, Evelyin shares insights related to the digital transformation on SMEs in the Q&A with Heaptalk team.

How big is the market penetration of the online industries in the Indonesian market? Considering that there are still many regions applying Large Scale Social Restrictions (PSBB) policy, it still affects conventional business operations. Specifically for the last two quarters, how do you see these phenomena?

Indonesia’s e-commerce market size is now the eleventh largest market for e-commerce globally, with revenue of US$30 billion in 2020, placing it ahead of Russia but behind Australia, according to eCommerceDB.

But let me start by explaining what we are: Genie is an omnichannel marketplace management system that allows local businesses to set up and manage their online and offline stores easily.

For example, instead of opening separate online stores on leading e-commerce platforms like Shopee or Tokopedia, they only need to set up once on Genie.

Since last year, Genie partners with all major e-commerce platforms in Indonesia. Business owners can manage everything from product listings, inventory, fulfillment, customer database and service, accounting, and payments.

This year, we expect to see a significant increase in e-commerce traffic during Ramadan/Eid for a few reasons. The mudik ban means more will turn to online shopping to prepare for Lebaran.

At the same time, the government has introduced 500 billion rupiahs (US$35 million) in delivery subsidies to encourage e-commerce, SME development, and boost spending to help the economy recover.

THR bonuses from employers will also boost e-commerce shopping, in our view.

But this also means online and offline businesses will need to manage the surge in e-commerce orders and transactions well and have a robust marketplace management system in place.

That is how a platform like Genie can help because we simplify and automate many processes, so owners can focus on running the business.

What is the most industry benefited from this situation? Maybe, in my opinion, It must be a business that has already go digital, like eCommerce. How about the telco, online travel, restaurants, retail, brands, etc.? 

We can only offer perspective for the industry we operate in (retail), where we’ve seen the strong performance on digital channels for categories across clothes/fashion, beauty and health products, groceries, and everyday household items, as well as consumer electronics.

The pandemic has given a huge boost to e-commerce and online shopping, benefitting, in particular, MSMEs (Micro, Small and Medium Enterprises).

One good example is Indonesian bookstore retailer Gramedia, which benefited from a long-term strategic partnership with us, achieving consistent and incremental growth of their e-commerce sales.

Because of PSBB, many people were forced online to shop for everything from necessities and groceries to health products, books, home furniture, and even pet food.

For example, last year, Genie‘s omnichannel platform processed 52 million orders (220x increase from the year before) during a pandemic.

This e-commerce trend continues with 50,000 stores set up on Genie last year, and since then, every month, we continue to see 20 percent growth per month.

However, I think that for higher-priced items or those that you need to “see, feel and touch,” shoppers will still prefer to feel the product in the store before buying.

Shoppers increasingly research and compare prices and reviews online before buying in the store, though sometimes it can be vice versa whereby they see the product in the store they like first – then they compare prices/reviews and buy online.

So local businesses must adjust to this type of “omnichannel” shopping behavior.

In terms of what shoppers bought online on Genie during the pandemic, our most searched for products in 2020 included: household groceries (3x increase year-on-year compared to 2019); health products like masks and sanitizers (3x increase); pet food and pet care products (3x increase); books (2.5x increase); household carpentry tools (2.5 fold increase).

Which one will dominate the market? Is it a male or female user? And from what age or demographic?

In terms of demographics, 80 percent of online shoppers in Indonesia are currently Gen Z and millennials, but this does not mean that only young people shop online.

Many people in their 50s and above may depend on children or younger relatives to buy online.

And now these shoppers find it so convenient, and they may not turn back to going to the physical stores as often.

Based on Genie‘s experience and user feedback, we know what online shoppers care about when they shop online.

They want to trust, credibility, and quality of products and professional and responsive customer service.

They also value customer engagement and conversation over social media platforms, especially interactive content, and videos.

In general, female shoppers tend to be more interested in fashion, beauty, cosmetics,  groceries, health, family, and children products.

On the other hand, male shoppers are more focused on electronics, men’s apparel, sporting products, and home improvement.

I agree that the “mudik ban effect” may cause the hype of online consumer goods demands. From the industry perspective, what are considered the main factors, they should enhance? Is it a must to turn their business into omnichannel?

It was addressed in an earlier question that commented on the need for omnichannel strategies among retailers.

Some research says Indonesia is still left behind the other countries like Malaysia, Singapore, Japan, or China, in the case of the telco infrastructure readiness that determines the bandwidth. Some of the areas in Indonesia, like in the middle and eastern still not yet covered well. How do you see this aspect aligning with the people’s behavior that is gradually becoming online?

We see the transition to e-commerce and digital retail channels as a key area where government must step in and support to shift both merchant and consumer behavior.

The Jokowi administration has just committed IDR 500 billion (US$35 million) in delivery subsidies during Ramadan to encourage people to support MSMEs to buy online.

It is part of a broader digitalization push to accelerate e-commerce development across Indonesia, not just the urban cities, and to stimulate a post-Covid-19 economic recovery.

It also will encourage more MSMEs to set up online platforms to sell their products or digitalize their shop so they can ride the e-commerce boom.
During Ramadan last year, we saw a 26 percent growth in orders on Genie versus pre-Ramadan. This year, we expect up to 30% because of new stimulus and other financial support.

But apart from the financial stimulus, the government can also do more.

For example, it could partner with the private sector to run education programs on how to digitalize business and sell online, as well as help successful local MSMEs to expand into other markets and reach new customers,

The government could also improve public infrastructure and broadband access to tier 2 and 3 cities and provinces for stable internet and supply chains and facilitate last-mile order delivery.

Next, it could encourage the development of IT and tech talent in universities and schools to support the digitalization and internet economy while at the same time encouraging foreign investment into Indonesia’s tech sector to increasing the next wave of local entrepreneurs and job creation.

Provinces with most online shoppers include Depok, South Jakarta, Sleman, Padang, and Yogyakarta, of which 92 million are young people. It is a prospective market based on the industry/business perspective. Is there any possibility of broadening the market up to the other cities in the middle/eastern Indonesia like Nusa Tenggara, Sulawesi, Kalimantan, and Papua in the near time?

Actually, it is not just these provinces you mention that have many young people, but across all of Indonesia’s 17,000 islands.  Indonesia is known to be the world’s fastest-growing e-commerce market, and there is a lot of pent-up demand for online shopping in Tier 3 and rural provinces.

There are several reasons for this.

Firstly, smartphone prices are getting cheaper all the time, and most Indonesians access the internet through their smartphone.

As such, Indonesians spend more time on social media than their Asian counterparts, which has created a mobile economy and growing demand for online shopping.

Secondly, in the last few years, the Jokowi administration has completed various infrastructure projects, including roads, railways, and ports.

This renovation needs to continue to plug many of these rural areas into the national and digital economy and deliver the associated benefits.

Thirdly, internet penetration continues to improve through better and cheaper broadband infrastructure such as 4G/LTE, which must continue to achieve lower cost of access.

As an ecosystem player, Genie is well-positioned to accelerate the growth and deepening of e-commerce across all of Indonesia through the various fulfillment solutions we already have (warehouse rental, products storage, and last-mile delivery processing and logistics).

That is the beauty of e-commerce and setting up your store online: your end customers can be anywhere in Indonesia or other overseas markets like the Philippines and Thailand, which we will expand to later this year.