- 29/08/2017
- Category: Commentaries
As part of the effort to integrate the national economy into digital economy, Indonesian government has finally signed the highly anticipated e-commerce roadmap earlier this month. The roadmap is aimed to serve as a guideline for the country’s digital economy sector amidst the rising global competition. This is a huge step for the national economy, considering the current trend during the recent years in which e-commerce has become increasingly prominent in Indonesia’s business environment. In brief, e-commerce will effectively eliminate the need of massive investments or direct expenses on physical infrastructure to develop a global presence, which has led to a substantial transformation in the approach on how business is conducted around the globe.[i] For Indonesian Small and Medium Enterprises (SMEs), this might sounds like the answer to their prayer. Regardless, jumping right into the digitalized system while being ill-equipped is essentially a death sentence for these small and medium businesses, if they manage to jump at all. Will SMEs—the 60 percent contributor of Indonesian national GDP—be able to benefit from the newly emerging digital ecosystem?
Recent trend demonstrates how Indonesian SMEs have started to receive benefit from e-commerce in creating value-added goods and services, new services, as well as new business models, and it is projected to continue to grow. In fact, the latest economic forecast predicts that the domestic e-commerce business in Indonesia may control 20 percent of the conventional retail market by 2020 (from five percent currently).[ii] Nevertheless, it has not revealed its full potential, particularly since most SMEs have not incorporated their business activity into the system. According to recent report from Deloitte, 36% of Indonesian SMEs are offline, while another 37% only have basic online capability.[iii] This indicates that, despite the massive positive prospect, small and medium businesses are struggling in incorporating e-commerce practice to their business activity.
The approach to solve this integration problem should be directed to both ends of the scale; eliminating the impediments faced by SMEs while simultaneously boosting consumer accessibility to online purchase.
In the era of digitalizing economy, SMEs are facing different issues from multinational corporations (MNC) as the rising of e-commerce could possibly lead to threat rather than opportunity. Various studies concluded that SMEs of both developed and developing countries alike are experiencing technical and non-technical difficulties integrating to the system independently.[iv] Therefore, public and/or private support will be extremely helpful in eliminating these barriers. In this case, Indonesian government can reflect upon the neighboring country of Singapore, which recently launched a program called ‘SMEs Go Digital’ aimed to increase SMEs’ overall level of digital readiness by giving them step-by-step advice on the technologies to use at each stage of their digital journey, in addition to funding opportunity.[v] But the effort should not stop there.
The next challenge is to integrate the consumer into the digital system, wherein Indonesian consumers are still reluctant to fully integrate to the system. Indonesian consumers are recognized as “online shoppers with conventional manners”, in which the customers merely visit online sites to see the products offered, and proceed to purchase the products through conventional methods of telephone, fax or even face-to-face.[vi] This indicates the presence of trust issue within Indonesian consumer towards online purchasing. Besides increasing overall level of consumer protection, increasing consumer’s digital literacy evidently correlates with the increase of e-commerce activities.[vii] This presents just another reason to outreach for ICT education.
While each SMEs are responsible in developing their own competitive business strategies, national business environment remains crucial in determining the options available to SMEs in integrating to e-commerce scheme. Shifting back to the Indonesian e-commerce roadmap, the national guideline is essentially off to a great start in ensuring SMEs competitiveness in the era of digital commerce. The roadmap has positioned its main priority to support SMEs, for instance in the form of digital platform for development and financial grants targeted as startup business assistance. Nonetheless, it is important to note that market structure consist of not only vendor. In other words, government musts start to figure out a strategy aimed at appealing domestic consumer to participate fully into the system to support the integration of SME into digital economy. This requires several measures to increase internet penetration, synchronized with increasing digital literacy in order to fix the public trust and confidence problems regarding e-commerce.
[i] Alyoubi, A. (2015). E-commerce in Developing Countries and how to Develop them during the Introduction of Modern Systems. Procedia Computer Science, 65, pp.479-483.
[ii] Indonesia Investment. (2017). Indonesian Economy: Micro, Small & Medium Sized Enterprises. [online] Indonesia Investment. Available at: https://www.indonesia-investments.com/id/news/todays-headlines/indonesian-economy-micro-small-medium-sized-enterprises/item7068 [Accessed 14 Aug. 2017].
[iii] Deloitte Access Economics (2015). UKM Pemicu Kemajuan Indonesia. [online] Sydney: Deloitte. Available at: https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/financial-services/sea-fsi-digital-banking-small-medium-enterprises-noexp.pdf [Accessed 14 Aug. 2017].
[iv] Savrul, M., Incekara, A. and Sener, S. (2014). The Potential of E-commerce for SMEs in a Globalizing Business Environment. Procedia – Social and Behavioral Sciences, 150, pp.35-45.
[v] Tham, I. (2017). Parliament: IMDA to help more SMEs go digital. [online] The Straits Times. Available at: http://www.straitstimes.com/tech/parliament-imda-to-get-hands-dirty-to-help-more-smes-go-digital [Accessed 26 Aug. 2017].
[vi] Rahayu, R. and Day, J. (2015). Determinant Factors of E-commerce Adoption by SMEs in Developing Country: Evidence from Indonesia. Procedia – Social and Behavioral Sciences, 195, pp.142-150.
[vii] Kumar M., D., Govindarajo, N. and Yeop Abdullah, O. (2015). Malaysian Consumer Research: Does Computer Literacy Affirmative towards E-commerce Activities?. Journal of Economics and Behavioral Studies, 7(1), pp.50-63.
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