The first publicly available estimates of the Indonesian eCommerce market since 2011 suggest that online transactions will hit $8 billion USD this year – doubling in size from 2012 – as millions of internet users hit the web and begin shopping online.

eCommerce in Indonesia is still in its early stages, and there’s still limited data.  But the data that does exist points to a story of extraordinary growth.

Vela Asia’s research team has combined publicly available information from sources like eMarketer and the Association of Indonesian Internet Providers to build a picture of Indonesia’s growing online revolution.

The last publicly available estimate of eCommerce market size, from Veritrans and Dailysocial in 2011, picked the market at $0.9 Bn in 2011.  This more recent data suggests that the total value of online transactions, including travel, marketplace and B2C websites, hit $4 Bn USD the following year.  The total is forecast to more than double to $8 Bn in 2013.

Vela Asia-Indonesian eCommerce to double in 2013

Indonesia’s growth story is built on a number of factors: 20% year on year increases in internet users, rapidly growing discretionary spending among the middle class, and the entry of a number of high profile eCommerce players within the last 12 – 18 months.

Fast eCommerce growth rates are not unusual in rapidly developing countries. McKinsey research from March this year pointed out that China’s online market had grown by a compound annual growth rate of 120% for ten years.  This Indonesia, in comparison, is tipped to double its market size in 2013 but then scale back growth to a more manageable CAGR of 54% through to 2016.

While the opportunity is large, local eCommerce businesses report that succeeding online in Indonesia can be challenging.  The country has well-reported issues with infrastructure, including limited online payment methods, relatively low internet penetration and the logistical difficulties associated with fulfilling online orders in an archipelagic nation.

Those online stores that do succeed, like Tokobagus.com and Lazada.co.id, have adapted Western business models to the needs of the local population.  They are being joined by a growing list of eCommerce players hoping to be part of a remarkable online growth story.