Creating Innovative Book Retail Business Through E-Commerce – a Case Study on an Evolving Indonesian Consumer

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Creating Innovative Book Retail Business Through E-Commerce – a Case Study on an Evolving Indonesian Consumer

CREATING INNOVATIVE BOOK RETAIL BUSINESS THROUGH E-COMMERCE : A CASE STUDY ON AN EVOLVING INDONESIAN CONSUMER

MM- 5003 MARKETING MID-TERM EXAM

By

Andra Geraldy Yoseph

29317022

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BLEMBA Program

Master of Business Administration

School of Business and Management

Institut Teknologi Bandung

CHAPTER I

INTRODUCTION

1.1 Background

1.1.1 Rise of E-Commerce in Indonesia

As the era of internet and application-based technology begin to show its strength in the global business environment, Indonesia is on the middle of an e-commerce golden era. By looking deeper into Indonesian consumerism as have been researched by McKinsey&Company—Indonesia’s consumer spending, at 57 percent of its GDP[1], is significantly higher than the figures for neighboring export-driven country, such as Malaysia, Thailand, and China. In relation to e-commerce sector, usage of Internet in the urban-areas of Indonesia has risen sharply over the last five years—by almost 40 percent—to reach about 40 million users in 2013, while social networking is by far the most popular activity, with approximately 70 percent of online users actively engaged on sites and mobile applications such as Instagram, Facebook, Twitter, Path, and others. This figure indicates a strong opportunity on Indonesian e-commerce sector.

Currently, Indonesia’s e-commerce market is quite similar to what has happened in China at the online marketplace beginnings, as huge numbers of entrepreneurial merchants selling goods purchased based majorly on social media recommendations. Moreover, e-commerce in Indonesia also similar to what happened in the early USA online marketplace industry, whose customers are not ready to trust online payments and retailers. From the current situation, Indonesia has big potential to breed various opportunities from e-commerce industry, propelling Indonesian online marketplace to the higher stage.  

1.1.2 Mobile-based Applications & Social Media

Indonesia has become one of South East Asia’s leading mobile-first nation, with a StatCounter report estimating that in 2015, more than 70 percent of Indonesia’s internet traffic originated from mobile devices[2]. This shows that e-commerce based on mobile devices, or known as mobile-based application is showing a positive growth throughout the period in the same time encouraging strong opportunity for entrepreneurs to develop e-commerce based on mobile applications.

Further indication that Indonesians have comprised mobile-first initiatives comes from social media usage, with Indonesians having the highest mobile Facebook usage rate worldwide, with 63 million users in 2015 based on McKinsey’s report. Further projections put Indonesians’ future Facebook access via mobile being almost 99 percent by 2018, this figure shows a true dominance for mobile based application usage over desktop platforms. This unique phenomenon that Indonesia has taken also allows retailers to focus on creating truly mobile functionality, presenting a more unique yet flexible proposition to dominate in the retail space.