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China tech giants bet on untangling logistics of Indonesian e-commerce

Reuters  |  JAKARTA 

By and Ed Davies

(Reuters) - In a warehouse on the outskirts of Indonesia's capital, supervisors at company use bikes or electric scooters to zip around a floor the size of four soccer fields, where up to 3,000 staff pack and dispatch goods around the one of five that has opened across to cut costs and expand its reach in an archipelago whose 17,000 islands are sprinkled across an area bigger than the

Chinese tech firms, including Lazada's top investor, Holding, have poured at least $6 billion into nearly every aspect of Indonesian

uses Alibaba's and has tied up with ride-hailing companies, often using their motorbikes to deliver goods in a country with creaking infrastructure and traffic-clogged cities.

The payoff could be huge. It is a market forecast to grow from about $7 billion last year to $63 billion by 2027, according to

"Indonesia, both in terms of the customers and behaviour, is a very unique challenge and we need to adapt," Florian Holm, at Lazada Indonesia, told

Lazada and Tokopedia, in which Alibaba is also an investor, dominate in customer traffic, with more than 117 million monthly website visits each, according to data from aggregator iPrice.

Alibaba doubled its investment in loss-making Lazada to $4 billion in April, underscoring its global ambition to secure a bigger share of the

Between the investment and the rewards, however, lie enormous complexities.

The has said logistical costs swallow up around a quarter of Indonesia's gross domestic product, citing bottlenecks in supply chains, long dwelling times in ports and lengthy trade clearances.

Lazada has opened warehouses in places like Balikpapan, on the coast of Borneo, to avoid hauling everything from Holm said that had in some cases reduced shipping costs by 90 percent.

Competitive pressure is growing. Another Chinese heavyweight,, arrived in in 2016. And the U.S. giant Amazon, which opened a warehouse in last year, may be prepared to dip a toe into the Indonesian market soon.


Indonesia's are set to rise from 3 percent of now to 19 percent by 2027, estimates. The same report said there were 159 million in Indonesia at the end of 2016, a number that could rise to 275 million by 2021.

Indonesia's young population and room for improvement in and communications add to the prospects for growth, the said.

That has attracted other Chinese companies. Holdings, which owns regional e-commerce SEA, has entered the fray.

and have stakes in Indonesia's ride-hailing firm Go-Jek, while has invested in company

But Usman Akhtar, a at in Jakarta, said Indonesian companies such as Blibli, backed by a unit of the group, remain a force.

"I would not characterize Indonesia as turning into a replica of China's e-commerce market, at least not yet," said Akhtar, referring to how and Alibaba dominate in

Kusumo Martanto, who heads Blibli, told the company had seven warehouses in Indonesia with seven more planned, and said it was important for companies to compete against Chinese players.

Alibaba founder is on an steering committee for e-commerce, advising on areas such as tax, cyber security and human resources.

Indonesia's communications minister, Rudiantara, said there was no conflict of interest in Ma's role, describing him as a "guru" who could help sell the country's potential.

But some policies seem to be turning toward Ma's home turf.

Indonesia, which is trying to tackle a shortage of talent in the digital sector, dropped sponsorships for 20 students to study in places like and the

Instead, 10 students will go to and 10 to to study this year "because the future of the digital is in and India," said the minister, who uses one name.


Caterine, a 30-year-old housewife who lives west of Jakarta, used to shop in conventional stores once a week, but after her baby was born six months ago, she has been shopping online two to three times a week for convenience.

"I prefer because it is quick. I can just click and click and the goods will arrive," she said, adding she mostly used and for goods such as diapers and clothing.

said delivery times of all types across Indonesia are down to about 3 days from 10 days, while deliveries in big cities can take 24 hours or less.

While in urban areas delivery times have greatly improved, other parts of Indonesia's are still inefficient, said Willson Cuaca, of East Ventures, a tech investment fund.

"To send goods from point A to B, the logistics company needs at least two modes of transport," he said, referring to the complications of operating across so many islands.

Amazon, by contrast, prefers to control its own from start to finish. But entering a market like Indonesia could require it to revisit that strategy.

did not respond to a request for comment on whether it had plans for Indonesia.

Much of the U.S. giant's international focus has been on developing its business in India, even though some view its entry into last year as a stepping stone for expansion in the region.

"At this moment, I believe it is trying to test the market, by selling products through third-party sellers," said of the Indonesian e-commerce Association.

Zhang Li, who heads's Indonesian joint venture with Capital JD.ID, was not overly concerned about competition from the likes of

"E-commerce is a global and borderless business, so we have to prepare and do continuous improvement to make our customers happy," Zhang said.

(Additional reporting by and in LONDON; Editing by Gerry Doyle)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, May 15 2018. 14:03 IST