HijUp, Indonesian online retailer of Islamic fashion.
Indonesia may be experiencing its slowest pace of economic growth in five years, but you wouldn't know it by looking at all the interest garnered by HijUp.com.
An online retailer of Islamic fashion, HijUp last week received an undisclosed amount of seed funding from Emtek Group, Fenox Venture Capital and 500 Startups.
“In Indonesia, online shopping is not something new anymore because it's supported by a rather massive Internet user base,” says Diajeng Lestari, HijUp's chief executive.
She says adds that by “mixing faith and fashion,” HijUp hopes to turn Jakarta into a global capital of Islamic fashion.
Operating on a much larger scale is the Lippo Group's MatahariMall.com, an e-commerce site named after the conglomerate's department store chain.
Earlier this year Lippo appinted Credit Suisse and Bank of America to lead its first round of financing to raise $200 million, as it bids to turn MatahariMall.com into “the Alibaba of Indonesia.”
The Jakarta Globe is affiliated with the Lippo Group.
The amount of funding pouring into Indonesia's fledgling e-commerce scene belies the general economic sputtering that has seen Indonesia post the slowest pace of quarterly GDP growth, at 4.7 percent in the first quarter of 2015, in five years.
That boon, writes Gary Khoeng in Convergence Ventures, a technology venture fund that invests in early-stage Indonesian enterprises, is down to an ever-expanding Internet user base.
“According to an e-commerce report by SingPost, Indonesia commanded between 70 and 80 million Internet users this year, growing at 20 percent year-on-year until 2016,” Khoeng wrote.
“This is more than 30 percent Internet penetration, double the rate several years ago,” he added.
Citing data from New York-based eMarketer, Khoeng wrote that the number of online shoppers in Indonesia was expected to grow to 7.4 million in 2015 and possibly increase to 8.7 million next year.
As the fourth most populous country in the world, Indonesia has long been a key market for retailers, with online shopping taking off in recent years as the country's Internet-connected middle class swells.
The Indonesian consuming class is expected to grow to 90 million by 2030, according to the business consultancy McKinsey.
For entrepreneurs like HijUp's Diajeng, it's clear where the business oportunity online lies. “We're targeting the middle class,” she says.
Ignes Messtya, a representative for MatahariMall.com, says the company is casting its net wider, targeting those beyond the usual urban consumer who typifies the online-shopping crowd.
“It is especially convenient for people who live on the outskirts of Jakarta,” she says.
“There are various prices, [and] its targeted at everyone in Indonesia.”
A major obstacle that e-commerce operators have identified early on is the limited range of payment options that most Indonesian online shoppers are willing to use: either cash on delivery, or bank transfer.
“[The] payment system [preference] is still relatively manual,” says Diajeng.
Ignes says MatahariMall.com has come up against the same challenge.
“Consumers prefer cash on delivery. Gaining the consumers’ trust is difficult,” she says.
Online fraud is rife in the various e-commerce forums and marketplaces that have sprouted up in recent years, and solutions that have been devised include the use of escrow accounts set up by site administrators and ranking systems for sellers
MatahariMall.com has devised its own system, the first in the country, where shoppers order their goods online, then go to one of the company's physical stores to pick up the items and pay.