Billed as the next frontier in e-commerce, Indonesia's money-making potential has goliaths of the online world are eyeing the nation. Regional players such as Zalora and Lazada are fiercely competing alongside local favourites like Tokopedia and Bukalapak. To succeed, they’ll have to contend with a unique local phenomenon: small online businesses thriving on social networking platforms like Instagram, Facebook and Line. Unlike bigger players with a grand strategy, these small businesses sprout up in a relatively organic manner. Their success in disrupting the way people buy and sell nods to the uniquely Indonesian ngakalin mentality.
Ngakalin is a term used to describe resourcefulness and the ability to circumvent obstacles. It stems from the word akal, which loosely means ‘mind’, and the Indonesian mind is one that knows no limits, even when the situation at hand poses certain constraints. In a country where corruption has been normalised and an inefficient bureaucratic tradition has lingered, Indonesians have had to be inventive out of necessity. Pragmatism and workarounds, or life hacks, are expected, part and parcel of daily life.
No resources to build an online shopping website, much less rent a physical shop space? No problem. Ingenious makers and sellers have essentially repurposed social platforms for e-commerce and created opportunities for themselves where none existed.
A stay-at-home mother of two in Surabaya that we spoke to sells baby clothes to other mothers in her neighbourhood via a Facebook group. Business has gotten so good that her husband built a simple shop front for her outside their home for her to meet the buyers who opt for self-collection. A girl from Bandung one day discovered that she lived near a sock factory; so she sourced her socks directly from them, and started selling them on Instagram when she was in high school. When her parents wanted her to go to college, she told them, “Why do I need to go to college? I’m already making so much money!” Now she has moved on to designing socks.
But social media is not just a boon to sellers. Buyers from rural areas much prefer doing their online shopping through social media.
Where Westerners trust big institutions such as government, banks and corporations implicitly, rural Indonesians are far more circumspect. Less tech-savvy and sophisticated shoppers see big brand websites as suspiciously faceless. Their reticence is fuelled by lurid stories of fraud cases, the regular fare of popular TV shows like Investigasi, and viral stories of online shopping gone horribly wrong. One tells of a hapless shopper who purchased an iPhone6 on Lazada only to receive a bar of soap.
|This article is part of the Cultural Radar series|
In contrast, they know that Facebook or Instagram shops are owned by individuals who—they’re willing to assume—are probably not too different from them. Everyone seems to know of a neighbour or a friend of a friend who is running such a business. And if things do go awry, where big corporations may be able to manipulate the law, people can be held to a social contract or a religious code of honour. This mindset seems crucial to the social fibre in Indonesia, especially in the tight-knit communities of tier two and three cities.
That said, it’s not as if buyers are willing to take a leap of faith and trust these small businesses completely. In the back of their minds, they know that for every reliable seller, there will be another who just wants to make a fast buck. For this reason, buyers actively look out for cues that signal trustworthiness. Sellers and buyers epitomise the ngakalin mentality by deftly repurposing the following social media functions at their fingertips.
“Just hashtag jual [or ‘sell’] for whatever you want to find. I’ve bought makeup, bags, vintage sunglasses, and even Hot Cheetos through Instagram," said one woman we interviewed. "It’s a US snack and they don’t have it here in Bali.” Adding such a hashtag filters out only specific, relevant and Indonesia-only results.
Sellers' popularity can be estimated based on their number of followers. Assuming the product is within the buyer’s budget, the shop with the most followers becomes the best option. Savvier buyers have also learnt to check out the shops that popular fashion influencers are following. If these shops have gained the approval of someone in-the-know, they are more likely to be reliable.
Screenshots and tagged photos
Small businesses put in a significant amount of work to build their reputation online. They upload screenshots of comments from satisfied customers and repost videos of customers gleefully unboxing their goods. When researching a new shop, potential buyers instinctively click on the photos the shop has been tagged in to verify that the shop has a sales history and see real life images of the items posted by others.
An important but often overlooked function of social media is the ability for buyers and sellers to communicate directly. Direct communication is not solely about the exchange of information but an opportunity to build trust and create a virtual but personal relationship that could well last beyond the first transaction.
Human interaction is prized and key to cultivating an honest and transparent relationship. These small businesses have managed to do it well and big players such as Zalora are starting to learn from them. Their 24/7 live chat function, personalised emails and prompt replies are helping to satisfy consumer demand for reassurance.
New online consumers are finding ways of ascertaining trustworthiness that work in harmony with their own culture, values and expectations. International brands that want to enter the Indonesian e-commerce market can learn from the local example, looking and behaving like little businesses with a direct line of communication to people who can be held accountable.
Maya Madhusoodan is director in Singapore, Widad Jamil is project director in Jakarta and Yun Jing Koh is senior research executive in Singapore, all with Flamingo. This article is from Flamingo’s second book in its frontier market series, Beyond Jakarta: A cultural snapshot of contemporary Indonesia.