The requirements (e.g., Indonesian ID card) to sell through e-commerce marketplaces in Indonesia are not that difficult to follow for locals. But, for foreigners, this might not be so.
Most marketplaces do not allow foreign individuals to be sellers or merchants. In other words, foreign and cross-border sellers are not “welcomed.” Particularly after the recent case of Mr. Hu.
Mr. Hu is a foreign cross-border seller on Shopee. He sold goods from China way below Indonesia’s market price. This caused anger for the price difference from local online sellers.
As a result, the case went viral on social media and caused the Indonesian government to step in. It eventually led to changes in Shopee’s regulations and a stigma for Indonesians to shop from local sellers only.
So, what if you are a foreigner who wants to jump on the bandwagon and start selling on e-commerce marketplaces in Indonesia?
We will explain how in this article.
E-commerce marketplaces drive Indonesia’s economy during the pandemic
In January 2021, out of the 275 million population, there were 203 million internet users. 93% of internet users searched online for a product to buy, and 87% purchased a product online.
The Covid-19 pandemic caused a significant shift in offline retail sales to online sales in early 2020. Furthermore, the e-commerce sector plays a major role in Indonesia’s economy during this pandemic.
The e-commerce sector had a 91% growth in GMV from 2019 and reached USD 40.1 billion in 2020. The gross merchandise value is expected to reach USD 83 billion in 2025.
Now, it is common for Indonesians to shop on e-commerce marketplaces. Also, its attractive sales and outlook intrigue Indonesians and even foreigners start selling.
Biggest e-commerce marketplaces in Indonesia
The following are Indonesia’s four biggest e-commerce marketplaces. It is based on the monthly visits of the second quarter of 2021.
This Indonesian e-commerce marketplace is currently the biggest in the country. It has Google, Temasek Holdings, Alibaba Group as lead investors, to mention a few.
With only 4.944 employees, it has the most monthly visits of 147.790.000. It ranks second on the App Store and fourth on the Play Store and does not lead on any social media sites.
Tokopedia recently merged with Gojek with its on-demand courier (GoSend) and e-wallet (GoPay). They formed a new entity (GoTo), and it is one of the largest tech multi-company in South East Asia.
Shopee is under Sea Group (before known as Garena) that launched first in Singapore. Tencent Holdings is the primary beneficiary of the listing on the New York Stock Exchange.
The marketplace leader in South East Asia comes in second place with 126.996.700 monthly visits. But, it has the number one rank on the App Store and the Play Store.
Shopee and Tokopedia have always been neck-to-neck every year for the first spot. In 2020, Shopee contributed the highest GMV with 14.2 billion, while Tokopedia had 14 billion.
Besides KMK Online, Bukalapak has gained its second-biggest investment from the public. It recently became the first unicorn to IPO in Indonesia’s Stock Exchange.
This other Indonesian e-commerce marketplace is third with 29.460.00 monthly visits.
Alibaba Group owns this international e-commerce marketplace. Lazada also has investments from Tesco.
It has 27.670.000 monthly visits. Although the visit was also lower than Bukalapak in 2020, it had more GMV and market share.
Lazada had 4.5 billion in GMV and an 11% market share. Bukalapak had 4 billion GMV and a 7% market share.
How to sell on e-commerce marketplaces in Indonesia as a foreigner
#1 Choose the right e-commerce marketplaces and product niche
Firstly, it is crucial to choose the right marketplaces and product niche for your business before selling.
There are now many marketplaces to choose from in Indonesia. You will need to understand how each marketplace operates, how prices differ, and the best-selling products.
For instance, Tokopedia leads the sales for gadgets, heavy equipment, medical supplies, and household needs. On the other platform, Shopee leads for fashion, accessories, beauty products, and home decor.
You can either choose the right marketplaces for your products or choose the right products for the marketplaces. Either way, having a good product strategy and knowing your target market will be your key to success.
#2 Set up a foreign-owned company in Indonesia
The essential requirements to sell on marketplaces in Indonesia as regular merchants are an Indonesian ID card (KTP) and an Indonesian phone number (+62). You can only have an Indonesian ID card if you have a permanent residency.
If you are not a permanent resident, it shouldn’t stop you from selling on marketplaces in Indonesia. You can sell as a legal entity, not an Indonesian individual, using official store service on marketplaces.
This type of limited liability company allows you to establish a legal entity in Indonesia. You can also have up to 100% ownership.
There are requirements when establishing a PT PMA in Indonesia. It includes having the required corporate structure, minimum paid-up capital, a commercial address, and company licenses.
You can use the smallest corporate structure with two individual shareholders. The shareholders can also serve the roles of the director (resident) and the commissioner (can be non-resident).
Moreover, you are required to have a minimum paid-up capital of IDR 10 billion or USD 700.000. In addition, you must have a commercial address. And, its building permit (IMB) must be suitable for your business activity.
#3 Fulfill the required documents to sell as an official store on e-commerce marketplaces
An official store is an exclusive service provided by marketplaces. It shows the buyers that the seller of an official store is the rightful owner of the brand and has legal rights to sell the products on the marketplace.
Selling as an official store instead of a regular merchant allows you to gain more credibility and trust from customers. It also allows you to get special features and promotions that are different on each marketplace.
The term for official store service also differs on different marketplaces, such as below.
To start selling as an official store with a legal entity on marketplaces, it is mandatory to attach the following company documents:
- Company tax card (NPWP)
- Company deed (Akta Perusahaan)
- Business license (SIUP/NIB)
- Domicile certificate of the company (SKDP)
- Trademark rights (HAKI)
- Taxable company confirmation letter (SKPPKP)
In some cases, you will also need to attach the documents below:
- BPOM certificate only for sales of food and beverages, health and beauty products
- Distributor appointment letter only for distributors
- SNI only for specific products that require an SNI certificate
- SDPPI only for telecommunications equipment
- SIA/SIPA only for pharmacies
- Indonesian ID card (KTP) of the official signing the contract (only on Tokopedia)
#4 Start selling as an official store on e-commerce marketplaces in Indonesia
After you registered for an official store application, you must wait for approval from the marketplaces. Soon after, you will be ready to sell your products on the marketplaces in Indonesia.
Make sure to have good product photos and copywriting in the product description. Buyers tend to be more interested in products with good visuals on the marketplaces.
Besides, you need to ensure your products are original and available with competitive pricing. Marketplaces will evaluate your official store if you don’t.
And, you would not want to end up like Mr. Hu for selling products for a meager price.
#5 Report and pay taxes to Indonesia
As an official store seller, marketplaces such as Tokopedia and Shopee will impose 10% VAT on the final administration fee per product. The administration fee depends on the product category (2-12%).
Tokopedia and Shopee will report and bear the value-added tax. You are also entitled to report and pay income tax from selling online to Indonesia since your company owns an Indonesian Tax Card (NPWP).
Using an e-commerce account holder for faster entry on the marketplaces
There is another option to sell on e-commerce marketplaces in Indonesia. It is to use an e-commerce account holder instead of establishing a PT PMA.
An e-commerce account holder like Emerhub can provide the documents and register you for a regular merchant or official store. Then, you can manage your accounts and start selling your products right away.
It works well and legally, especially if you want to test out your business in Indonesia’s marketplaces. Or if the requirements for a PT PMA are too costly and time-consuming for you.
An e-commerce account holder will also help you to follow Indonesia’s rules and regulations. It includes bookkeeping and providing monthly to annual tax services to follow Indonesia’s tax law.
Reach out to us by filling in the form to consult which option is best for you to sell on e-commerce marketplaces in Indonesia.