Alibaba’s AliExpress Sets Its Sights On Indonesia’s Promising E-Commerce Market

Chinese e-commerce behemoth Alibaba Group is keen to expand beyond its home market, and now it has set its sights on Indonesia. The company announced today that AliExpress, one of its e-commerce sites, has signed a strategic agreement with DOKU, Indonesia’s largest online payment provider. It also launched a website and customer service line in Bahasa and English.

AliExpress allows vendors in China to sell small quantities of goods to overseas shoppers at wholesale prices.

Indonesia’s e-commerce market is still small compared to China and India, but it is expected to grow to $18 billion by 2015, making it Southeast Asia’s largest. Consumers, however, are faced with several obstacles to purchasing online. According to the Indonesian Chamber of Commerce and Industry, roadblocks include low Internet penetration and lack of easy payment methods or quick delivery methods.

AliExpress’ agreement with DOKU might help it solve the payments problem. Customers will be able to make payments online through DOKU Wallet, Mandiri Clickpay, and Bri e-Pay or offline through 9,000 brick-and-mortar stores owned by Alfa Group or ATM machines.

It will also work with Singapore Post (an Alibaba investment) and Pos Indonesia to expand its logistics network between China and Jakarta. AliExpress says that Indonesian buyers will now get their orders in two weeks, an improvement over the previous shipping time of 35 days.

Offline payments are especially important because Indonesia has 250 million people, but just 8 million have credit cards. Credit card penetration has also seen declining growth because of a new regulation that prevent people from using cards if their income level falls below a certain amount.

Alibaba has been busy building a logistics network in Southeast Asia, not just to entice more shoppers but because it will help it grow through economies of scale. It spent $249 million to take a 10.35 percent stake in Singapore Post (SingPost) last year, which originated as Singapore’s state postal service, but is now a company that operates logistics and delivery throughout Southeast Asia.

The company, which dominates e-commerce in China, is eager for opportunities in other growth markets. For example, its affiliate Ant Financial recently took a 25 percent stake in India’s One97 Communications, which runs Paytm, the country’s leading mobile payment platform.

Other signs that Indonesia may eventually join China and India as the most important Asia-Pacific countries for e-commerce (and an important target for investors) include the $100 million investment Sequoia Capital and SoftBank made in online marketplace Tokopedia last October. Indonesia is also a key market for Rocket Internet’s e-commerce site Lazada, and Lamudi, its online property listings company.