McKinsey: Resellers a key driver of Indonesia’s e-commerce sector

03 May 2023 2 min. read

Having grown fivefold over the past five years, Indonesia’s e-commerce market is booming. One of the key drivers of growth are resellers, which according to new McKinsey & Company research account for half of the sector’s gross merchandise value.

The report by McKinsey & Company found that Indonesia’s e-commerce market has over the past decade grown into the ninth-largest sector in the world, driven by fundamentals such as growth in household income, population, internet connectivity, and e-commerce maturity.

Research platform Statista estimates that in terms of value, the e-commerce sector now accounts for over 13% of the country’s annual GDP. With the segment, the role of resellers is notably large: the vast majority – 85% in McKinsey’s estimate – of merchants are resellers or distributors; only 15% of merchants sell their own products.

McKinsey: Resellers a key driver of Indonesia’s e-commerce sector

Resellers are businesses that don’t sell their own products. Instead, the buy products from manufacturers and distributors, and sell them in physical stores or online.

The McKinsey report estimates Indonesia’s reseller market to be worth between $115 billion and $125 billion in gross merchandise value. In key segments such as fast-moving-consumer-goods and consumer appliances, between a third to half of gross merchandise value reaped by resellers is generated by online channels.

Among the most popular platform for resellers are JD, which had a revenue of $1 billion in Indonesia in 2022, and Blibli and Shopee, which rank second and third with respective revenues of $670 million and $390 million.

The reseller opportunity

However, the McKinsey report suggests that despite their importance in the value chain, resellers often face difficulties such as “narrow margins, minimal visibility, erratic social commerce performance and poor understanding of how demand and pricing impact decisions.”

This is in part due to their relatively small size, meaning they lack the investment funds to professionalise. McKinsey also concludes in its analysis that resellers are often overlooked by large players in the sector.

“The sizable reseller market segment has several unmet needs that represent substantial untapped opportunities, especially for large consumer goods companies and e-commerce platforms,” states the report.

To take advantage of this opportunity, McKinsey’s report advises that businesses and online platforms should collaborate with resellers in order to draw exposure on them. “Supporting this critically important segment will not only boost the overall digital marketplace but also empower individuals who otherwise must continue to make do, subject to the vagaries of selling online in an information vacuum.”