Accelerating MSMEs’ digital transformation supports RI economy (The Jakarta Post)

Tokopedia has recently made fulfillment centers available in five different cities in Indonesia, namely Jakarta, Bandung, Surabaya, Makassar, Palembang, and Tokopedia data shows that in the second quarter of 2020, consumer demand for MSME products sold through local fulfillment centers was 2.5 times greater than the demand in the first quarter of the same year.
Photo: Tokopedia/The Jakarta Post

Indonesia’s micro, small and medium enterprises (MSMEs), which account for 60 percent of the national gross domestic product (GDP) and 97 percent of the domestic workforce, play a crucial role in protecting Indonesia’s economic resilience, especially during the COVID-19 pandemic.

Embracing digital transformation has become a prerequisite for strengthening MSMEs to enable them to bolster economic resilience amid the global health and economic crisis.

According to a recent survey by the Mandiri Institute, digitalized MSMEs could help reduce 1.5 percent of the economic burden on Indonesia’s GDP caused by the COVID-19 pandemic.

In that context, the COVID-19 pandemic seems to have accelerated the digitalization of Indonesian MSMEs, most of which have found they have no choice but to conduct their business online amid the social restrictions put in place to prevent the spread of the virus.

Of Indonesia’s more than 60 million MSMEs, only 13 percent went digital in 2019.

But as the pandemic has given most consumers no choice but to do most of their shopping online, Coordinating Economic Minister Airlangga Hartarto said a significant number of local MSMEs had moved their businesses online to stay abreast of the changes.

Between May 14 and June 9, about 301,115 MSMEs digitalized their businesses, according to Airlangga.

Official data on the percentage of MSMEs that have gone digital in Indonesia as a result of the COVID-19 pandemic is not yet available.

Nonetheless, an economist from the Institute for Development of Economics and Finance’s (Indef) Center of Innovation and Digital Economy, Nailul Huda, estimated that the unforeseen acceleration brought about by the pandemic had boosted the percentage of MSMEs that had gone online to about 15 to 20 percent this year.

However, simply going online, according to Huda, is not enough to ensure that Indonesian MSMEs survive these tough times.

“These MSMEs have to be able to gauge precisely the consumer demands for the products they sell in a particular region or city. For instance, are salty snacks still in demand in this city right now? Because it doesn’t make sense to keep on producing when there is no demand for such products there,” Huda told The Jakarta Post on Oct. 1.

He highlighted the importance of market insight to help guide MSMEs conducting their business online as consumer demand had been in decline amid the financial contraction brought about by COVID-19.

“During the pandemic, most consumers instate spending austerity measures, except when it comes to their primary needs,” he said, citing data from Statistics Indonesia that food prices recorded an annual deflation of 1.09 amid the pandemic.

He added that proper market insight could help MSMEs resume their operations and prevent laying off too many workers.

Fortunately, some marketplace platforms in Indonesia have already recognized the importance of sharing their real-time, data-driven market insights with their MSME merchant partners to help the latter thrive, even before the pandemic occurred.

Tokopedia Vice President of Corporate Communications Nuraini Razak said that since 2019, the marketplace platform had been offering market insight to its MSME merchant partners that wished to expand their operations beyond their region of origin.

“Let’s say you’ve been successfully selling the Acehnese sale pisang (banana snacks) in your hometown in Aceh all these years and you’re considering opening your business in Makassar, South Sulawesi and Bandung, West Java,” she said.

“Typically, you’d have to move to these cities, rent a shop or house and when it turns out that no buyer is interested in your snacks, you’ll have to cease operations and suffer some business losses,” she told the Post in a Google Meet interview.

She said that by tapping into its pool of consumer behavior data to provide merchants clear market insight, Tokopedia helped these MSME merchants avoid these inefficiencies.

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The Jakarta Post

10 October 2020

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