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eCommerce merchants, including those based in Malaysia, have to balance lots of things from considering your inventory, logistics planning, and just as importantly expanding your pool of consumers in the region.
When it comes to expanding your reach within Southeast Asia, Indonesia stands out with the largest population and eCommerce market size in Southeast Asia. The archipelago’s eCommerce industry is expected to grow to USD 50 billion by 2024 from its 2020 value at USD 26 billion.1 Additionally, Indonesia has a high number of internet users, standing at 175.4 million people in 2020, and 88% of these internet users have bought a product online.2 To find out more about this market, we’ve covered its details extensively in our country guide to Indonesia.
In Indonesia, most eCommerce purchases take place within the Jabodetabek or Greater Jakarta region, which includes Jakarta, Bogor, Depak, Tangerang, and Bekasi. This metropolitan area is a 2 hour and 10 minute flight away from Malaysia and is the most populous area in Indonesia. Because of the developed infrastructures in place, Jabodetabek is able to support eCommerce transactions and deliveries to its residents.
Malaysian products that have the potential to do well in Indonesia include cosmetics, fashion and mom & baby products. With both Malaysia and Indonesia having large populations of Muslims, products that cater to a halal lifestyle can work well in Indonesia. Modest fashion products and halal cosmetics from Malaysia are two major categories with great export potential to Southeast Asia’s most populous country.
However, with the recent spread of COVID-19, flights into and throughout Indonesia have been limited in an effort to curb the pandemic. When shipping internationally into Indonesia from Malaysia, it helps to stay updated of any regulatory changes in these countries so that you can plan your logistics supply chain accordingly.
While the logistics supply chain from Malaysia to Indonesia can vary depending on your requirements, shipping your orders from Malaysia to Indonesia would usually follow these steps.
The first mile stage in international shipping is where your order leaves the origin address, be it a storefront, office, or warehouse. Prior to your goods leaving your storage facility, the product has to be packaged and labelled appropriately to facilitate smooth cross border shipping.
Packages may sometimes go through events which shift your parcels or order around, like turbulence during delivery. Having extra padding for fragile items, like bubble wrap and packing peanuts, is recommended to prevent your products from bouncing around or getting deformed during shipping. To learn more about the best practices in packaging your goods, we’ve covered this topic in a previous article.
Additionally, the orders’ shipping labels and the appropriate customs documentation must be accessible for customs officers to inspect the shipment. We have a guide on labelling your shipments which you can also find in our resources for B2C shipping to Southeast Asia.
Once the shipment is ready to be passed to your shipping partner, you can choose to have it picked up from your address or drop off your order at your shipping partner’s drop-off point, such as Janio’s warehouse in Shah Alam. Most shipping partners would have a cut-off time for submitting orders for drop-offs and pickups so that they can optimise their route.
If your shipment is a B2C parcel, it typically has to be consolidated at a transportation hub along with other packages with the same destination country before it can be sent for customs clearance. Since B2B shipments are already consolidated, the shipment can be transported directly to the origin warehouse for customs clearance.
As your shipment arrives at the origin warehouse, the parcel would need to be cleared by Malaysia’s customs officers for export. Most B2C orders don’t need extensive documentation if you’ve prepared them for entry into Indonesia already. The common documents you’ll need for Indonesian customs clearance is found in the next section. If you’re planning to ship a B2B order, you may want to check if you need to produce specific customs documentation for export in Malaysia’s Ministry of International Trade and Industry.3
When it comes to freight, shipping your goods from Malaysia to Indonesia can be done in two ways - air freight and sea freight.
For merchants shipping B2C parcels, air freight is the faster option, especially if you don’t have a consistent order volume and need your parcels to reach Indonesia quickly.
To ship into the Jabodetabek region in Indonesia, your shipment will typically leave via Kuala Lumpur International Airport (KUL) and then enter Soekarno Hatta Airport (CGK). Usually, airfreight’s speed makes it the preferred option for eCommerce merchants who want to test the market via cross-border shipping.
Cross-border shipping is great for testing the market, as you would only need to hold your inventory in your origin country like Malaysia and not have to pay for storage costs in Indonesia. However, due to the limited number of flights due to the COVID-19 pandemic, prices for air freight have increased from the lack of cargo space. The limited number of flights may also cause delays and affect the delivery timing for shipments.
On the other hand, sea freight is generally more cost-effective for shipping in bulk. However, it is slower than air freight. When managing your inventory, you’ll need to take into account the estimated delivery date so that you can plan out your supply chain accordingly.
The main port of Jabodetabek is the Port of Tanjung Priok at North Jakarta (IDTPP) and leaves Malaysia from Port Klang (MYPKG). This mode of transport is preferred if you are looking to expand into Indonesia on a larger scale and is typically paired up with having a local distribution centre within Indonesia for storage and fulfilment within the country.
With the COVID-19 pandemic around, sea freight could be a good alternative to air freight even for B2C deliveries considering the shortage of available international flights. While slightly slower compared to pre-COVID air freight timings, it is still preferable to facing possible delays if you choose air freight during this period.
Once your item arrives in Indonesia’s airport or port, your shipment will be moved to a customs warehouse for customs clearance. Here, customs officers will inspect your shipment and shipping documents and determine if your product is allowed to enter Indonesia.
To clear customs for import into Indonesia, you or your shipping partner would generally need to provide the following documents:
If your item is below Indonesia’s de minimis rate of USD 3, then there is no need to pay additional import duties and taxes to the customs office. Currently in Indonesia, items below the de minimis just need to pay VAT at 10% of the order valuation.
The de minimis rate refers to a value threshold where fewer or no duties and taxes are charged if the shipment’s customs valuation is below it. In Indonesia, the valuation is calculated using the CIF (cost, insurance, freight) value, which includes your good’s price, shipping fee, and insurance costs if any. However, this only applies to goods that are delivered via air freight. Earlier in 2020, the Indonesian government revised their de minimis rates down from USD 75. To find more information about this regulatory change, you can read our article here.
On the other hand, if your goods exceed the de minimis threshold, higher import duties and taxes will be levied on your shipment. You would have to pay a value-added tax (VAT) at 10%, and the import duties and income tax depend on the product category as declared by the harmonised systems code (HS code). You may find out the percentage of your import duties, VAT and income tax paid through Indonesia’s Directorate General of Customs and Excise website.4
However, with the COVID-19 situation, the Indonesian government provided temporary duties and tax exemptions on products that are designed to fight the virus, such as hand sanitisers and personal protective equipment. You can find out more information in our article on this temporary regulation and how it could apply to your shipments.
If you’re shipping a B2C parcel, you can choose to either pay for the import duties and taxes yourself or let your customers or consignees pay for the import duties and taxes. This is determined by the incoterms Delivered Duties Unpaid (DDU) and Delivered Duties Paid (DDP). While we strongly encourage you to opt for DDP to keep your shipping experience smooth for your B2C customer, it also helps to familiarise with what these arrangements mean.
Once your shipment has cleared customs in Indonesia, it will enter the distribution stage of the shipping journey. If the consignee’s address is within the Jabodetabek region, your B2B shipments can be delivered directly to its destination. However, B2C parcels need to be sorted at a transport hub to the right vehicles before the last mile journey can begin. However, if the address is beyond an address that can be reached by vans or trucks, an additional domestic flight will be needed before your shipments can be sorted or sent to last mile delivery.
The last mile delivery stage is where your parcel will be sent from the destination warehouse to your consignee’s address. In Indonesia, last mile delivery is usually done via vans or motorcycles. According to Statista in 2019, around 1 in 10 online transactions are paid via cash on delivery.5 It’ll definitely help to offer cash on delivery in order to win the trust of your Indonesian online shoppers.
Now that you know the full process of shipping your items from Malaysia to Indonesia, you’re in a better position to choose a suitable shipping partner who can cover the entire logistics supply chain from first mile to last mile. When choosing a logistics service provider, it helps to consider the cost, speed, delivery experience, and your whole supply chain before committing to a shipping solution.
With eCommerce likely to continue booming in Indonesia, expanding internationally into this market means that you’ll be riding the wave of eCommerce growth in the country. To leave a good impression on your customers in Indonesia, it helps to have a reliable eCommerce shipping partner that can deliver on time. That way you can impress your customers with your hottest items in stock while wowing them with efficient delivery speeds.
If you'd like to find out more about how we can solve your SEA e-commerce cross-border delivery needs, come and have a conversation with us.
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