The Potential Growth of the B2G E-Commerce Business Model in Indonesia
We have been familiar with famous e-commerce startups in Indonesia such as Tokopedia, Bukalapak, and Shopee. These marketplace startups get more exposure because they directly sell their products/services to the public at large. However, the e-commerce sector is much more than just business-to-consumer relationships. Lately, we have seen a stronger bond between the e-commerce sector and government institutions.
The government is also a heavy consumer. According to the Government Goods/Service Procurement Policy Agency, the allocated budget for the purchase of goods and services in 2021 accounts for 52% of the total state budget or around 1.214 billion Rupiahs. This opens a chance for the e-commerce sector to tap into the government market. Despite its potential to grow, little attention has been put on B2G e-commerce.
What is B2G E-Commerce?
B2G stands for (Business to Government) and is also often called B2A (Business to Administration). B2G e-commerce generates profit from selling products or services to governmental institutions. There is a lot of variety of products/services offered such as IT support, equipment, or even air transportation.
Rigid Process but High Return
Selling to governmental institutions is much more complex and takes a longer time compared to usual business-to-consumer transactions. This is due to the rigid bureaucratic nature of government institutions. Before transactions, usually, the government will prepare a pre-negotiated agreement and open a tender process for businesses where businesses will bid to take part in government projects. After winning the bidding process, businesses must submit a project pricing which will be reviewed by the government. After those processes, only suitable businesses will sign a contract with the government. Despite having its downside, the B2G e-commerce business model can also bring a huge benefit. Government projects are huge in number and are more stable in the long term.
Examples of B2G E-Commerce in Indonesia
A lot of e-commerce has widened its business model by tapping into the B2G sector. Some of the examples are Skill Academy by Ruangguru’s cooperation with Kartu Prakerja which provides education for job seekers. Another famous startup in the B2G field is Qlue. By now, Qlue has partnered with 8 provincial governments and 7 ministries and institutions. Qlue partnered with the government to implement the smart city system by utilizing AI, IoT (internet of things), and mobile solutions for various projects such as disaster relief and satellite cities.
Future of B2G E-Commerce: Integration of Governance and Technology
Currently, various provincial governments in Indonesia are aiming to become smart cities. The smart city concept is the usage of technology to integrate all governmental services. By now, 8 cities in Indonesia have transitioned to smart cities. These cities are Jakarta with the Smart City Lounge program, Bandung with Hay U, Makassar with Makassar Smart Card, Surabaya with smart governance, Semarang with various technological integration on their service, Yogyakarta with their sustainable energy effort, Denpasar with Cyber Monitor, and Banyuwangi with their electronic tax payment system.
With the trend to build a smart city, tech startups can use this to take part in governmental projects in the future. Qlue B2G business model has proven that e-commerce can be successful. In the future, we can expect more e-commerce companies to expand their operations to the governmental sector even though some of them may not use B2G as their main business model.
Are You Interested in Building a C2B E-Commerce?
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