Indonesia’s recent announcement that it will limit online sales of imported goods worth under US$100 is set to upend the country’s rapidly growing e-commerce sector, and possibly pave the way for local players to take market share from international competitors, particularly those based in China. The country’s trade minister Zulkifli Hasan was quoted as saying that the move is aimed at protecting small and medium enterprises in Indonesia. Under the new policy, imported goods will be required to obtain a supplementary licence, known as the Indonesian National Standard, but details about how the government plans to enforce the measure remains sketchy. The country’s president Joko Widodo has previously stated concerns about cheap Chinese made goods, and urged locals to shun these products.According to Statista, revenue in the Indonesian e-commerce market is projected to be US$45.28 billion this year, and expected to increase at a compound annual growth rate of 10.41 per cent between through 2027, resulting in a projected market volume of US$67.30 billion.The number of online shoppers in the country is expected to reach 244.7 million by 2027, representing an estimated 85.5 per cent of the population by 2027. The average revenue per user is expected to amount to US$230.50.According to a 2022 industry report by Alphabet’s Google, Temasek Holdings and Bain & Company, the gross merchandise volume of Indonesia’s digital economy is expected to hit $130 billion by 2025 and $360 billion by 2030.A nuanced perspectiveDr Seshan Ramaswami, associate professor of marketing education at Singapore Management University (SMU), described Indonesia’s recent move as a form of protectionism, which is a policy of creating barriers to foreign competition for domestic marketers. “There can be outright bans of imports in some industries, or from some countries, or imposition of steep tariffs, or even restricting certain retail formats, for example multi-brand retailing. The Indonesian policy – a ban on sub-$100 goods – is an interesting version,” he told Inside Retail.Ramaswami believes this policy is clearly aimed at brands and retail businesses operating on the lower end of the spectrum, where middle-class consumers tend to shop. “Clothing, accessories such as shoes, jewellery and bags, household goods for daily use such as low-end kitchen appliances, furnishings, toys, and budget electronic goods, such as smartphones, headphones, and phone accessories all fall in this range,” he added.He believes that Chinese e-commerce platforms will be most affected by the policy, as they dominate e-commerce sales in Southeast Asia, especially for these types of products. The aim of the policy, he believes, is to protect Indonesian producers in these categories. “In the short run, the policy will be a big boost to domestic manufacturers and retailers – the reduction of cut-throat price competition from outside the country will create that protected market for themselves,” he noted.But in the medium to long term, Ramaswami believes manufacturers and vendors will find multiple ways of circumventing the rules. “Some examples are subscription plans, bundling products, group-buy plans so that the total price is over $100, or selling bulk parts to a foreign owned subsidiary in Indonesia which will assemble the product and sell within the country,” he opined.In general, he believes consumers tend to lose when there is protectionism of any kind, but governments across the world are wary of “dumping” or predatory pricing tactics that are strategically aimed at dominating a market by eliminating competition.“The Indonesian policy is an understandable reaction to this potential threat. There may actually be a boost to domestic e-commerce in the short run which could have long-term implications to the ecosystem as a whole,” he stated.From warehousing to transportation, last-mile delivery, locker systems for convenient temporary storage of delivered items and a variety of other such components; all of these elements could get a fillip with this boost to domestic businesses. Huge potentialIndonesia’s move comes at a time when a growing number of major international retailers are expanding their presence in Southeast Asia and other markets with an expanding middle class. “International brands are attracted to the large markets in populous countries around Asia, which are at an inflection point for rapid economic growth. These include markets such as Indonesia, Vietnam, Bangladesh, and India,” Ramaswami said.But he cautioned that overseas brands need to be very sensitive to local consumer tastes and preferences, as well as the inevitable political concerns that will arise if they begin drawing market share from domestic businesses. His advice to brands is to work closely with partners on the ground, communicate in a way that localises the brand, develop product variations specific to the local culture, and assemble the products domestically in order to demonstrate a long-term commitment to the economic development of the countries they are operating in. “As an example, Samsung used to be the main sponsor of the Indian cricket team, and cricket is a religion in India with a mass following,” he stated.Maintaining a balanceLooking at the big picture, Ramaswami also noted that there needs to be government level talks between countries too to ensure that economic policies do not set off a trade war.  “A foreign country that perceives this new policy to be aimed at their manufacturers and e-commerce platforms could in turn impose a restriction on Indonesian goods and service imports in retaliation,” he stressed.He also acknowledged that when these sorts of cultural sensitivities are combined with economic and political concerns, it is not clear what the medium term shake-out will be, and whether Indonesian business will really reap economic benefits. “The best outcome for them would be if protectionism in the short run becomes a catalyst to develop a more robust domestic e-commerce system,” he added.Ultimately, he thinks the bigger local players may be the biggest beneficiaries, especially if they can acquire new customers, and hence, access to new datasets on the purchasing behaviours of the price-conscious Indonesian e-commerce shopper.