The Indonesian government has signaled plans to limit free shipping promotions offered by e-commerce platforms. This regulatory move is designed to ensure fair competition, especially for small and medium enterprises (SMEs) and traditional offline retailers struggling to keep up with heavily subsidized online sellers.
As Indonesia continues to be one of Southeast Asia’s fastest-growing digital markets, this shift is expected to have a significant impact on consumer behavior, seller strategies, and platform policies.
Why Is the Government Limiting Free Shipping?
Over the past decade, free shipping has evolved into a powerful incentive for Indonesian consumers shopping online. E-commerce platforms have used free shipping vouchers and subsidies as a major customer acquisition and retention tool.
However, concerns have been mounting over the long-term economic implications:
- Market distortion: Government officials argue that aggressive shipping subsidies—often funded by deep-pocketed foreign investors—are making it nearly impossible for local SMEs and traditional merchants to compete.
- Unfair competition: Offline retailers and smaller online sellers without access to subsidy programs feel they are being squeezed out of the market.
- Economic nationalism: The policy aligns with Indonesia’s broader efforts to strengthen local enterprises and ensure fair digital competition.
In late 2024, President Joko Widodo called for stricter regulation of digital commerce to prevent monopolistic practices and to protect national interests, setting the stage for this policy.
Key Impacts of the Free Shipping Limitation
The regulation, while well-intentioned, could lead to major operational and strategic changes for sellers and platforms. Below are the most likely consequences:
1. Declining Conversion Rates
Free shipping is consistently ranked as one of the top motivators for online purchases. With its restriction, cart abandonment may increase, especially for low-priced products where shipping fees could nearly double the total cost.
2. Increased Price Sensitivity
Without blanket free shipping, customers will start comparing the total cost (product + shipping) across platforms and sellers. This could lead to higher competition and margin pressure for sellers.
3. Reduced Platform Subsidies
Many e-commerce platforms currently bear the cost of shipping promotions. If regulations tighten, platforms may be forced to scale back subsidies, shifting the burden to sellers or end-users.
4. Disruption for Micro Sellers
Micro and small online sellers, especially those operating through social commerce or informal marketplaces, may find it harder to compete without free shipping as an incentive.
Courir/shipping illustration. Image from Freepik
Strategies for E-Commerce Sellers to Adapt
Despite these challenges, e-commerce sellers in Indonesia can adapt and continue to thrive by shifting their strategies in smart, sustainable ways:
1. Incorporate Shipping into Product Pricing
Sellers can integrate shipping costs into the product price to continue offering “free shipping” in a regulation-compliant format. Transparency is key—customers should understand what they’re paying for.
2. Leverage Local Fulfillment Centers
By using local warehouses or third-party logistics (3PL) partners, sellers can shorten delivery distances and reduce shipping costs. This also improves delivery speed, which is becoming increasingly important to customers.
3. Promote Bulk or Bundled Purchases
Encouraging customers to purchase multiple items at once helps spread the shipping cost over a larger order, reducing the impact on profit margins and offering better value to the buyer.
4. Enhance Customer Loyalty Programs
Now more than ever, sellers must invest in loyalty-building initiatives. Offer reward points, exclusive discounts, early access to new products, or personalized deals to retain repeat buyers.
5. Focus on Product Differentiation and Branding
In a market where shipping perks are limited, product uniqueness and brand trust become top differentiators. Sellers should highlight quality, local production, sustainability, or other unique selling propositions.
6. Collaborate with E-Commerce Platforms
Maintain open communication with platforms to access promotional opportunities, co-branded campaigns, or local government programs that support digital MSMEs.
A Turning Point for E-Commerce in Indonesia
This move is part of a broader regulatory trend aimed at rebalancing Indonesia’s digital economy. In 2023, the government already banned direct sales on TikTok Shop, citing concerns over data security and SME protection. The upcoming limitations on free shipping are a continuation of that narrative—prioritizing long-term economic sustainability over short-term growth tactics.
While the policy may create short-term friction, it also encourages more equitable competition, innovation, and localized growth. Sellers that adapt early will be better positioned to thrive under the new rules.
Indonesia’s e-commerce landscape is entering a new regulatory era, where sustainability, fairness, and local empowerment take center stage. The limitation of free shipping features will reshape how businesses operate and how consumers shop. But with the right strategies—ranging from logistical improvements to brand differentiation—e-commerce sellers can turn this challenge into an opportunity.
For sellers, the message is clear: Adapt quickly, innovate smartly, and always stay customer-focused.
Sources:
- https://www.jakartadaily.id/tech-media/16215167826/indonesia-limits-e-commerce-free-shipping-to-three-days-a-month-as-government-aims-to-protect-delivery-tariffs-under-new-regulation
- https://www.socialexpat.net/government-limits-free-e-commerce-delivery-to-three-days-a-month/
- https://voi.id/en/economy/483074
- https://www.thejakartapost.com/business/2025/05/21/govt-moves-to-level-playing-field-in-ri-logistics-sector.html
- https://technode.global/2025/05/21/maybank-sees-indonesias-new-logistic-regulation-to-benefit-third-party-players/(Jakarta Daily – Indonesia News Portal, Social Expat, VOI, The Jakarta Post, TNGlobal)
