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The number of small and medium enterprises (SMEs) is surging in Southeast Asia. Not only are they a major contributor to the GDP of ASEAN’s economies, but they are also responsible for creating and sustaining employment.

Based on the Directory of Outstanding ASEAN SMEs 2015, it was estimated that there are more than 62 million SMEs in ASEAN’s emerging countries, which includes micro enterprises in Indonesia and the Philippines.

It is not surprising given the massive impact of SMEs on the local economy that policy makers are paying a lot of attention to helping SMEs grow. UNESCAP’s report on SMEs in Asia and The Pacific defined a matrix of SME development by the policy makers in 5 different groups:

  1. Training and information: such as vocational training for employees
  2. Financial services:  such as micro-loans, venture capital
  3. Support structures: such as B2B portals and e-business platforms
  4. Policy advocacy: such as government procurement, taxation
  5. Capacity building: for all the stakeholders

While four of the above have been in place for decades, one group is relatively new: B2B portals and e-business platforms. Thanks to the internet, support for the growth of a SME business is now at a whole different level: faster, scalable, and more efficient using a B2B ecommerce platform.

It’s never been easy to trickle down a concept into execution, especially in emerging markets with its unique challenges and opportunities. Take Indonesia for example, with a significant share of SMEs across the region, creating a workable model there will mean a greater chance of replication in neighboring emerging markets.

Bizzy Case Study: SME To B2B Ecommerce, Concept To Execution

Bizzy is one of the leading B2B ecommerce platforms in Indonesia that focuses solely on B2B ecommerce and has become one of the pioneers in educating Indonesian SMEs on how to procure online. Founded in 2015, the platform is backed by both regional and local ventures: Ardent Capital, Sinarmas Digital Venture, and Maloekoe Ventures.

By identifying the top two challenges for doing B2B ecommerce in a leading emerging market like Indonesia, it is easier to see how these challenges are very much related to how multiple segments of customers behave differently and how businesses can overcome them.

Challenge #1: Small Enterprises Reach a ‘Demand Planning’ Dilemma

In emerging markets, micro and small businesses are big fans of “just-in-time inventory”. They rely on a petty cash system to procure their supplies in nearby convenient stores or groceries by cash or personal reimbursement.

There is no rigorous demand planning in this segment. When the copy paper is out of stock, they will go to the nearest stores to buy one pack; no more no less.

In contrast, the concept of B2B ecommerce platforms for this segment suggests a demand planning concept because of two key reasons. First, B2B ecommerce will need a service level agreement (SLA) to fulfill the order, not ‘just-in-time’ or ‘walking distance travel time’ as with convenience stores or groceries.

Second, B2B online procurement expects bulk or higher quantity order levels; not a single unit purchase in the case of B2C. SMEs would be required to create a step-by-step plan in advance, in order to make accurate predictions of which office supplies to buy.

Challenge #2: A Medium Enterprise Encounters Procurement-Supplier Relationship Disruption

A good “traditional supplier” will find a way to be the preferred supplier with negotiated rate cards to their medium enterprise customers. The effort is purely a journey of relationship management over many years. Preferred “traditional suppliers” have a great human relationship with the procurement department.

B2B ecommerce sales also work best at the C level where quantifiable savings, efficiency, transparency, and the increase of productivity pitches will hit the nail on the head. C levels understand the power and obvious benefits of online, strategic sourcing, and market place.

Virtually, any SKU is available at the tap of a fingertip, and more importantly, there is no secrecy on pricing as the internet will give several comparisons. The only fluid piece is the cost of finance for term of payment and the delivery cost if the goods are not sent from the domestic area.

When the “let’s try B2B ecommerce and e-procurement” message is sent to the procurement department from the top level, it will disrupt the existing procurement process, and specifically, disrupt the procurement-supplier existing established relationship that has been built for years with preferred suppliers.

The immediate voice of insecurity will come from the preferred suppliers. This is simply because the B2B ecommerce platform will give access to virtually unlimited SKUs and virtually unlimited vendors with (mostly) more cost effective pricing. In some cases, the feeling of insecurity is also transferred to the procurement department because technology creates more efficiency and likely less human intervention is needed, hereby disrupting the traditional system.

The B2B online platform could be seen as a clear and present danger by the ‘traditional procurement’ process.

This situation could bring a risk to the adoption of a B2B platform as it will take a longer time. It needs to resolve the relationship disruption effect that a disruptive technology brings to the equation.

Bizzy’s “Tier Pricing” Solves the Small Enterprise Challenge

To educate small businesses to start using the 21st century online procurement system and move away from “traditional procurement”, internet-first B2B platforms like Bizzy and Mbiz would need to provide a value unit that is perceived higher compared to the ‘just in time’ supplies concept from the nearest convenience store or groceries.

To address some of the aforementioned challenges, Bizzy for example has introduced a “tier-pricing” system that creates a value unit to compete with the traditional way of how small businesses procure products. Tiered pricing gives an upfront discount based on the tier volume. The tiered-price approach is the first and the only in Indonesia today (see picture below).

bizzy b2b

Small businesses can easily see the difference between buying a product, like glue, in small quantities or buying a larger quantity online from Bizzy with an upfront discounted price based on a periodic basis (aka demand planning).

The benefits of consolidated procurement and demand planning of supplies will also give more predictability of spending ahead of time for small businesses.

Buying from a B2B platform like Bizzy will also give them a tax refund as they register their tax ID to the system. If supplies are bought through retail stores, tax ID is not always an option for purchases.  

Bizzy’s ‘Select’ Solves the Medium Enterprise Challenge

It is super important for Bizzy in its sales motion to not position the offering for medium businesses as a “new supplier” who will compete with the existing preferred suppliers and create potential friction within the internal procurement department.

Rather, Bizzy should be seen as a “platform” that serves both internal procurement department and their preferred suppliers.

Recently, Bizzy introduced Bizzy Select as a unique platform for Medium Enterprise customers.

What is Bizzy Select?

  • A personalized e-procurement platform with e-catalog for medium enterprise customers
  • Customers can build their own e-catalog based on needs and Bizzy can onboard existing preferred suppliers to fulfill the requirements.

 

bizzy b2b

For the existing suppliers, onboarding to Bizzy Select will also give them access to new business customers to scale. These customers will have access to an e-Catalog with a virtually unlimited amount of SKUs as well as connection to a much broader list of other suppliers to anticipate both existing and the new needs.

In this mutually beneficial situation, moving both customers and “traditional suppliers” from the “traditional procurement” process to a more strategic procurement process is now doable.

The majority of medium sized businesses have not yet adopted ERP solutions, especially for procurement systems.

The offering of Bizzy Select, which includes approval flow, budgeting, e-quotation, shipment tracking, analytic dashboard, etc., is a compelling tool for medium businesses as they will instantly gain access into e-procurement without additional investment.

The Path forward

All the factors that contribute to the tipping point of B2B ecommerce are already apparent. The adoption of broadband – thanks to the aggressive smartphone penetration – means that consumers are already educated with the B2C and C2C buying-selling processes.

The large, addressable market of SMEs means that B2B ecommerce growth in Indonesia, and most likely other emerging markets in the region, is solid and bullish. The transformation of traditional procurement into strategic procurement for SMEs is happening today.

Now it’s the matter of the players such as Bizzy to switch paper based procurers into paperless.

by Hermawan Sutanto, Chief Commercial Officer at Bizzy Indonesia

In a recent study by McKinsey, Southeast Asia was identified as one of the fastest growing economies in the world with a combined Gross Domestic Product of $2.4 trillion. Southeast Asia is also home to a rapidly growing population of active internet users who are starting to use the internet to research products and shop online.

With an increasingly tech-savvy population used to conveniences offered by ecommerce in their everyday lives, it is only expected that this will influence ecommerce adoption for B2B sales. Decisions for companies are ultimately made by individuals.

And B2B sales are currently anything but convenient. A supplier selling electronics wholesale may have orders coming in from sales representatives by phone call, email, or even physical mail and fax. The difficulty of consolidating B2B orders from a variety of sources have been creating headache since 2001, as according to Richard Jacobson, ex-B2B Internet Research Manager of IDC Asia Pacific, “the biggest driver of B2B adoption is the lowering of administrative costs for buying and selling activities.”

In fact, the opportunities and benefits of B2B ecommerce in Southeast Asia have not gone unnoticed: Singapore Press Holdings is tying up with Industrial and Commercial Bank of China (ICBC) to develop the region’s first bilingual B2B ecommerce platform to enhance cross-border trade between China and Southeast Asia. While UOB is reported to launch a B2B marketplace in the first quarter of 2017.

However, since these partnerships are still in the early stages, businesses won’t have an easy option for a while.

If you are running a B2B business in Southeast Asia and have been through the hassle of consolidating orders across a range of sources, it might be time to proactively move your wholesale business online.

On one hand, you could apply to sell on a B2B marketplace like Alibaba or Indonetwork or you could choose to set up an ecommerce portal on your own. Both marketplaces and private ecommerce portals have their benefits — it’s just a matter of choosing the B2B channel that best suits the size of your business.

1. For manufacturers and large scale distributors: Alibaba’s B2B marketplace

With US$1.49 billion in revenue coming from Alibaba international B2B marketplace and its portal for China-based buyers and suppliers, the wholesale behemoth is the product source for retailers shopping for everything from motorcycles to cashew nuts. For businesses looking to reach as many prospective buyers as possible, Alibaba may be your B2B channel of choice.

However, it is important to note that Alibaba is best suited for large-scale manufacturers who enjoy economies of scale and do not prioritize strong brand identity.

If you’re selling under a B2B marketplace like Alibaba, visitors will see Alibaba’s branding before they see your brand.

If Alibaba looks like the right fit for you, here are some best practices to keep in mind:

Get a paid membership

Alibaba offers “free” memberships, although the “free” option does comes with a catch. Your items will be ranked last, which makes it difficult for prospective buyers to chance upon your products. You will also be limited to only listing 50 products, and without having the product showcases, verified icons, customization, or the ability to quote for buying requests

 

Compete on other things beside price

With products on Alibaba as cheap as they are, competing on price alone can be difficult for SMBs. After all, the cheaper your products are, the lower your profit margin becomes. Instead of falling into a price war, you can offer faster shipping, or faster response time when it comes to customer service.

 

Ensure your images and descriptions are optimized

Take clear, high-quality product photos to give your buyers a good idea of what they’re paying for. Similarly, providing accurate descriptions of your products that outline all necessary specifications — from material to measurements — to provide potential buyers with everything they need to make an informed purchase.

2. For independent designers and distributors: Private wholesale portals

For B2B sellers who run a distribution business, a marketplace like Alibaba may not be the ideal space for business. Some may have exclusive rights to sell certain products or brands in a specific region, or they are selling items unique to their brand.

If branding is an important part of your business, a private wholesale portal ensures that you can maintain control over how your products are presented to prospective buyers.

There’s a big catch when it comes to private portals. Unlike the added discoverability offered by public marketplaces, wholesaling through your private site means that you’ll have to find alternative ways of driving retailers to your site.

A private B2B portal is suitable for businesses that are either already running a wholesale business or looking for a scalable wholesale B2B option. According to the customer satisfaction survey by TradeGecko, a cloud-based inventory management software company, there are some important areas of consideration when choosing a private B2B portal:

Inventory management

As your business grows, there will be more inventory to manage and having more inventory means it will become increasingly difficult to manage visibility of inventory levels, especially if you decide to open a separate store for wholesale purposes. If this sounds like an area of concern, using a system such as TradeGecko B2B ecommerce ordering platform will give businesses the opportunity to sync the inventory levels of a B2B site with shopping cart platform.

 

Automated notifications

Moving to the cloud also lets you link up different business applications like accounting and fulfillment to deliver better customer experiences through automated notifications that update your customer on the status of their order. By sending updates to your customers every step of the way, you’ll save plenty of time on fielding inquiries.

 

Bulk data import

When new retailers start purchasing, you don’t have to manually enter in all the customer’s data into the system. Instead, you can set up online application forms that enables the bulk import of data — reducing man hours and transcription errors.

This means that next year, whether adding 600 new customers or 6 million new customers, the amount of time spent on data-entry won’t change.

Adopting ecommerce for the B2B side of your business will enable you to stay ahead of the curve as you’ll be making it easy for your buyers to purchase products when they need it. After all, buyers are expecting the immediacy, transparency and accuracy of retail ecommerce to carry over into the B2B world now that it’s well infiltrated the B2C world.

By Vera Lim, Inbound Marketing Manager at TradeGecko

singapore ecommerce landscape

With 83% of its population connected to the internet, Singapore holds the title as the most mature ecommerce market in Southeast Asia. Despite its small population, Singapore accounted for 25% of Southeast Asia’s 2013 online retail value, larger than the region’s largest market, Indonesia that contributed 20%.

Singapore’s ecommerce market is valued to reach $5 billion in 2025, making up 6.7% of retail sales in the country. What else can we see from the Lion City’s ecommerce scene? ECOMScape: Singapore will provide a quick overview.

1. Cross-border ecommerce is (still) preferred by the population

Around 55% of ecommerce in Singapore consists of cross-border transactions. Their developed infrastructure, liberal regulations on customs and tax, and large population of expats in the country opens the gate for foreign companies to flourish without having to establish local ecommerce operations in the country.

Singapore ecommerce landscape

The US and China are the top two destinations for shoppers from Singapore, putting Amazon and Alibaba’s Taobao on the top five most visited ecommerce websites in the country.singapore ecommerce landscape
As a result, there aren’t many home-grown players opting for a marketplace business model. Lazada and Qoo10 are the only mainstream B2C marketplaces in Singapore, unlike in Indonesia and Thailand where the space is a battlefield for deep-pocketed companies.

Its strategic location also attracts global companies to use Singapore as an ecommerce hub for their Brand.com presence to serve online customers in nearby markets such as Indonesia and Malaysia. Adidas used to fulfill regional orders from Singapore before opening an online store in Indonesia this October while Charles & Keith, a brand native to Singapore, offers free shipping to most countries with minimum purchase conditions.

2. Grocery shopping becomes more convenient

As the popularity of online shopping in Singapore increases, more Singaporean are turning online to fulfill their basic needs, including groceries. According to Ipsos and Paypal, online grocery shopping in Singapore is predicted to increase 21% in 2016.

This space seems to be very attractive for investors as seen by funding news of pure-play online grocers like Redmart and honestbee and transition of Singapore’s traditional grocers like Giants and Fairprice jumping on the online bandwagon. In fact, the majority of the etailer in Singapore are traditional grocers.

singapore ecommerce landscape

Food delivery services like Foodpanda and Deliveroo are also thriving in Singapore, the latter boasting 25% week on week growth, while Foodpanda claims Singapore to be one of its key markets in Southeast Asia after closing down operations in Indonesia and Vietnam.

singapore ecommerce landscape

3. Daily deals sites are still popular among Singaporeans

As news of daily deals companies shutting down across Southeast Asia grows, the business model may have overstayed its visit in the region but seems to be stable in Singapore. Groupon, which closed operations in Philippines and Thailand last year and sold its Indonesia operations, remains in Singapore’s top 5 most downloaded shopping apps and top 15 most visited website in Similar Web’s ‘shopping category’. Although Ensogo shut down earlier this year, many more deals sites still continue to operate.

singapore ecommerce landscape

4. Payments opportunity in Singapore attracting global players

Singapore’s established infrastructure and internet maturity makes an appealing testing ground for global players wanting to expand their reach in Asia, especially online payments players. The country’s credit card penetration is 38%, while most of the Southeast Asian countries are still below 5%, and the amount of cards circulating in the country averages 3.9 cards per person.

As a result, the Cards and Payments market in Singapore has become one of the most attractive and competitive markets in Asia Pacific. Adyen, a payment platform unicorn from Europe, recently opened its office in Singapore following the company’s plan to focus in Asia Pacific.

singapore-ecommerce-landscape-mobile-wallet

Singapore’s cashless habit has also made Singapore the perfect place for NFC payments solutions like Apple Pay, Android Pay and Samsung Pay to launch in Asia and the heavy traffic to Alibaba’s ecommerce platforms ensure the adoption of Alipay is well on its way.

5. C2C is driven through mobile apps

singapore ecommerce landscape

According to PwC, 38% of online shoppers in Singapore are making purchases on their smartphone, this number is higher than the global average of 28%. 57% of the shoppers in the republic also turn to social media to read product reviews. As an early adopter of internet culture in the region, Singaporeans are apt at using their mobile to access the internet.

Home-grown C2C platforms like ImSold, Shopee and Duriana have focused on their mobile platforms in order to appeal to customers who want the convenience of buying and selling their things on the go. More mobile-only players are expected to emerge.

Click here to download the full, high resolution version of ECOMScape: Singapore version and join the ecommerceIQ network for the first look at the next ECOMScape in our series.

You can also find ECOMScape: Indonesia and ECOMScape: Thailand.

Thailand Ecommerce Landscape

Thailand, while not the most populous nor richest of the Southeast Asian nations, is currently the fourth largest ecommerce market in the region, valued at $900 million and is expected to increase its ecommerce business 12-fold to a value of $11.1 billion by 2025.

What does the attractive Thai ecommerce market looks like now and what can be expected in the coming years? ecommerceIQ shares ECOMScape: Thailand to provide a quick snapshot.

1. Lazada is the dominating marketplace, while others compete in niches

What differentiates Thailand from other markets in Southeast Asia is that one online marketplace – Lazada – has significantly advanced over its local ecommerce rivals. The traffic of Lazada’s two closest competitors WeLoveShopping.com and Wemall.com combined makes only around a quarter of Lazada’s monthly traffic.

Yet, that and the fact Lazada now has the support of Chinese ecommerce giant Alibaba, is not scaring off competitors. Korean ecommerce marketplace 11street is expected to launch in Thailand in time for campaign season, 11/11, in hopes to replicate its success in Indonesia and Malaysia. The group’s claimed annual gross merchandise value of $7 billion is 7 times bigger than that of Lazada Group, but will it manage to challenge Lazada in Thailand?

Deep pocketed conglomerates are also moving in to steal market share, such as Thai CP Group, which belongs to the richest family in Thailand – brothers Chearavanont, owns Tesco Lotus, Shopat24 and 24Catalog. The second richest man in the country, Charoen Sirivadhanabhakdi, this year bought BigC and Cmart (formerly Cdiscount). While Central Group, the operator of Central department stores and distributor of several tens of foreign brands in Thailand behind which stands the third richest – Chirathivat – family, owns online marketplaces Central.co.th, Robinson and Tops. All of the above mentioned retailers have both – offline and online stores.

Thailand Ecommerce Landscape

Despite Lazada’s dominance, competitors are not easily scared off, especially deep pocketed Thai conglomerates who want their share of etailer online market.

Fashion & Apparel is one of the most competitive online market segments. In Thailand, this category represents a healthy mix of local players like Pomelo and WearYouWant, regional players like Zalora, Reebonz and global brands such as Adidas and Uniqlo.

Thailand Ecommerce Landscape

The competitive Fashion & Apparel online market in Thailand represents a healthy mix of local, regional and global players.

Brand.com webstores are also gaining traction in Thailand, which is best observed in the beauty category. Brands such as Maybelline, L’OccitaneEstée Lauder and Kiehl’s in Southeast Asia embrace the ecommerce market boom and use the opportunity to sell on their brand web stores, marketplaces or through distributors to capture the widest possible audience.

Thailand Ecommerce Landscape

Beauty brands go all-in in Thailand selling their products online on their own webstores, marketplaces or through distributors.

2. Old school vs new kids on the block compete in C2C

Classifieds and consumer-to-consumer (C2C) marketplaces were the first ‘ecommerce’ businesses to operate and remain an important part of the online journey in Thailand. Three of the most popular C2C marketplaces – WeLoveShopping, Tarad, Pramool – were created around the millennium and are run by local companies. However, newer market entrants like Shopee, supported by Southeast Asia’s largest gaming company Garena, are on their heels.

Tarad and Pramool ecommerce sites can be accessed on desktops, while the newest competitors – Shopee, Blisby, as well as WeloveShopping – all have mobile apps, which rank among the top 10 most popular C2C ecommerce apps in Thailand. Since approximately 85% of online shopping outside the major metro areas in Thailand takes place through mobile, it is easy to see that the new kids on the block are disrupting traditional, desktop-first marketplaces.

3. Social commerce is driven by Facebook, Instagram and LINE

An ecommerce business model specific to Thailand is social commerce – merchants set up ‘shops’ on Facebook and Instagram where they post images and details of their products so online browsers can inquire about the product and other details to further facilitate the deal.

Thailand Ecommerce Landscape

Thailand is the leading country where half of online shoppers buy directly from merchants through social networks.

According to a PwC report, Thailand is the biggest social commerce market and around 50% of online shoppers purchase products through social networks. Therefore it was no surprise when this June, Facebook started testing social commerce payments in Thailand and later in August launched Facebook Shop, the first in the world.

Companies like Shopee are looking to lure merchants selling on social networks to its online marketplace with aggressive marketing by offering easy integration of their Instagram shops and reimbursing shipping, cash on delivery fees to sellers. Other players like LINE also have eyed this market segment. LINE Shop was created to utilize the wide audience of LINE messaging app and tap the social commerce market. Yet technical issues such as a requirement to upload merchant product catalogues on the app through mobile phones, as well as limited payment options through LINE Pay, has hindered the success of LINE Shop.

4. Cash is still king

Thailand is still a cash driven society and cash on delivery (COD) is the preferred payment method for 70% of ecommerce shoppers, making payments a bottleneck for faster ecommerce growth as many sellers cannot offer COD. There are various mobile wallets offered by telecom companies, banks as well as independent players but so far, none of them have quite caught on.

Thailand Ecommerce Landscape

Despite various mobile wallet providers, cash is still the most preferred payment method.

The large unbanked population and low trust in the security of personal financial details does not make the task of Thais adopting digital payments any easier. And though there has been a surge in fintech players, none really address the core issue. For example, LINE Pay accounts can only be linked with a credit card in Thailand, where just  3.7% use one to make payments. Mobile wallets and banks offering a top-up through either ATMs or special kiosks, defeats the purpose of an mwallet. Good news is that there is an opportunity for a player to provide a convenient and easy digital payment solution for those without a bank account and/or credit and debit cards.

5. Fierce competition in logistics leads to price war

The ecommerce gold rush across all Southeast Asia has facilitated growth of startups who hope to solve logistics problems like next-day delivery and live tracking, and Thailand is no exception. The success of ride-hailing apps Uber and Grab has encouraged several startups to offer on-demand delivery services.

Thailand Ecommerce Landscape

The success of ride-hailing apps has driven several start-ups to offer on-demand delivery.

There are numerous companies who provide 3PL services and ensure a smooth last mile delivery. This means companies engage in price wars and suffer lower margins, if any at all.  

The packed logistics market is beneficial for marketplaces and merchants as they have plenty of delivery service providers with whom to negotiate a lower price.

Thailand Ecommerce Landscape

Numerous companies offer 3PL services and ensure last mile delivery driving down delivery costs for the benefit of marketplaces.

Click here to download the full, high-resolution version of ECOMScape: Thailand and join the ecommerceIQ network for first look at the next ECOMScape in our series.

Check out also ECOMScape: Indonesia

Are we missing any players? Let us know on FacebookTwitterLinkedIn

Indonesia Ecommerce Landscape

Mapping Southeast Asia’s Dynamic But Fragmented Ecommerce Market

In order to ‘win a market’, some online publications will say: ‘define your brand’, define your competitive advantage, ensure product-market fit, create a customer database, and/or market to the world. And while your business should encompass all these strategies, the very first step any company, old or new, should take is to identify the key players already in the field.

Southeast Asia has become a hotspot for saturation thanks to booming growth – the online sector is expected to reach more than $87 billion by 2025 and many global players such as Alibaba and Amazon are scrambling to get their own slice of ecommerce pie.

However, what new entrants often overlook or find out too late when entering the region is its fragmented nature. Every country brings with it a different set of strengths and challenges.

For any player looking to grab Southeast Asia market share, the key to unlocking its potential is knowledge. Different players exist in several market segments, and some dominate certain niche segments all hoping to solve problems or capture an untapped opportunity but the ecommerce bottlenecks vary across borders.

The ECOMScape Series by ecommerceIQ aims to bring you a complete picture of the ecommerce ecosystem in individual Southeast Asian countries from the businesses selling, to the specialists providing their online solutions, all the way to the end customer. We hope it will help you navigate the competitive space. Let’s start first with the region’s biggest and most promising market, Indonesia.

Indonesia Ecommerce Landscape: 6 Key Takeaways from Current Market Conditions

The country is on track to become one of the biggest markets in Asia with the potential to comprise 52% of Southeast Asia’s entire ecommerce value by 2025.

Despite the country’s attractive $46 billion ecommerce valuation that keeps foreign investors and companies pouring in, local players are not intimidated by the influx of global ones. What else can we tell from the bird’s eye view of Indonesia’s ecommerce ecosystem?

1. Local players are dominating the market, especially in niche sectors

Indonesian run companies are seen selling in every sector of ecommerce in Indonesia, especially C2C, Lifestyle & Travel and smaller niches that fall under the ‘Other’ category. These include marketplaces like Cipika, Qlapa, and KuKa that sell local and handcrafted products and Limakilo, a marketplace targeted at farmers.

Indonesia Ecommerce Landscape

‘Others’ category under B2C sector is filled with niche players.

Some locally owned companies such as Shoot Your Dream and AkuLaku also better understand the country’s payment pain points and allow customers to buy products via installments through their website without a credit card.

Targeting a smaller consumer segment for local players is one way to empower local SMEs to go online. It also means less competition as foreign and big players usually try to compete over a more ‘mainstream’ audience such as Lazada, Elevenia and MatahariMall.

A reason for the success of Indonesian owned companies is due to familiarity of local trends and behavior. These companies, such as Bukalapak, customize marketing campaigns to match cultural preferences and identify better with the customer.

Indonesia Ecommerce Landscape

Bukalapak’s viral video campaign for Online Shopping Day 12-12 last year, starred their CEO creating a small-budget, home-made marketing initiative while ‘apologizing’ to the executives everywhere for distracting and decreasing their employees’ productivity with big discounts offered.

Among the top 20 websites in the archipelago under SimilarWeb’s ‘Shopping’ category, more than half are native Indonesian run companies.

Indonesia Ecommerce Landscape

Even OLX and iProperty, who have the advantage of vast resources to be at the top of their respective niches as seen in the ‘Classifieds’ section, were once local companies acquired by regional players.

2. Brand.com and the rise of omni-channel

Indonesia’s most popular ecommerce model is presently the marketplace like Tokopedia and Lazada. Even in the vertical sectors like Fashion & Apparel, Electronics & Gadgets and Local & Handcrafted products, the dominant choice is still a marketplace.

This model is popular to accommodate the growing interest of SMEs and brands that want to bring their business online but lack the capital or are unwilling to take a risk jumping online with both feet.

Indonesia Ecommerce Landscape

However, as the industry matures and brands realize the importance of having an online channel, more adopt a brand.com strategy to directly reach customers.

HP and Kiehl’s are some of the big brand names in their field that recognize the potential of going online. And it isn’t restricted only to brands because offline retailers are also joining the ecommerce bandwagon.

MatahariMall and MAPEmall are just two examples of retailers with deep pockets that recently joined the online space and it’s paying off. MAP, the parent company of MAPEmall, has stated 78% year on year profit growth in August and credit their online venture as one of the main drivers.

As more customers demand convenience to shop anywhere and at anytime, it is vital that retailers complement their offline networks with an online strategy to create an omni-channel experience.

3. B2B sector is slowly gaining momentum

B2C is not the only sector that has seen an increase in online adoption. The country’s biggest industrial retailer, Kawan Lama, is among the early players making the jump to ecommerce in this sector.

The company launched a shoppable website to cater to both a B2B and B2C audience after seeing steady traffic from consumers browsing its catalogs, indicating a change in customer behavior. Another big offline retailer that followed suit is Electronic City.

Indonesia Ecommerce Landscape

However, despite the push for B2B ecommerce in Indonesia with the establishment of Indonetwork, an online directory and marketplace for SMEs catering to B2B and B2C alike, the sector is still very scarce. Bizzy and Lippo-backed Mbiz are the only significant B2B marketplaces that launched in the past year.

Indonesia Ecommerce Landscape

4. Market research is urgently needed

Due to the infancy of the industry in Southeast Asia, there is only a handful of resources that exist to help businesses make informed decisions. Even established research firms like Nielsen are having difficulty obtaining enough market data to create a comprehensive report.

Indonesia Ecommerce Landscape

The lack of knowledge and insight affects the growth of ecommerce as executives are forced to make strategic decisions based on gut thus the reservation of conservative brands going online.

ecommerceIQ aims to bridge the gap of knowledge in Southeast Asia by providing market research to executives in the form of summits, reports, insights and data.

5. More payment options to tap into the unbanked

With more than half of the population in Indonesia still unbanked and credit card penetration at only 1.4%, payment has become one of the biggest bottlenecks to ecommerce growth in the country.

Telco companies in Indonesia are one of the key contributors that help build the ecommerce ecosystem by launching their own versions of mobile wallets, a popular payments method. And it’s not surprising, considering that each telco company has their own ecommerce website.

Other popular payments gateway include Adyen, a payments unicorn used by both Uber and most recently, Grab and aCommerce. The payment gateway offers both online and familiar offline options that locals trust, such as ATM transfers.

6. Diversifying delivery services

Infrastructure is often acknowledged as one of the top barriers for ecommerce in the region, especially Indonesia where lack of public transportation, tricky island geography and under-developed roads pose serious problems.  

Ride-hailing apps are expanding their offerings to include courier services to cater to growing demands. Gojek, for example, a traditional transportation startup has become the preferred delivery method for C2C merchants and buyers as it offers same-day delivery services and a built-in tracking system at an affordable price.

Indonesia Ecommerce Landscape

The third party logistics (3PL) category is also very saturated in Indonesia. Brands are provided with so many options that it becomes a time-consuming task to find one that suits the needs of their business and consumers. Multi-shipping tech from aCommerce or Alibaba’s Cainiao aim to save time by aggregating the best options based on the price and destination.

The potential of ecommerce in Indonesia has already tempted many players, both foreign and local, to enter the market. However, it’s still a long time before a clear winner emerges from the battlefield.

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