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Despite its reputation as the next biggest ecommerce market after China and India, Indonesia’s playground has caused many players drop out.

Alfacart, an e-marketplace offering products from various categories, is the latest name in retail that has shifted strategy in order to remain in the game.

After more than a year operating as a horizontal marketplace, Alfacart has reverted back into an ecommerce channel selling products solely from its parent company, Alfamart – Indonesia’s second biggest convenience store chain.

The pivot has not only caused the downsized in the team and C-level management to resign but as well, all third party sellers.

What happened?

Alfacart’s beginning

Alfacart was first introduced to the country as AlfaOnline and built in 2013 when Alfamart realised the importance of having an online channel to expand its reach. The platform at that time focused on selling groceries and various daily necessities.

After three years and a lack of significant growth, the company decided to open its platform to third party vendors and increase their product categories to include items under Fashion, Gadget, and Lifestyle.

“Our digital presence needed to be transformed into full-fledged ecommerce to be able to win the market and contribute significantly to the group’s revenue,” said CEO Catherine Sutjahjo at the time of the transformation.

This pivot came along with a new name, and Alfacart was born.

Alfacart pivot

Alfacart portal before the pivot

To distinguish themselves from the other many horizontal marketplaces – Lazada ID, elevenia, Mataharimall, blibli, etc. – they introduced O2O (online-to-offline) by leveraging Alfamart’s offline network of over 7,000 stores nationwide.

Customers ideally could pickup and return their order at any Alfamart counter, which also widened their payments options to cash.

However, despite its efforts, Alfacart struggled to compete with the already established marketplaces. A quick look at web traffic ranks in Indonesia show that Alfacart hasn’t managed to come in the top five.

Alfacart pivot

Alfacart (purple line) traffic is seen declining in the last three months

Say yes to the horizontal marketplace?

Alfacart is not a lone case in Indonesia’s saturating retail space. Only a month earlier, Cipika, a  marketplace backed by Indosat Ooredoo – one of the largest telco providers in Indonesia – announced that it was shutting down its business.

Similarly to Alfacart, Cipika also evolved into a multi-category marketplace model by offering snacks and electronics in an attempt to reach more potential customers but called it quits after almost 3 years.

Alfacart pivot

Cipika’s shut down announcement on their website

The company’s reason for closing down?

“B2C ecommerce will take a long time to reach profitability,” admitted Prashant Gokarn, Chief Strategy and Digital Services Officer at Indosat Ooredoo.

Say no to the marketplace.

The landscape for B2C ecommerce in Indonesia is indeed crowded and becoming more so as big corporations and conglomerates scramble to back new ventures by pumping in millions of dollars.

Alfacart pivot

Indonesia’s crowded B2C space

The problem though is a lack of any distinguishing factors between these marketplaces as they all offer similar product categories, operate on the same models, and target the same people.

With the same people vying for the same slice of pie, one way to win the consumer is by offering heavy discounts — a strategy that hasn’t changed since the birth of ecommerce in the country 4-5 years ago and still yields the same little return. Another way would be to diversify.

Blibli is a good example of a B2C site offering new categories such as local Indonesian goods and travel through the acquisition of Tiket.com.

What’s important to note is that the playing field is about to get even more rough as notable C2C players like Bukalapak, Tokopedia and Shopee have also branched out to B2C by onboarding big brands like Unilever to their platforms.

Who will be standing at the end of the year?

Alfacart pivot

Alfacart’s C-levels: CCO Ernest Tjahjana, CEO Catherine Hindra Sutjahyo, CMO Haryo Suryo Saputro with Alfamart’s IT Director, Bambang Djojo (in red)

Thailand startup known for selling digital content and eBooks Ookbee has enjoyed pioneer status since the platform’s launch in 2010. As one of the country’s early entrepreneurs and the face of Ookbee, founder Natavudh “Moo” Pungcharoenpong has first handedly seen the benefits of ecommerce that led to the launch of Ookbee Mall in 2015, a B2C marketplace focused on Japanese products.

Today, Natavudh took to his personal Facebook account to announce the closure of Ookbee Mall, to be effective on 31st March, 2017.

Source: Natavudh Pungcharoenpong’s Facebook page

In his status, Natavudh writes:

I’d like to thank everyone for their support of Ookbee Mall in the past. After much consideration and performance evaluation, myself and the managing team at Ookbee Mall have decided that it is time to end the ecommerce vertical of our business. We have been unable to scale and grow according to plan.

The competitiveness of the landscape is very different now to what it was when we launched in 2015.

For the other aspects of the Ookbee business, we will be operating as normal and working to expand our digital content platform. Thank you very much.

Ookbee Mall in numbers 

The marketplace launched with a injection of 150 million THB from Transcosmos, a business process outsourcing provider.

“It’s a strategic move for us to try to use physical products to support our existing Ookbee members. We try to propose physical products to support our existing customers who consume digital contents or eBooks,” commented by Natavudh in an article in The Nation 2015.

A look at Ookbee Mall’s web traffic now shows it has been on a decline for the past 6 months, down 29.98%.

Source: SimilarWeb Pro

In January this year, the site received 55,000 views compared to 200,000 from August 2016. If web analytics are anything to go by, it would suggest that Ookbee Mall has been struggling to capture the attention of its user base.

There are three possible reasons the company reached its fate:

1.  Lack of appeal 

When Ookbee Mall first launched, it tried to leverage its more niche services such as delivery of fresh Japanese fruit to customers living in Bangkok. The entrance of Happyfresh and honestbee into the scene made it more difficult for Ookbee Mall to bank on food deliveries as a selling point to bring more users to the platform.

How could they compete with bigger players with bigger war chests? What did Ookbee offer that marketplaces such as Lazada or 11street couldn’t?

2. Lack of experience

The founder and team were content professionals who created an extremely successful business selling digital media but not equipped to deal with problems that arise when selling physical products. Although ambitious, the company wasn’t able to scale quickly enough.

3. Lack of the right branding 

Ookbee made a name for itself by selling eBooks and it has stuck. When people think of Lazada, they think of online shopping. The product associated with the brand is extremely important.

During its initial launch, Ookbee Mall expected that within three months, it would reach about 10% of the 3 million active Ookbee members from about 7 million Ookbee users. The brand’s original user base were mainly high school students who enjoyed reading manga online – not the ripe and avid ecommerce users with money to spend.

For reasons like this is why many parent companies choose to launch new ventures under an entirely separate standalone brand. An example would be Ascend Group and its ecommerce branded marketplace, WeMall.

Thailand’s hyper competitive B2C space has made it significantly more difficult for players to remain in the landscape without constant innovation and the right offerings.

Ookbee Mall’s decline also highlights the difficulty for media companies to pivot into ecommerce than vice versa. And simply going online doesn’t mean instant success, the business also needs the right marketing, fulfillment partners and a product market fit.

Ookbee Mall’s humble closure may be the realistic future for many B2C business models in the country. What’s your take?

 

Here are the headlines you should know before you head out for lunch:

 

1.  B2C Ecommerce heats up in Southeast Asia

The forecast predicts retail ecommerce sales for the six countries studied will surpass $14 billion in 2016. Read the rest of the story here

 

2. Concerns linger over Singpost despite improved corporate governance

“While the new directors add to diversity and strengthen the board’s financial and legal capabilities, we think the main letdown is the lack of experience in the e-commerce or logistics business,” said CIMB. Read the rest of the story here

 

3. Alibaba backs PlaceIQ, a startup that combines location data with first-party data

Although the deal has not been disclosed by the two companies, the investment is more of a ‘strategic partnership’. Alibaba could use PlaceIQ’s technology in a variety of ways, including marketing, product recommendations and providing data for broader decision-making. The startup can determine not just whether someone’s visited a car dealership,but whether they’re actually shopping for a car, and what kinds of TV stations they’re likely to watch. Read the rest of the story here