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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)

Here’s what you should know today.

1. Online retailers in Indonesia records big sales for Eid season. 

Blibli and Blanja.com have reported a significant revenues from sales during Ramadan this year, as Indonesian tend to shop more to celebrate the occasion.

The former have recorded a 200% increase in sales compared to the same season last year, with most popular categories included Muslim attire, beauty products, food and beverages products, and automotive parts. Blibli’s special offers like Eid packages and free express shipping also contributed to the boom.

Meanwhile, Blanja.com who underwent a huge change in its branding earlier this year, recorded a 78% increase in sales.

Read the full story here.

2. Stripe strikes a global partnership with Alipay and WeChat Pay.

Silicon Valley-based payment startup Stripe has partnered with Alipay and WeChat Pay and enable online merchants using the platform to accept payments from hundreds of million Chinese consumers.

The partnership also coincides with the company’s launch in Hong Kong.

The deal is hoped to boost the revenue by allowing clients to tap into the massive Chinese consumer market. Tencent’s WeChat Pay is recorded to have 600 million users, while Alipay, who is part of Alibaba’s Ant Financial, has recorded of 520 million users.

“If we can help a business double their sales, then it doubles our revenue from that business,” said John Collison, President and Co-Founder of Stripe.

Read the full story here.

3. Droom is expanding to Indonesia after closing $20 million of series C round

An online marketplace for used automobiles, Droom, announces its plan to close a few acquisitions by the end of this year and its expansion to Indonesia. The company is planning to spend about $8-10 million from its freshly $20 million fund for the acquisitions.

“We are planning 2-3 acquisitions this year.. [and] we have been in talks with several companies,” stated Droom’s founder, Sandeep Aggarwal.

The company has been planning its expansion to Indonesia last year but the delayed the plan as it’s still trying to strengthen its hold in India. In addition to Indonesia, they are also planning to open in Malaysia, the Philippines, Thailand and Singapore.

Read the full story here.

Here’s what you should know today.

1. Indonesia’s Blibli acquires online travel agent Tiket

Indonesian online travel agent Tiket has been acquired by Blibli, an ecommerce site backed by Indonesian tobacco conglomerate Djarum. It’s a 100 percent takeover, but no further details on the deal were disclosed.

Tiket is a popular ticket booking site that offers flights, train tickets, hotels, car rentals, and concert tickets. Blibli, an ecommerce site with a diverse range of products, began branching out into travel at the end of last year. With this acquisition, it can fast-track growth in this segment.

Read the rest of the story here.

 

2. Snap shares close at IPO price of $17

Shares sank 4.9 percent in intraday trade, and are down 42 percent from their high of $29.44 on March 3, the second day of trading.

The instant messaging and photo application began trading in early March. Its IPO price was $17 a share, and shares surged 44 percent during their first day of trade.

Several analysts’ sell ratings have cast doubt over the longevity of the company. The stock will face more price pressure when 1.2 billion shares become available for sale at the end of July.

Read the rest of the story here.

 

3. Amazon reportedly eyeing BigBasket buy in India

Amazon is in preliminary talks to buy the Indian grocery site BigBasket, as the American company steps up efforts to gain ground in the fast-growing market.

BigBasket, run by SuperMarket Grocery Supplies Pvt, is India’s largest online grocer and operates in about 25 cities across the country. A spokesman for BigBasket said that it’s untrue that Amazon is in talks to buy the firm. A representative for Amazon declined to comment.

Amazon has been expanding in online food and grocery sales as it seeks to increase its product offerings. This year, it opened drive-in grocery locations in Seattle, its home town, as part of a renewed effort in the business.

The Bloomberg story also suggests that BigBasket could be talking to other parties, including private equity firms, about a deal, even though the company raised about $150 million from investors last year and another $7 million in venture debt just three months ago.

That may be another sign of how fast the market is growing, as even a well-funded, fast-growing online grocery firm appears to need even more money help to keep up.

Read the rest of the story here and here

Blibli.com is best known for being Indonesia’s first established online retailer where shoppers can find quality vacuums and handphones to local Indonesian fashion labels.

The ecommerce veteran has been around since 2009, raised over $13 million in funding and runs in-house operation of over 1,000 employees to ensure that its 5 million monthly customers receive their packages within two-days. How do they manage it?

eIQ caught up with Lisa Widodo, Blibli’s Head of Operations and Product Management, at Last Mile Fulfillment Asia to discuss one of the most common questions asked in logistics, buy or build?  

To answer this question, there are many factors to consider and understanding where the company stands is a good place to start.

Growing in a crowded B2B2C space

A quick glance at the e-marketplaces available in Indonesia show that there is already a number of strong horizontal ecommerce players.

To succeed in a saturated market like Indonesia, companies either need to differentiate or allocate a large budget to marketing to get their site in front of the eyes of consumers.

Blibli focuses on product differentiation and based on the latest data in 2016, has over 12,000,000 sellers, 12,000 brands and more than one million products on its platform to attract a growing population of wealthier young Indonesians.

By 2030, the highest concentration of top income earners will be 30-34 year olds (Euromonitor: Income and Expenditure Indonesia 2016) and Southeast Asians in general are willing to pay more for better everyday products especially in personal care and food (see chart below).

This is good news for Blibli.com as the company’s shoppers are comprised of equally male and female (55% and 45%, respectively), between the ages of 25 – 35, and digitally savvy.

Galeri Indonesia is the newest vertical by Blibli.com that puts local Indonesian entrepreneurs in the spotlight. These small shops sell items like handmade wooden watches, speakers that run without electricity, grow-at-home mushrooms and jewelry made out of rice.

Blibli internal data shows sales from this category has been growing 1197% MoM since its launch last year.

“Locals like to shop locally,” says Lisa.

The company also recently began offering hotel bookings and soon train tickets under Blibli Travel and electronic tokens for Indonesians to pay their utility bills with under Blibli Digital Product.

The company, Lisa assures, is in it for the long run.

So buy or build?

Blibli currently has five warehouses strategically placed near Jakarta’s airport, near Jakarta’s port, in the middle of the city and in Medan. The company’s facilities, which also includes a fleet operating out of five hubs in the Greater Jakarta Area, and two hubs outside Jakarta, serving all orders coming from Java – 70% of Blibli’s total volume.

Out of the five warehouses, only one was outsourced to a local provider because the company knew it would be set up faster and that the packing process was standard meaning irregular shaped items like guitars or products that needed special handling weren’t going to be stored there.

But even so, the warehouse management system used at the outsourced warehouse belongs to Blibli for complete product transparency tracked by four statuses:

  1. Order comes through and payment has been received → package will be delivered within two days, otherwise the merchant will incur a penalty
  2. Ready for shipment
  3. In shipment
  4. Delivered

Only 10% of Blibli’s orders are paid for with cash-on-delivery, which is quite low for Indonesia.

“What sets Blibli apart is our dedication and empathy towards our customers,” says Lisa. “This means we must have complete control over their happiness, their complaints and the ability to track the problem back to the source.”

Because Blibli holds its customers in such high esteem, it needs to ensure the last mile experience is of quality.

 

“Even down to smallest dent in a box, it all matters,” comments Lisa. “The only touch-point we have with the customer is the package at their door so it needs to be perfect.”

The company sends all new merchants a care package that includes free Blibli branded boxes in various sizes and tips on how to pack a product properly.

“Currently we work with 12 different last mile service providers to serve customers outside of Java and we’re always open to working with others as long as they have a solid business plan.

Buy or build? In short, if the company is a class brand that sells at a higher price point thus needs to prioritize a quality customer experience to keep retention healthy, they should spend the resources to build its own operations.

Other factors to take into account would be local knowledge, the urgency for expansion and financial allowance.

“Blibli.com had over 7.5 million transactions last month, it makes sense for us to do as much as we can in-house to give our customers their money’s worth,” comments Lisa.

If the company’s selling point is low priced goods, it should focus on scaling before investing in its own operations. Other factors to take into account are cash reconciliation, difficult delivery routes outside of the metropolises and capabilities of its tech solutions.

And of course, a hurdle to overcome is the key resource needed to make ecommerce operations a success – talent.

Changing the mindset of the people

As Lalamove International Managing Director Blake Larson commented at LMFAsia 2017,

“Technology isn’t magic dust you can simply sprinkle on logistics, it still requires a human element to work.”

Lisa believes the company’s strongest asset is its people and as with most digital companies in Southeast Asia, finding the right employees can be a challenge.

“It’s really about changing the way the general population thinks and getting them to take more ownership,” says Lisa.

She personally vets each employee during the onboarding process to ensure that there is a culture fit. Coming from a mechanical engineering background, Lisa identifies strongly with logical thinking as a necessity for anyone joining her operations “super team” of 400.

The Blibli mission

There are two main objectives for the future of this online company:

  1. Expansion in Indonesia
  2. Putting local talent on a global stage

“We plan to keep monitoring the data to determine how quickly we need to expand our reach outside of Java,” comments Lisa. “SLA and cost also need to match up.”

“We hope to make these small businesses internationally known through mentorship programs like The Big Start Indonesia. The strength of Indonesia is its local talent but it needs to be nurtured,” says Lisa.

By: Cynthia Luo

January is generally a slow month for retail as people are tightening belts after splurging during the holiday season. End of year campaigns are also allocated large marketing spend to drive more traffic to Southeast Asia’s November 11/11 sales period and the 12/12 “Online Revolution” driven by Lazada, the region’s largest marketplace.

Looking at SimilarWeb web traffic – a sum of all (non unique) visits both on desktop and mobile –  for Indonesia’s most popular B2C marketplaces shows a decline of around 3 to 20% from December to January. Lazada Indonesia experienced a 3% drop in the number of monthly visitors.

But it was MatahariMall,  the country’s biggest department store chain, who noted the largest staggering drop of 62% in visitors to its online marketplace.

The two-year old online venture, MatahariMall.com, raised $100 million in October last year to bolster its share of Indonesia’s ecommerce market. A look at the company’s online traffic shows a buoyant performance in terms of its visitors – spikes in traffic from roughly 7M to 24M shows the difference in organic traffic and the effects of a marketing push.

A more stable performance this year might provide a better indication if it will manage to live up to its ambitions to become the “Alibaba of Indonesia”.

Two players that continuously capture a steady audience are Lazada and Blibli.com, a six year old e-marketplace owned by Djarum Group and BCA, one of the largest banks in Indonesia.

Not surprisingly, the best performing ecommerce sites are the best-funded, making it harder for smaller players to compete unless targeting a niche audience.

Meanwhile, most C2C marketplaces saw site visitors in January increase by 3 to 8%. Jualo, an online marketplace for secondhand goods, saw the biggest lift in web traffic with 8% growth.

Web traffic, of course, doesn’t automatically equate conversions, it’s only one metric in tracking an online company’s traction. The data, however, is useful for marketers, advertisers, merchants, etc. to understand which marketplaces can provide an opportunity to tap into a large pool of existing customers.

eIQ will be updating the numbers every month. Find out the statistics for Indonesia | Thailand | Malaysia | Vietnam | Philippines

Indonesian express and logistics courier service company, JNE revealed that 60% of its revenue from the first semester in 2016 came from ecommerce. Vice President Marketing of JNE, Eri Palgunadi stated that among the 60%, an estimated 30% is coming from the registered big ecommerce players like Blibli and Lazada.

JNE has built a lot of warehouses to accommodate the surge of ecommerce deliveries. One of them is in Wangon, Banyumas, Central Java. With the existence of this warehouse, they are hoping to push down the cost for the customers in the eastern Java area. Eri claimed now the delivery costs to this area is down to single-digit because of the closer distance.

In addition, JNE has also built a warehouse in Medan close to Silangit airport, Batam, Bandung and extending an existing one in Soekarno-Hatta airport.

Investing in technology and supporting businesses

In the beginning of the year, JNE announced that it was going to put an investment of $34.8 million to support the growing ecommerce sector in Indonesia. They will set aside $4.2 million (55 billion IDR) of investment to develop their IT infrastructure and the rest, $30.6 million (400 billion IDR) into business-supporting infrastructure like warehouse, etc.

JNE plans to expand their business area in Cikarang, Karawang and Purwakarta to support the needs of ecommerce players but despite the technology services that it provides, Eri claimed that JNE is not going to become an ecommerce-only company.

“We are still a logistics company, that’s why we are planning to develop trucking, because that is our own fleet. And then we are also setting up a warehouse in Cibatu, Cikarang of 25.000 x 3.000 sqm.” added Eri.

A version of this is appeared in Bisnis.com on July 30. Read the full article in Bahasa here