In a country where there are more active mobile phone subscriptions than people alive – 255 million people versus 326 million mobile subscribers – Indonesian telecommunications providers are in a prime position to shape the future of ecommerce and mobile commerce in Indonesia. But while the telco sector contributed 3.14% of total GDP in Indonesia in 2014 and experienced high growth of 10.36% in the same year, placing Indonesia’s mobile market as the fourth largest in the world and top ten 3G markets, have the original giants of emerging market tech kept up with the online shopping boom?
From telecommunications to “telecommerce”
Traditionally, telco companies were the ones who have direct access to customers, but in light of the ecommerce boom, things are slowly changing. The Indonesian telecommunications sector is dominated by three big players; Telkom, Indosat Ooredoo and XL Axiata, which make up 80% of total market share in Indonesia. Not one to miss opportunities, all three companies have aided the archipelago’s ecommerce sector through investments and strategic partnerships. Below is an aerial snapshot of Indonesia’s telco landscape, the evolution from telecommunications to telecommerce.
Telkom x Blanja.com
52.6% government owned, Telkom has the largest telecommunications network and is Indonesia’s largest service provider. Telkomsel, its subsidiary for mobile providers, has control of 46% total market share with more than 152 million users.
Since 2009, the company has ventured into the local ecommerce space by investing $5 million in an ecommerce company called Plasa.com. Plasa.com later became a project under MetraPlasa and was merged with Blanja.com, a joint venture between Telkom and eBay that launched in 2012.
Following the partnership, eBay injected $9.2 million into the marketplace, shifting ownership 49% by eBay and 51% for Telkom. Additionally, the partnership meant that merchants could easily market their products quicker on a global scale and for a cheaper price through eBay’s network.
As a sign of their commitment to stake their place in the industry, the company announced that Telkom, through its subsidiary TelkomMetra, and eBay would inject a new fund of $25 million to the marketplace in April earlier this year. Telkom would lead the funding by contributing 60% of the total round, approximately $15 million. The marketplace has recorded $35 million of transaction value in 2015 and currently ranked #198 in terms of web traffic in Indonesia by SimilarWeb data. Blanja is led by Aulia Marinto as its CEO.
However, even with the aforementioned resources at their disposal, the C2C site’s growth currently is still left behind its competitors like Tokopedia and Lazada. It may be attributed to restrictions put on its vendors such as the requirement of government permits to register on the site and forbidding the sale of second-hand goods.
Indosat Ooredoo x Cipika Store
The second biggest telecommunications company in the country has 69.8 million subscribers in its database. Initially a state-owned company, Indosat was acquired by the Qatar-based telecommunication company, Ooredoo Group, in 2009 and changed its name to Indosat Ooredo in 2015. Now, the government only holds 14.29% in the company. Earlier this year, the company announced its partnership with IBM to develop and deliver solutions on IBM’s platform, Bluemix.
Through its subsidiary company IM2, Indosat has launched a marketplace called TokoOn in 2012. In 2014, the marketplace pivoted to an ecommerce platform with a new name, Cipika Store, to sell Indonesian culinary and local handicrafts. Since then, the company has added new categories in its marketplace; lifestyle, gadget, home & entertainment, books and play. It has also allowed people to buy wholesale products at cheaper prices.
The site is ranked #4166 by SimilarWeb, performing way below the two other “telecommerce” companies. Although not selling the exact same products, the site faces competition from Qlapa and KedaiKuka in its Indonesian local products category and the likes of Lazada and Tokopedia in other categories.
XL Axiata x Elevenia
XL is the first private company in Indonesia that provides mobile telephone services, which was originally established as a trading and general services company. In 2009, the company was bought by Axiata Group and since then changed its name and logo to XL Axiata. As of March 2016, it has 42.5 million users, down 19% from 52.1 million users in March 2015.
In 2013, Elevenia launched as a joint venture between XL Axiata and SK Planet, Korean telecommunications operator. The initial investment made was $18.3 million, with both companies sharing fifty-fifty ownership. Lead by James Lee as the CEO, total investment put into the marketplace to date is $110 million, placing it as one of the top three most funded startups in Indonesia.
Since the beginning of its existence almost three years ago, Elevenia has sought to differentiate itself from the other marketplaces with its seller and buyer reward points. Sellers can use the collected points to boost their sales with things like ad placements and providing buyers with discounts. Elevenia is also providing their sellers with education facilities in their ‘Seller Zone’.
Compared to the other “telecommerce” companies mentioned above, Elevenia has the best performance so far, recorded $95 million (1.3 trillion IDR) of revenue in 2015. The site is ranked #21 in the country and they are projecting five times sales growth potential for 2016.
Key Stats of Telecommerce Companies in Indonesia
Building the ecosystem
Moving into ecommerce is only one way for telcos to make the most out of the resources at their fingertips. Evidently, having direct access to users is not enough to ensure their success in online retail. Telcos need to leverage more of its networks to ensure the success of their ecommerce venture. The recent news about the participation of MDI, Telkom’s venture capital arm, in the latest bridge funding of ecommerce-enabler aCommerce is great news for building a sustainable ecommerce ecosystem.
Many changes still need to be implemented to successfully shift to ‘telecommerce’. Considering the niche market that Cipika Store is targeting, it will be hard to scale up without spending a lot of money to acquire more users. Restrictions made because of its associations with the government are most likely stifling Blanja’s growth despite Telkom having more than three times subscribers of XL Axiata. XL Axiata boasts the most successful ecommerce portfolio out of the three, probably credited to the unique valuables the marketplace offers to its sellers and customers.
Ecommerce in Indonesia is only at the beginning of what looks like a long marathon race, and despite falling short behind big players like Lazada and Tokopedia, there are still many laps for these companies to improve their stance before reaching the finish line.