Posts

When ecommerce first boomed in Indonesia around 2014, Albert Lucius saw many companies racing to serve the top 20% of the urban population while ignoring the rest.

“What about the people unfamiliar with the internet, let alone shopping online? And what about those living in rural areas?” Lucius mused. “Ecommerce players at that time were doing almost nothing to educate this demographic.”

Seeing this gap, Lucius teamed up with a fellow schoolmate from the University of Berkeley’s Haas School of Business, Agung Nugroho, to build Kudo – the online to offline (O2O) technology platform that connects online merchants with offline customers and was acquired by Grab in April. TechCrunch estimated the deal is worth $80 – $100 million but no confirmation has been made by either party.

Lucius acts as CEO, while Nugroho takes care of operations as COO and through its platform, Kudo wants to ensure all Indonesians are included in the online revolution and benefit from an economy that boasts a $157 billion potential.

Product-market fit: Tales of trial and error

Currently, the company is using individuals, mom and pop shops, and small store owners as Kudo agents to act as medium between online merchants and hard to reach customers.

Through these agents and a tech platform, the company enables the unbanked or those with low financial literacy to perform digital transactions. How?

  • The agent invests capital into their Kudo agent account, which can be as low as IDR 10,000 or $0.75
  • The customer views a list of products on the Kudo platform on mobile or a tablet provided by the agent
  • The customer chooses what they want to buy and pays the agent in cash
  • The agent makes a commission based on the product category sold (3%-20%) – the more they sell, the more they make

Although currently a well-functioning system, this was not how things were always done at Kudo. The company pivoted two times before finding a model that complemented Indonesians buying behavior.

kudo micro-entrepreneur indonesia

Kudo platform, facilitated through its agent, is bridging the gap between offline customers and online merchants.

 

Kudo is an acronym for ‘kios untuk dagang online’ or ‘kiosk for online trading’, and funnily enough, the business’s first model was literally a kiosk.

The company installed machines loaded with the Kudo platform in office complexes, shopping centers and convenience stores in Indonesian suburbs, as well as second-tier malls in the city, in hopes people would use it to place orders for various things such as food, tickets, and other goods.

They soon discovered that majority of citizens are wary about using unknown machines, afraid to break it seeing as they didn’t know how to operate it.

Kudo later redefined its business by creating a tablet-friendly platform and employed the help of sales promotion girls (SPG) to educate the people about its buying process. The second attempt worked well but hiring so much (wo)man power was not sustainable nor scalable.

The two broken models taught the founders a valuable lesson.

“Most Indonesians still need the element of trust in order for commerce to work. They need the personal and social touch in order to purchase something.”

Kudo’s agents of change

Through its present-day network of more than 500,000 agents across 500 cities and rural areas in Indonesia, offline customers once disconnected from the digital world now have access to products from Kudo partners like Lazada, BukaLapak, Berrybenka and Unilever to name a few.

The platform not only offers commerce but also facilitates bill-payments, phone credit top up, and purchase of financial products such as insurance.

The most popular transactions are top-ups that make up 30% of total transactions, followed by purchase of goods, especially cheap electronics, fashion, and bill payments.

kudo micro-entrepreneur indonesia

Kudo’s team explaining how the platform works to potential agent.

 

There are millions of customers that have used Kudo in Indonesia and the company credits its Kudo agents for partially solving three main roadblocks commonly encountered in emerging ecommerce markets like Indonesia – trust, payment, and logistics.

“Our agents are all familiar faces in the neighborhood, so even if initially the community does not understand nor trust the internet, they’re more willing to try out a new technology if it comes from someone they know,” explain Lucius.

From a logistics perspective, agents act as the drop-ship points for ecommerce players who can either have pick ups from their store or deliver straight to the customer. This highly reduces the chance of failed deliveries.

Kudo agents also decrease shipping costs for retailers when they order customer purchases in bulk.

“We know it’s not the most sophisticated system in the world and it’s not perfect, but it works for our market as it utilizes Kudo’s network of agents to solve a real logistics problem in Indonesia,” remarks Lucius.

Grooming a generation of micro-entrepreneurs

By taking a traditional route and using real people to educate and share new technology within communities, Kudo is not only speeding up the race to e-retail adoption but empowering individuals to dabble in “micro-entrepreneurship”.

“People only need a smartphone to become an agent and it doesn’t need to be an expensive one because our app works on every Android phone,” said Lucius.

There are two kinds of agents in Kudo’s network right now; store-owner agents and non-store agents, with the share of 40% store owners and 60% non-store agents or individuals. On average, the store owners agents could doubled their normal income through Kudo.

Building an inclusive economy with a giant

The company’s principle is and has always been to improve the lives of people.

Under its current model, Kudo aims to slowly convert more people to try online shopping by maturing the country’s payments literacy and understanding of ecommerce.

Its acquisition by Grab takes the company’s mission a step further as the Kudo platform will be integrated with Grab’s mobile payments platform, GrabPay and both companies are invested in a collaborative R&D lab in Kudo’s office called Kudoplex.

Kudo’s agents are also offering services like GrabPay credit top-ups and recruiting drivers for Grab to interconnect the two already-large networks into one expansive and all-encompassing payments infrastructure.

“We are very excited to work with Grab as we share the same mission to empower the unbanked to benefit from the rapid growth of digital economy,” closed Lucius. “There are a lot of good things to come.”

 

 

kudo micro-entrepreneur indonesia

Left to right: CEO Kudo Albert Lucius, CEO Grab Anthony Tan, and COO Kudo Agung Nugroho

Here’s what you should know today.

1. Indonesia’s payments startup Kioson raises funding from gadget distributor

Kioson, a direct competitor of Grab owned Kudo has raised a round of investment from MKNT, an Indonesian stock exchange listed firm that distributes gadgets, prepaid phone vouchers and SIM cards.

MKNT now owns 4.94% of Kiosan.

The online-to-offline model established by startups like Kioson and Kudo in Indonesia is seeing some traction. They both work in a similar way. Kioson equip local store owners with an app through which they can order and resell phone credit or physical goods from online stores. The store owners become ‘agents’ that bridge the online-offline gap, and make money on commission.

Kioson’s app offers a wide range of services. It integrates with online shopping portals like Tokopedia, Elevenia, and Berrybenka, lets customers settle bills for electricity and water, order TV subscriptions, apply for loans, or make money transfers.

Through its partnership with MKNT, Kioson will boost its inventory of telecommunication products and services.

Read the rest of the story here.

 

2.  Delivery Hero seeks $4.9 billion valuation as IPO price set

The company and current owners will sell as much as 996 million euros in stock for 22 euros to 25.50 euros apiece, according to a statement. Rocket Internet owns about 35% of the company.

Shares of Rocket Internet have been rebounding in recent months on expectations of a successful IPO of Delivery Hero, which seeks more funds to compete in the cut-throat restaurant-meal delivery market.

Delivery Hero expects trading to begin on the Frankfurt stock exchange on June 30. The offering is for about 39 million shares, including an over-allotment, and the company said it will have about 172 million shares outstanding after the IPO.

Delivery Hero operates a variety of brands including Lieferheld, Foodora and Foodpanda, through which it either brokers deliveries from restaurants or brings the food to customers’ homes itself, by bicycle.

The food delivery sector is notorious for stiff competition, with rivals spending big on marketing to dominate a country because usually, the winner takes all.

Read the rest of the story here.

 

3. Recommended Reading: The direct to consumer landscape

So what’s the direct to consumer model. Well it’s an innovation in supply chain which typically involves skipping out the middle man, so stock goes from factory to consumer. Traditional retailers being skipped out, which is just music to their ears. Not. This theoretically results in better prices for consumers and higher margins for startups.

The world is changing and the big boys are still waiting for the bus while everyone’s ordering a diverse and inclusive Uber. In short, they need to stay relevant and buying kids is a safer strategy.

Read the rest of the story here.

 

 

Here’s what you should know today.

1. Grab opens R&D center in Indonesia

Grab announced the opening of its new R&D centre in South Jakarta, in a media conference. The sixth Grab R&D center will employ up to 200 engineers by end of 2017, and is situated on a 4,500 square meter land.

According to Kudo CEO and Co-Founder Albert Lucius, the center will focus on researching and developing technology to be used by Grab drivers and Kudo agents, as well as data on consumer behavior and pattern.

For the next step, Grab announced that it aimed to build five million new micro-entrepreneurs in Indonesia by 2018, and to increase the number of its local engineering talents by the hundreds by end of year. It also announced that it will be looking for more Indonesia startups to invest in.

Read the rest of the story here.

 

2.Walmart reports 63% rise in online sales

Here’s what you should know today.

1. Grab confirms it will acquire Kudo to boost digital payments

The ride-hailing startup confirmed in a statement today it has signed an agreement to buy Kudo for an undisclosed sum.

Behind the acquisition is Grab’s interest in expanding its digital payments ecosystem, GrabPay.

Through Kudo, it taps into an already existing payments platform and online-to-offline channel. The startup’s most obvious asset is approximately 40,0000 agents who use the app to sell things like prepaid phone credit, tickets, household items, and fashion.

Read the rest of the story here

 

2. Indonesia’s Bhinneka shares updates on IPO goals

The Indonesian ecommerce platform for electronic goods and gadgets has the ambition to strengthen its offline store network.

The company plans to open another five to 10 offline stores, though they did not give further details in which city they are going to locate in

Bhinneka has implemented several business models, including B2C, B2B, and B2G.

This year, Bhinneka also aims to increase revenue from its B2B line for up to 40%. The company is also still on track for an IPO.

Read the rest of the story here.

 

3. Amazon is trying to push past Walmart by going directly to big brands

Amazon is working to convince major brands they’d be better off selling their goods directly to shoppers.The news service obtained an invitation Amazon sent to packaged goods companies for a meeting to discuss the initiative, which would require them to package their products in new ways.

The grocery business has been one of the most resistant categories in the shift to online spending. Not only do most shoppers prefer to pick their own produce, but fresh food is a notoriously low-margin business. It requires a sophisticated supply chain and quick sales to prevent items from spoiling.

Read the rest of the story here.

 

4. Recommended Reading: What does Amazon’s acquisition of Zouq mean for the future of retail?

Retailers are already reporting lower revenues and rents in malls in Dubai and Abu Dhabi are stagnant, according to JLL consultants, and likely to decline in secondary locations.

Retailers are battling a higher US dollar, which erodes any price advantage, particularly for tourists, and a weaker economy

S&P analyst Sapna Jagtiani told Arabian Business in February that “footfalls in the malls are stable”. However, shoppers are buying less. The deep pockets, data and experience of Amazon in the Middle East will speed up the region’s ecommerce boom.

Read the rest of the story here.

Here’s what you should know today.

1. Grab is in the process of buying Indonesian payment firm Kudo

Uber’s Southeast Asia rival Grab is in the process of buying up Indonesia-based online payment startup Kudo in its first major acquisition.

Payments are a central focus to Grab’s push, as it is a way to differentiate itself from Uber and local rival Go-Jek, which raised $550 million last year, but also because it can help win business from millions of unbanked citizens and provide a solution in the market.

Not only is Kudo focused on Indonesia, but it directly enables those without a credit card, bank account or event internet access to buy online. Initially it used point-of-sale kiosks located in public areas, but it later broadened its focus to support an agent model.

Read the rest of the story here.

 

2. Vietnam’s Tiki looks to raise $60m in series D funding

Vietnamese ecommerce major Tiki is looking to raise a series D round of $50-60 million which is expected to close this year. Founded in 2010 as a book selling platform, Tiki did not comment when asked on the proposed Series D funding.

Part of the fundraising  is expected to be used to pare its loss. The company has recorded VD255 billion in losses since VNG Corporation’s investment until the end of last fiscal.

Read the rest of the story here.

 

3. Recommended Reading: With cloud, Alibaba follows the ‘build it and they will come’ approach

Alibaba quietly announced that Alibaba Cloud service has already doubled the capacity of its Hong Kong based data center in order to meet fast increasing demand in the Asia-Pacific region. The company said that the expansion in Hong Kong is part of its master plan to eventually expand into providing cloud services the world over.

 The worldwide cloud services market was projected to grow 16.5% in 2016 to total $204 billion, up from $175 billion in 2015. Alibaba Cloud has operations in 14 global economic centers including mainland China, Singapore and the U.S, in addition to Hong Kong.

 

Read the rest of the story here.

 

Wind down from a busy day with some ecommerce highlights of the day.

 

1. Indonesia’s Kudo raises an eight digit funding round from Emtek

Kudo CEO Albert Lucius said, the funds will be used to establish a “network presence” throughout suburban and rural areas in Indonesia. Read the full story here.

 

2. 1 in 10 of online shoppers get cold feet and abandon their basket

The report also found that price savvy younger consumers (18-to-24 year-olds) are the most difficult age group to convert from online browsers to buyers. Read the full story here.

 

3.  Thai Banks, NBTC agree on 5 step m-banking security plan

The participants have agreed on a five-step plan to tighten KYC rules to increase confidence in eBanking and mobile banking in the run up to the launch of Thailand’s Promptpay national mobile payments system. Read the full story here.

 

4. Coach closes handbag shop on Alibaba’s Tmall

A Coach spokeswoman declined to explain the reasons behind the decision, beyond saying it wanted to consolidate resources. Read the full story here.

 

5. Ant Financial Buys Startup EyeVerify For $70M, Eye Scan Payments in the Works For Alipay

EyeVerify checks identities through eye-vein patterns and creates a digital key equal to a 50-character complex password. Users hold their smartphone about 12 inches from their face so a picture can be taken, opening up apps or websites on their device. Read the full story here.