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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. Grab wants to offer more consumer services

Grab wants to be the number one provider of online-to-offline (O2O) services, said founder Anthony Tan. O2O is a term to describe services that bridge the digital and offline worlds. Grab has been trialing food and parcel delivery in some of its markets. But so far, it hasn’t diversified as much as Go-Jek when it comes to types of services it offers.

“There are many O2O consumer services waiting to be disrupted,” Tan said but didn’t specify if Grab plans to launch any that are similar to Go-Jek’s.

However, he emphasized the importance of first- and last-mile services, which include deliveries and transportation, and mentioned the potential of retail, hospitality, and lifestyle sectors. Tan said that Grab wants to “win payments in Southeast Asia.” He pointed to the example of PayPal and how it leveraged eBay’s massive reach to cement its position as a payment platform, saying that Grab’s installed base can be the groundwork for its payments services.

While payments and commerce is an important new frontier for Grab, its transportation features are still evolving.

In Jakarta, Grab plans to test GrabNow, a feature which lets riders book a GrabBike rider they just flagged down, without having to wait for the app to run through its match-making algorithm.

Read the rest of the story here.

 

2. LINE starts to attract luxury brands in Japan

There are signs that the luxury industry is taking more interest in the platform in 2017, as several major fashion labels have flocked to the app this year. LVMH brands Louis Vuitton, Fendi, and Dior launched official LINE accounts at the beginning of the year, and were joined by Prada in February.

As these new brands launch on the platform, they’re forcing early adopters including Coach, Michael Kors, and Burberry to step up their game to keep up with luxury marketing innovations. In the months since its January launch, Louis Vuitton has surged ahead of competitors, generating 237% more interactions per post in April than the Index Luxury brand average, despite a lower follower base.

Fendi is also investing in LINE with a strategy that understands the role of LINE as a closed one-to-one communication tool, where users expect brands to behave more like their friends and less like advertisers.

The brand used chatbots to reveal exclusive celebrity content when users message a designated keyword, and utilized gamification for a virtual slot machine that offered the chance to win an original Fendi USB flash memory stick. The collaborations with luxury brands may be a good move for Line,

Read the rest of the story here

 

3. Amazon’s pivot to lower tier consumers

On Tuesday, Amazon announced that it will slash the price of membership to its Prime program by almost 50 percent for low-income shoppers on federal welfare.

It’s a direct challenge to Walmart, the reigning king of American retail, which relies heavily on low-income shoppers and receives nearly one of every five dollars of its revenue through SNAP, or food stamps, each year.

Prime, which includes fast premium shipping and access to movies, games, and exclusive Amazon television shows, typically costs $99 upfront or $10.99 a month. Households that can show they’re receiving public assistance, such as Temporary Assistance for Needy Families (TANF) or the Supplemental Nutrition Assistance Program (SNAP), will be able to subscribe to Amazon Prime for just $5.99 a month.

With today’s announcement, Amazon is trying to become Walmart faster than Walmart can become Amazon.

Read the rest of the story here.

With pure play online brands around the world adopting offline channels, which retail strategy is really the way to go? Is an online-to-offline (O2O) approach feasible for your brand? David Jou, founder & CEO of Pomelo, one of Southeast Asia’s best performing ecommerce fashion brands, shares his views on today’s definition of a “retail experience” and what it means for his company.


A few months back, I had a very memorable meeting with a prominent Indian investor. He was the number one ranked student among all Institutes of Technology in India back in his days as a student, sold his first company for a hefty sum to Amazon and now heads up one the leading venture capital firms in India. His perspective is particularly interesting because India over the last decade has experienced one of the steepest adoption curves for ecommerce globally.

I was given a bit of time to pick his brain at his office.

“Ask him your hardest questions, because he’s an absolute genius.”

I sat down, launched into a quick introduction of myself and Pomelo and got him up to speed about my margins, growth, the brand, our competitive advantage, the team, our factory etc. etc. I looked over and asked,

“Does that all sound good?”

“Yes, that all makes sense.”

“So, you think this all makes sense?”

“Yes I think you’re absolutely spot on and you’ve figured something out.”

So there it was, we were on the same page and the discussion could continue.

With the groundwork in place, I decided to ask him a question Pomelo had been considering over the past few months.

“Should Pomelo spend its capital on creating an offline retail footprint or on marketing its mobile app?”

I had asked this particular question to many before and heard variations of “forget offline, you’re online! Why would you want to deal with a non-scalable, hassle-filled business model that’s crowded and competitive. You’re exactly where you want to be. Double down!”

Without hesitation and much gusto he answered,

“Go offline.”

Astonished, I asked, “why?”

“Even 5–10 years from now, best case scenario, only 10–15% of retail spending in your markets will be online. 85% of spending will still be offline.”

So there it is. For the coming years, offline will remain an important part of the 360 retail experience. Think of Warby Parker, Amazon, Bonobos in the US who have all opened offline stores. Now how can online players really take advantage of clicks to bricks?

1. Provide concrete incentives to visit your offline location

Spend time with your team to figure out the ‘why’ behind your offline project. Why would your target customer come to this particular location and what benefits do they get from coming to it? Opening a flagship store for the sake of it isn’t a good enough reason, answer these questions first:

  • Is it to showcase your physical product because it shows better in the real world?
  • Is it to alleviate a particular barrier to purchase that exists in your category?
  • Is it to provide a space where you can build a community?

If your “why” is to drive more sales or a generic “to increase awareness”, it will be hard to determine if you’re set up for success or failure. Imagine the location you’re contemplating is really a physical billboard to drive customer acquisition and that the metrics you track should be on that basis.

Amazon recently picked up a lot of attention following the launch of Amazon Go, an offline grocery store that boasts zero queues and no check-out. The major realization was that Amazon could reinvent the grocery store experience by getting rid of lines and cash and draw in more users online through a highly attractive offline experience.

“Grab & Go” at the Amazon Go store.

2. Scrap traditional retail conventions

The key to success is to provide a differentiated experience and scrap traditional retail conventions. Remember that you’re not in the business of building more efficient candles, you’re after the next light bulb. Figure out how to disrupt the traditional store format that reigns in your category.

One great example is New York based workwear website MM.LaFleur that has become famous through a product it calls the “Bento Box”, a mail-ordered shipment that comes with four to six ready-to-try wardrobe staples.

The company focuses on professional women’s wear for the office and have been extremely successful, with revenue growing 600% in 2015 and a projected $30 million in 2016.

David-Jou-Pomelo

The “Bento Box”

The brand’s approach to its offline experience directly mirrors the Bento Box philosophy. Stylists curate a selection of products based on a survey customers fill-out when they book their appointment online. A lot of players in traditional retail would say the cost of having a personal stylist on hand for an unpredictable amount of customers is highly inefficient and consequently won’t scale.

MM.LaFleur’s success would suggest otherwise; they’re launching a showroom in Washington DC this March, in addition to a showroom in New York and pop-ups scattered the country.

David-Jou-Pomelo

MM.LaFleur New York City location

3. Have a built-in digital marketing plan

One thing I would say is if you build it, they will not so simply flock. If your brand is considering an offline location, you have most likely built up a loyal following on social media, your email database and an efficient conversion funnel online. The trick here is to take the same approach with offline as you did online, and fully utilize it for your brick & mortar venture.

One of the best examples I’ve come across was by fashion label Marc Jacobs at the Marc Jacobs Daisy Pop-up Tweet Shop in 2014.  The three day pop-up store in lower Manhattan used tweets and Facebook posts as viable payment methods, where customers walked out with products after tweeting or posting a picture about the pop-up event.

The pop-up was a huge success and the brand received a ton of PR via social engagement to reinforce the fun playful character of the brand all at the same time. This concept was later replicated at a few additional Marc Jacobs locations, including London.

Marc Jacobs Pop-Up Tweet Shop window

David-Jou-Pomelo

Signage showing how the tweet shop works

From eIQ:

What’s next for Pomelo?

Multiple mall staples in the US, such as BCBG and JC Penny are struggling to keep stores open. Long-standing department stores Macy’s had to shut down multiple stores, while scrambling to launch ecommerce strategies to stay afloat. Ironically, purely digital brands are beginning to adopt offline strategies, most notably eyewear startup Warby Parker and Rent The Runway. If the death of pure play retail is indeed true, then what is stopping Pomelo from pursuing an offline store strategy to become a global fast fashion powerhouse?

BY DAVID JOU, FOUNDER & CEO OF POMELO

Read more about David Jou in eIQ’s SPARK 40