Of the many stories that start with an undervalued sports team ― pushed against the wall, odds heavily stacked against them ― but end with the team fighting their way out, and winning against the odds ― eCommerce in the Southeast Asian region can find its parallels.
Slowest to grow, when compared to the global industry, it is now the hottest hunting ground for eCommerce businesses. And in this digital shift, the region’s largest economy, Indonesia, is also its biggest contributor. Significantly, the country’s large consumer market adds 51 percent to the total gross merchandise value (GMV).
A big part of this growth story has been the rise of Tokopedia, Indonesia’s largest eCommerce platform. To this day, despite the presence of a global leader like Amazon, buyers in the region still prefer their homegrown e-tail giant. In this blog read about the intriguing story of Tokopedia ― how it started, and why it grew. In the process let’s analyze the eCommerce market in Indonesia: before and at present.
Table Of Contents
Why has eCommerce Grown in Indonesia?
Fundamentally eCommerce is underpinned by some key catalysts for growth. When Tokopedia started back in 2009, the Indonesian market presented some favorable growth drivers. These have been to current times, instrumental in driving the success of eCommerce in the region. While the market has been evolving ― these drivers continue to be the catalysts of online growth. Let’s see what these are:
Economic Growth:
Driven significantly by the maturing of online eCommerce, Indonesia’s economy has been on the rise. Classified as a newly industrialized economy, the country’s GDP continues to grow at 5% while inflation rates continue to decrease. This has come against the backdrop of effective and positive government policies. Moreover, the big infra-push over the years means that support pillars to growth ― logistics and other industries, have progressed for commerce to thrive.
Internet Affinity:
For a country that boasts of the second-largest TikTok user base after only the United States, Indonesia is a country with a very internet-driven population. This has significantly eased the penetration of eCommerce in the Indonesian market.
Moreover, this internet affinity is on the rise even further. More and more users are added to the internet ecosystem with every passing year.
A young and dynamic demographics:
Universally, eCommerce gains maximum traction with a user base aged between 18 and 45 years. For Indonesia, 16% of people are aged between 15 and 24 years, while a significant 43% are between 25 and 54. This makes up 59% of the world’s fourth most populous country. Hence the growing significance of eCommerce platforms in the country.
Interestingly, around 24% are aged between 0 and 14 years, so the future will have an even larger user base ― ready for eCommerce.
Growing seller base:
Taking into consideration the entire archipelago of Indonesia, beyond the major regions of Java, Sumatra, and Borneo ― the country has a seller ecosystem that is largely dominated by MSMEs. Online commerce has been able to aggregate these businesses on a common platform and gives them tools to expand their business further.
Moreover, there is also a growing seller base that is leveraging dropshipping via eCommerce platforms, giving additional opportunities to online eCommerce, in expanding and growing.
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All About Tokopedia
The soul of the business:
William Tanuwijaya, the founder, and a man of humble beginnings ― stayed rooted in his values when he envisioned his eCommerce business: Tokopedia. Growing up, he witnessed making a three-hour journey, just to get a book. For the next generation of Indonesians, he thought, things have to change. With his keen business sense and an eye for the change taking place in the country, he started an entrepreneurial journey with a solution that will catalyze the e-tail revolution in the country.
The time before Tokopedia:
Before Tokopedia rose as an eCommerce force in the region, one of the major challenges that people like Tanuwijaya faced buying essential products was because commerce in Indonesia was highly centralized. The main engines of economic growth for the country were regions like Java, while large portions of the largest archipelago in the world, i.e. Indonesia lacked development and infrastructure to match its big cities.
Moreover, in this period, the only online commerce that was happening came through social media channels. These were more a la Craigslist, which allowed just classified ads. This modus operandi for sellers lacked the holistic sales solution that eCommerce offers. For instance, there were no payment solutions or shipping integration with these. So online sales were restricted, not scalable, and inefficient.
How Tokopedia filled in the Market Gap
For Tanuwijaya, the early journey wasn’t smooth sailing. It took him some time to persuade investors to support his business idea. Coming from a humble background himself, and pitching an idea that hadn’t been executed by anyone at that time in the country, he found it difficult to get that initial traction with them. However, convinced by his vision to “democratize eCommerce” in the country, he didn’t give up. His resilience was finally rewarded with interest from PT Indonusa Dwitama ― who invested US$ 158 T. And this is how the Tokopedia juggernaut, made its first steps as Tanuwijaya’s visionary dream project. Discussed below, are some of the business practices taken up by the eCommerce company, that are key to its success in the Indonesian eCommerce market.
C2C business model
As discussed, MSMEs, resellers and tech-savvy drop shippers have been key to Tokopedia’s growth. Tanuwijaya understood the market and built a platform to work on the C2C business model. Just like C2C marketplaces like eBay spurred eCommerce in the US, Tokopedia did the same for Indonesia.
A C2C or consumer-to-consumer business model in eCommerce marketplaces refers to a platform where individual consumers can directly buy and sell goods or services from each other, without the involvement of a retailer or business.
In this model, the marketplace provider acts as a facilitator, connecting buyers and sellers and providing the necessary infrastructure for transactions to take place. Hence, sellers on such a platform may not be focused retailers, rather small-time businesses and individual sellers can also operate. Moreover, on a C2C platform, the same user can be a buyer or a seller.
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No inventory of their own
Some popular B2B2C e-marketplaces like Amazon or Lazada, also maintain their inventory and sell it on their platform. So they participate in the sales along with the third-party sellers.
Tokopedia did not adopt this model. Rather it just focused on its C2C business operations and did not offer any product range on its own. This meant that the company had clarity in the approach it wanted to adopt ― and it was to be the intermediary facilitator, giving its users the right tools to succeed.
Suggested Read: Business Strategies to Succeed against the Chicken-egg Paradox
Diverse Product Range
Tokopedia derives its name from “Toko” meaning shop and “pedia” from the word “encyclopedia”. And this was the vision for the company from the start ― to offer a comprehensive product range and complement their C2C and no inventory strategy. Hence, Tokopedia did not restrict itself to any specific product niche. Rather it focused on providing its buyers with a diverse range of products ― this includes fashion, electronics, home decoration, even downloadable digital files, and more. Hence Tokopedia finds a broader appeal in the market.
How has Tokopedia sustained its impact in the market
Focus on consumers
Tokopedia has had a razor-sharp focus on understanding its users. Over the years, it has implemented multiple business strategies aligned with its analysis of the target users. From its initial marketing campaign to encourage users to a more current signing of BTS as its brand ambassador, the C2C platform has consistently adapted to varying user needs.
Consistent Value Addition
The marketplace platform has consistently worked on diversifying its business to add more value to its core offering. From adding a digital products marketplace: Mitra Tokopedia to offering financial products and services targeted specifically to the Muslim population via Tokopedia Salam, and giving courses and boot camps through its Tokopedia academy ― the platform keeps broadening its eCommerce ecosystem with these value addition activities.
An emphasis on technology
To expand its ecosystem, the company has invested sustained efforts to enhance its platform capabilities. Apart from the services mentioned above, it has also introduced other services like Tokopedia Play and more. Each of these has leveraged technology to offer more on the platform. Moreover, the business has worked to offer a robust shopping experience, despite increased traffic. This scalability has been achieved through continuous optimization and enhancement.
Key Tokopedia platform features
A key thread that connects business strategy with execution is the features of the platform. For C2C business operations let’s analyze the features of the Tokopedia platform ― that have been pivotal to offering the eCommerce experience to its users, and hence drive the success it has achieved over the years.
Ease of Use
According to data released by Tokopedia, 76.4% of sellers on the platform find it easy to set up their business on the platform, and sell their products. For a C2C platform, ease of use is pivotal ― since users are not big businesses, a seamless UX experience, maximizing simplicity and minimizing effort are integral for them to conduct operations seamlessly.
Market Insights Data
Data is a pivotal driver for success in a digital ecosystem. Tokopedia provides key insights to its sellers to reach out to the buyers, understand their buying behavior, and analyze the performance of their products. These insights help sellers to data-drive their decisions.
Multiple payment methods
In Indonesia there was less acceptance for digital forms of payment to start with, but over time these picked up. However, credit card ownership remains lower when compared to some of the Western eCommerce markets like the US. According to the International Trade Administration, 72% of eCommerce payments take place via digital wallets. Hence, it has been important for Tokopedia to offer multiple payment methods like eWallets, card payments, bank transfers, cash on delivery, and more.
Community Building
C2C marketplaces thrive on building a community for its users. Especially for a social media driven audience like Indonesia, features like sharing on social media, chatting with users, and blogs by the business have fostered this sense of community among the users.
Engaging shopping experience
From advanced search capabilities to adding products to a wishlist, to seamless checkout, Tokopedia facilitates a convenient and engaging shopping experience for the platform’s buyers via a multitude of features.
These are some of the highlights of Tokopedia’s features that aid in C2C eCommerce operations. A purpose-driven ecosystem of these platform capabilities has catalyzed the success of the eCommerce platform.
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What is the Future for eCommerce in Indonesia after Tokopedia’s success
Tokopedia’s success from an idea to Democratize eCommerce by a visionary man from a humble background to an evaluation of US$ 279.85m is inspiring, still, it has been some time since 2009. A question one might ask: Are the Indonesian market dynamics the same as in those times? Let’s find out.
Relevance of B2B2C business model going forward:
Currently, a lot of eCommerce in the region is generated via Chinese imports. Presently, and in the future: sellers from China will want more robust and sustainable inroads into the region, here eCommerce platforms based on a B2B2C model present a viable business proposition.
Scope of further increasing user base for eCommerce platforms:
Interestingly, social commerce is still popular in the country. However, the same challenges of scalability and lack of a holistic payment infrastructure mean sellers will gain from a purpose-built eCommerce platform. Hence the opportunity for entrepreneurs to launch such platforms is there.
Growth of the manufacturing ecosystem in Indonesia:
With the evolving geopolitical scenario, bolstered by a rise in production costs in China, the local manufacturing ecosystem in countries like Indonesia is likely to receive a boost. Historically, as with China, such scenarios also mean that along with becoming a key player in the global manufacturing supply chain, local consumption within Indonesia will also receive a boost ― further leading to growth in the eCommerce sector.
Improvement and expansion of logistics in the country:
As logistics within the archipelago have undergone a fundamental shift and continue to get better, there is competition within the industry as new players come up to get a stronghold in the market. For eCommerce businesses, this means more connectivity, better capabilities, and lower costs for better prices.
Overall these indicators reveal favorable dynamics within the Indonesian eCommerce ecosystem, and they also indicate a market that is maturing for more business model variations within the eCommerce industry.
Wrapping up
Indonesia’s readiness for eCommerce was fueled by economic progress, internet affinity, and a young demographic. However, commerce within the country was fragmented with some regions better placed than others. William Tanuwijaya identified this cohesive ecosystem for online growth and laid the foundation for his vision The success of his vision i.e. Tokopedia is rooted in a C2C model and driven by a continuous effort to understand the market dynamics ― and responds accordingly with a sustained consumer focus, consistent value addition, and a focus towards technology progression. Its rise as a significant player has further catalyzed the growth of eCommerce in the region.
As the market evolves, so do opportunities for eCommerce startups. Moreover, with the eCommerce ecosystem spurring increased development of local manufacturing, improved logistics, and increased user participation ― signalling a maturing eCommerce landscape with the potential for entrepreneurs to thrive amidst evolving dynamics. Indonesia’s eCommerce market reflects resilience, adaptability, and a promising trajectory in the digital ecosystem.
FAQs
Q1. What is the secret to the success of Tokopedia in Indonesia?
Ans: Some of the key reasons for Tokopedia’s success in the Indonesian market are:
- Understanding the Market and responding with suitable business strategies.
- C2C business model with no inventory maintenance baggage.
- Continued focus on users, adapting and evolving with changing times.
- Leveraging technology solutions and tailored features for users.
- Ease of use, and intuitive mobile apps.
Q2. What is a C2C eCommerce platform?
Ans: C2C or consumer-to-consumer eCommerce platform is where consumers can buy and sell products. This is achieved when the eCommerce platform offers simplicity of use such that users can easily register and sell, encouraging non-businesses or smaller businesses to transact on the platform.
Q3. How is Tokopedia democratizing retail in Indonesia?
Ans: Before Tokopedia, retail was highly concentrated in a few cities/regions in the archipelago of Indonesia. Tokopedia with its all-inclusive eCommerce business strategies has been catalyzing the economic growth of the region. It has given MSMEs all over the country to serve the users on a common platform. The result is the ongoing democratizing of retail in the country.
Q4. How to build an eCommerce marketplace like Tokopedia?
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