Indonesia’s multi-billion greenback e-commerce enterprise

Indonesia is known for its millions of traditional family-owned street stalls, or “warungs”. But behind the scenes of many of them is a billion dollar business.

And as it helps small businesses modernize, retail startup Bukalapak is hoping to revitalize an iconic segment of the country’s economy.

“Every 50 or 100 houses there will be one of those people who will open a business in their house and sell basic groceries: water, soap, coffee or whatever. They were like that from the start and when the economy grew, they stayed Basically back, “Bukalapak CEO Rachmat Kaimuddin told CNBC Make It.

A neighborhood shop

Bukalapak is an Indonesian e-commerce marketplace designed to help the country’s millions of mom and pop kiosks get online.

Today the company has millions of customers in the vast archipelago. When it was founded by Akhmad Zaky in 2010, it was simply a way to help its neighbors.

Bukalapak’s co-founders Achmad Zaky, Nugroho Herucahyono and Fajrin Rasyid.

Bukalapak

“My predecessor Zaky returned to his hometown one day,” said Kaimuddin. “He’s seen all of these small businesses, his neighbors, and he was surprised to find that these guys have looked the same for decades.”

“Now I know about technology, I’ve learned about the internet and everything, and wonder how I can … help people improve, do better,” he said.

The capital he used to start this company is just the registration fee to register the website … maybe about $ 5.

Rachmat Kaimuddin

CEO, Bukalapak

Zaky, who was then 23 years old, teamed up with friends Fajrin Rasyid and Nugroho Herucahyono of the Bandung Institute of Technology to create a website that will help small businesses sell online.

“The capital he used to start this company is just the registration fee for registering the website. It’s equivalent to 80,000 rupiah, or about $ 5. That is Bukalapak’s seed capital,” Kaimuddin said.

Support for small sellers

It didn’t take long for Bukalapak to act as a third-party intermediary to facilitate purchases between consumers and retailers. However, the company’s real breakthrough came a few years later.

In 2017, Mitra launched Bukalapak to help these stores compete with modern day retailers by offering additional online services such as bill payments and phone top-ups.

Rachmat Kaimuddin, CEO of Bukalapak, meets with Bukalapak booth owners during the pandemic.

Bukalapak

Mitra Bukalapak also connects Warungs with consumer goods retailers, narrowing their supply chain, lowering the cost price of their goods and increasing profit margins for these micro-businesses.

In the same year, the company, which earns a commission on every transaction, hit a billion dollar valuation.

Lead through the pandemic

In January 2020, Zaky stepped down as CEO after a decade at the helm. Kaimuddin, a 41-year-old former banker, has been selected to succeed him. Zaky, who now heads an entrepreneurship foundation, will continue to serve in an advisory role with the company while co-founders Rasyid and Herucahyono have both left the company.

“Zaky (said) basically, look, I ran this company from scratch and it is probably time for me to extract myself. We probably need someone who can make this (company) more professional and bigger, and we see that you can help us. I thought, okay. Really? “said Kaimuddin.

Failure is not an option: we can’t just give up and say, okay, Covid, let’s take a break … People actually need us.

Rachmat Kaimuddin

CEO, Bukalapak

However, a pandemic broke out within the first 100 days of Kaimuddin. The lockdowns that followed have hit millions of warungs and small and medium-sized businesses hard. Bukalapak had to rise.

“We need to make sure that SMBs can continue to transact. The only way we could do it now or now was online. So our job is to create a much more efficient onboarding process,” he said. “Failure is not an option: we can’t just give up and say: Okay, Covid, let’s take a year off. People actually need us.”

E-commerce on the rise

E-commerce has now been one of the big winners from the pandemic. In 2020, digital consumers in Indonesia grew 37% as blocks allowed more people to try new services online. In the same year, online spending increased 11% to $ 44 billion. By 2025, this number is expected to almost triple to 124 billion US dollars.

Bukalapak has mastered this wave, seeing a 130% increase in transactions in 2020. The company now serves 13.5 million micro, small and medium-sized enterprises and 100 million customers.

This rapid introduction should help Kaimuddin with his main task – to achieve profitability.

“This is a big organization and we want to be there a long time,” he said. “Of course growth is good and we all want more growth, more transactions, more customers. But we have to see if we can create an organization that is self-sustaining in the future.”

Indonesia’s growth opportunity

That hasn’t stopped investors from getting into the deal.

In January 2021, Standard Chartered Bank became the youngest company to join a $ 200 million financing round to help drive the company’s expansion. The partnership will help build Bukalapak’s digital banking service, while the company will take over the tech giant’s Azure cloud computing platform in a separate contract with Microsoft.

Other investors include the Indonesian media group Emtek, the Alibaba-affiliated Ant Group and the Singapore sovereign wealth fund GIC, which is increasing the company’s estimated valuation to $ 2.5 billion to $ 3 billion.

People believe the demographic dividends will pay off: 270 million people, most of them now with smartphones.

Khailee Ng

managing partner, 500 startups

This makes the 11-year-old company one of Indonesia’s growing number of unicorns, which include e-commerce colleague Tokopedia, hail giant Gojek and travel website Traveloka. The fourth most populous country in the world has the most internet users in Southeast Asia, and analysts say it has potential for more growth.

“A lot of people believe the demographic dividends will pay off: 270 million people, most of them now with smartphones,” said Khailee Ng, managing partner of 500 startups and one of Bukalapak’s first investors. “What intrigues me a lot is how much of this investment is going into world-class, city-centered business models versus Indonesian business models.”

Preparing for the IPO

Still, some analysts are skeptical that Bukalapak’s hyperlocal roots allow it to expand beyond Indonesia. But Kaimuddin is confident that the company has plenty of room to grow.

“I’m not going to say we just want to stay in Indonesia,” he said. “But Indonesia today is a market big enough to keep us very busy and we still feel like we have a lot of homework to do. I don’t think we’ve scratched the surface if you’ve got over underserved markets in speaking Indonesia. “

Street vendors sell fresh produce in an Indonesian market.

Getty Images | photo3idea

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