GEPI - Startup Talk E-Commerce by Fun Fuk Lestario

eCommerce Basics

Oleh: Fung Fuk Lestario

Global Entrepreneurship Program Indonesia (GEPI)DBS Tower Lv. 9, Ciputra World I,Jl. Prof. Dr. Satrio Kav. 3-5, Jakarta, Indonesia

Definition

“Buying & selling goods & services electronically”

Global Entrepreneurship Program Indonesia 2

Contents

Indonesian eCommerce Landscape

Competitive Environment & Strategies


2

1

2 Competitive Environment & Strategies

Contents

Indonesian eCommerce Landscape


1

Five key elements of eCommerce


LogisticsPayment

ConnectivityTechnology

Demand

Technology Connectivity

PaymentLogistics



Demand

Demand

Very strong demand potential

Median age: 28.5 years old

Rising middle class

Urban pop.: 51% of total


250 Million pop.

Demand


250 Million pop.

Rising middle class




Demand



Source: CIA World FactbookGlobal Entrepreneurship Program Indonesia 9

Demand



Source: redwing-asia.comGlobal Entrepreneurship Program Indonesia 10

Demand


250 Million pop.




Rising middle class

Demand


Rising Middle Class

Source: BCGGlobal Entrepreneurship Program Indonesia 12

Demand


250 Million pop.


Rising middle class



Demand

Technology

PaymentLogistics



Connectivity

Connectivity

Low base of internet users but good growth

Internet users (as % of population)

90

80

70

60

50

8179 797878 787574

40

30

20

10

02008 2009 2010 2011 2012

United States Japan Singapore Malaysia China Indonesia

Source: ITU


7471 71 747169 69

66

5661

56 56

4238

2329

34

15121178

Connectivity

Solid growth in mobile-phone subscribers

Mobile phone subscribers (avg. phone ownership per person)

1,6 1,531,501,45

1,391,341,4

1,151,2 1,091,02

1,0 0,92

0,80,69

0,600,6

0,4

0,2

0,02008 2009 2010

Indonesia

2011

United States

2012

ChinaSingapore Malaysia Japan

Source: ITU


1,41

1,271,19

1,081,01 1,05

0,

0,970,92 0,89

0,980,950,87 0,86 88

0,810,73

0,640,56

0,48

Connectivity

Very good growth potential for smartphones,hence conducive for eCommerce

Source: redwing-asia.com


Demand

Technology

Connectivity

Payment



Logistics

Logistics

Indonesia overall logistics performance lagsbehind most countries in ASEAN

Country

Singapore Hong

Kong, China

FinlandGermany

Japan United

States China

Malaysia

Thailand

India

Philippines

Vietnam

LPI Rank

1

2

3

4

8

9

26

29

38

46

52

53

LPI Score

4.13

4.12

4.05

4.03

3.93

3.93

3.52

3.49

3.18

3.08

3.02

3

Customs

4.1

3.97

3.98

3.87

3.72

3.67

3.25

3.28

2.96

2.77

2.62

2.65

Infrastructure

4.15

4.12

4.12

4.26

4.11

4.14

3.61

3.43

3.08

2.87

2.8

2.68

International shipments

3.99

4.18

3.85

3.67

3.61

3.56

3.46

3.4

3.21

2.98

2.97

3.14

Logistics competence

4.07

4.08

4.14

4.09

3.97

3.96

3.47

3.45

2.98

3.14

3.14

2.68

Tracking & tracing

4.07

4.09

4.14

4.05

4.03

4.11

3.52

3.54

3.18

3.09

3.3

3.16

Timeliness

4.39

4.28

4.1

4.32

4.21

4.21

3.8

3.86

3.63

3.58

3.3

3.64

Sri Lanka

Cambodia

Myanmar

81

101

129

2.75

2.56

2.37

2.58

2.3

2.24

2.5

2.2

2.1

3

2.61

2.47

2.8

2.5

2.42

2.65

2.77

2.34

2.9

2.95

2.59

Source: World Bank


Indonesia 59 2.94 2.53 2.54 2.97 2.85 3.12 3.61

Demand

Technology

Connectivity

Logistics



Payment

Payment

Very low credit card penetration…

Number of active credit cards

Source: AKKIGlobal Entrepreneurship Program Indonesia 21

Payment

… However, Innovative online payment solutionsavailable

Banks

Prepaid mobile paymentPayment-gateways: Indomog, Veritrans, Doku, Finpay, etc


Demand

Connectivity

PaymentLogistics



Technology

Technology

Each evolution stage lowers the barrier forindividuals to have great eCommerce site


HighLow MediumAdaptability

Low - mediumHigh LowDevelopment

Control

LowHigh LowResource

Requirement

LowHigh MediumComplexity to

User

LowHigh Medium lowInitial Capital

Investment

Conclusions

Indonesia’s demographic conditions present great opportunity foreCommerce. Rapid growth is imminent as infrastructure developmentprogresses: communication, logistics, and payment solutions.

Appropriate and balanced governance, rules & regulations are alsorequired to ensure sustainable growth forward.


1 Indonesian eCommerce Landscape

Contents

Competitive Environment & Strategies


2

eCommerce Types


Daily Deals

B2BB2CC2C / Marketplace

Types & implications (typical scenarios)

Traffic, transaction &sales volume

Member size,revenueSales & profit margin

Low High Low

Sales margin, ads,volume discounts,

other seller incentives

Cut from transactionamount, ads,

premium services

Premium businesssubscription

services,ads


Monetization

CapitalRequirement

Basic successIndicators

B2C B2BC2C

Only handful players at stable state

Source: chinasocialgames.comGlobal Entrepreneurship Program Indonesia 29

In B2C, scale matters!

Source: Investopedia.com


In C2C, the network effect plays a big role

the effect that one user of a good or service has on the value of thatproduct to other people


Better be early than late!

Trust still the key barrier to eCommerceIndonesia

in

Some of the tactics to build trust to consumers

Cash-on-delivery

Buyer & seller ratings (C2C) Publicity on credible mediaStrategic partnership with credible brands


Typical Business Flow of B2C eCommerce

Marketing FulfillmentSourcing Content


IT, Finance, HR, BI

Customer Service

Sourcing

Sourcing methods & implications (typical)


Operational reliability

Cash Flow

Margins

OutrightPurchase

DropshipPurchase on

OrderConsignment

Sourcing

Gross margins (typical)

Note: data obtained from qualitative surveys on online & offline retailers; Actual margins depend much on volume, cooperation &negotiation Global Entrepreneurship Program Indonesia 35

40%20-70%Fashion

35%25-100%Home Decor

25%15-30%Books

25%5-40%Toys, kids, baby

20%10-30%Home (electrical)appliances

8%3-12%Computers

4%3-5%Mobile Phone

Range Average

Sourcing

The importance of Terms of Payment

(Walmart’s):Cash conversion cycle 10 days


Sourcing

The importance of Terms of Payment (Amazon’s):

thesuppliers are financing Amazon’s business!


Content

Strategic placement for premiumPopular / high margins / loss leaders (highly discounted)

landing page

Source: lazada.co.id


Content

Pictures, descriptions, reviews – crucial, esp. fornon-standardized products

Source: zalora.co.id


Marketing

Focus on digital marketing!Digital marketing provides highest return for eCommerce

Search Engine Optimization

Search Engine Marketing (AdWords, GDN, FB, etc) Guerilla campaigns (Twitter, other freebies, etc) BB BroadcastsThe only exception: TV (to build credibility, and only if you haveobtained traction & the budget


Fulfillment

Invest in system, carefully choose logistics partners

Overall: Investments in systems (technology, procedures, rules) areessential. Ideally the fulfillment system is fully integrated with others:order management, customer service, finance to ensure reliability.

Considerations:

In-bound: Only a very small fraction of suppliers have open integratedinventory system

Warehousing: Clear floor planning, SOP, system are mandatoryOut-bound: Partner selection is crucial (if outsourced). Quality

(timeliness, tracing & tracking, responsiveness) and commitmentwidely among the players.

varies


Topic List for Interactive Discussions

Social Media: prioritize & use top

NewsletterBlogs & communityLoss leaders & long-tail items Bundles & seasonal packages Merchant-sponsored promotions InstallmentsFree shipping

channels

Relaxed return

CODPrivate labels

policy rate


Fung Fuk LestarioExecutive Director,

GEPI fung.lestario@gepindon

esia.org Twitter & FB:

GEPIndonesiawww.gepindonesia.org

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