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
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1
2 Competitive Environment & Strategies
Contents
Indonesian eCommerce Landscape
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1
Five key elements of eCommerce
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LogisticsPayment
ConnectivityTechnology
Demand
Technology Connectivity
PaymentLogistics
Five key elements of eCommerce
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Demand
Demand
Very strong demand potential
Median age: 28.5 years old
Rising middle class
Urban pop.: 51% of total
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250 Million pop.
Demand
Very strong demand potential
250 Million pop.
Rising middle class
Urban pop.: 51% of total
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Median age: 28.5 years old
Demand
Very strong demand potential
Median age: 28.5 years old
Source: CIA World FactbookGlobal Entrepreneurship Program Indonesia 9
Demand
Very strong demand potential
Median age: 28.5 years old
Source: redwing-asia.comGlobal Entrepreneurship Program Indonesia 10
Demand
Very strong demand potential
250 Million pop.
Median age: 28.5 years old
Urban pop.: 51% of total
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Rising middle class
Demand
Very strong demand potential
Rising Middle Class
Source: BCGGlobal Entrepreneurship Program Indonesia 12
Demand
Very strong demand potential
250 Million pop.
Median age: 28.5 years old
Rising middle class
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Urban pop.: 51% of total
Demand
Technology
PaymentLogistics
Five key elements of eCommerce
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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
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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
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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
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Demand
Technology
Connectivity
Payment
Five key elements of eCommerce
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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
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Indonesia 59 2.94 2.53 2.54 2.97 2.85 3.12 3.61
Demand
Technology
Connectivity
Logistics
Five key elements of eCommerce
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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
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Demand
Connectivity
PaymentLogistics
Five key elements of eCommerce
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Technology
Technology
Each evolution stage lowers the barrier forindividuals to have great eCommerce site
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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.
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1 Indonesian eCommerce Landscape
Contents
Competitive Environment & Strategies
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eCommerce Types
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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
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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
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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
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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
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Typical Business Flow of B2C eCommerce
Marketing FulfillmentSourcing Content
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IT, Finance, HR, BI
Customer Service
Sourcing
Sourcing methods & implications (typical)
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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
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Sourcing
The importance of Terms of Payment (Amazon’s):
thesuppliers are financing Amazon’s business!
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Content
Strategic placement for premiumPopular / high margins / loss leaders (highly discounted)
landing page
Source: lazada.co.id
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Content
Pictures, descriptions, reviews – crucial, esp. fornon-standardized products
Source: zalora.co.id
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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
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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
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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
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Fung Fuk LestarioExecutive Director,
GEPI fung.lestario@gepindon
esia.org Twitter & FB:
GEPIndonesiawww.gepindonesia.org
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