A 264 million population with high mobile penetration makes Indonesia one of the most attractive markets for e-commerce companies competing for a larger share in the region.
But a bigger market comes with bigger challenges.
A sprawling archipelago means logistical nightmare, and while Indonesia is ramping up infrastructure investment, the existing gaps makes delivery costly.
They underestimate just how big the country is
“One of the things that people misunderstand is, they visit Jakarta - and they think this is Indonesia. That’s nothing further from the truth.” says Jeffrey Yuwono, CEO & President of Sorabel, an online fashion retailer.
“They underestimate just how big the country is. So if you’re doing a business that requires any kind of roll-out, it is much more challenging than people would expect,” he says as a matter-of-fact.
Sorabel, formerly known as Sale Stock, is a homegrown e-commerce company that knows first-hand Indonesia’s logistical challenges; the retailer delivers to almost every city in the republic - covering some 7000 districts from Aceh, the northern tip of Java to Papua, the easternmost province of Indonesia.
How do they achieve that?
“You have to invest a lot to make it economically reliable. For us, it means developing a logistics infrastructure.”
“We have 60 distribution hubs throughout Indonesia,” says Yuwono, adding that the four-year-old company doubled in revenue since its Series B fundraising in mid-2017. It has, for the past year, focused on rebranding and expanding its reach and offerings.
We have 60 distribution hubs throughout Indonesia
“Let’s put it this way, if we cut our marketing spend, we would have been profitable already. Profitability is a choice.”
“But why limit growth when things are going well?. We want to keep investing in growth and get to a point where we are (to check) cash flow positive even if with a certain level of marketing spending,” he adds. “This is when we can be truly independent.”
An expansive distribution infrastructure must come second to none for Sorabel, which pride itself for having a service that no other e-commerce fashion retailers in Indonesia offers - a cash-on-delivery feature called Coba Dulu, Baru Bayar (‘try first pay later’).
A service that has been very well received, says Yuwono, where customers are allowed to try on the clothes for 15 minutes (once the courier arrives at the destination). They can choose to return the product or pay only for products that they like.
“The programme is in 380 cities all across in Indonesia - not just in Jakarta or the major cities.”
“That’s very important for us to mention because a lot of our customers don’t live in these big cities. So sometimes, when they hear about all these cool services, they assume that it doesn’t apply for them.”
“But Cuba Dulu, Baru bayar is something that we have expanded to about 80 percent of all Indonesians. We are very proud of that as we are the only ones with that kind of reach.”
According to Yuwono, one of the challenges facing e-commerce retailers are that clothes must be low priced to sell to mass market. However, clothes made for mass market prices in Indonesia tend to have poor quality.
This is why Sorabel is building out its private label offerings, that enables it to better manage product quality.
In Indonesia, being able to have good quality products is already very challenging. That’s why we build our private label
“In Indonesia, being able to have good quality products is already very challenging. That’s why we decided to build our private label.”
“We want to be able to create and sell clothes in the 8-10 dollar range that have very good, consistent quality,” says Yuwono.
In order to maintain quality, Sorabel partners with local factories; many of which caters only to Sorabel, he adds.
“We partner with manufacturers. We would put our own team inside these factories to make sure the operations are run well, and the quality (of products) is consistent and good.”
“We try not to have big fixed-assets. So partnerships with factories is the way to go,” says Yuwono, adding that Sorabel’s private label have proved to garner better retention rate that products acquired from wholesale buying.
NEXT LEVEL GROWTH: PERSONALISATION, CONTENT CURATION, INFLUENCER MARKETING
As Sorabel looks to penetrate deeper into its home market, Yuwono says the company will evolve to from an e-commerce retailer to become a fashion lifestyle destination.
Among its strategy, introducing social features such as original content and partnership with celebrities in a bid to improve customer affinity and loyalty.
“We want partnerships beyond ‘Hey, write about us on Instagram,’” says Yuwono.
“We want to take it deeper. For example, let’s create a collection together. A lot of influencers have distinctive fashion style. So who don’t build a collection with us? And we can revenue share, he says. Previous partnerships include Indonesian dangdut singer Siti Badriah and fashion designer Barli Asmara.
We have gone beyond geographic segmentation and into personalisation
The role of artificial intelligence, meanwhile, is increasingly important in forecasting trend, and personalisation - helping the e-retailer better predict and fulfil consumer demand.
“We have gone beyond geographic segmentation and into personalisation,” says Yuwono. “If you are the type of person to view a certain type of item, for example pleated skirts, then we would show you more pleated skirts.”
“The challenge with that is that it takes a few times before we learn about what you like, and we need to be much faster.”
“If you shop with us a lot, we can be pretty good at knowing what you like. So, the challenge for us is how do we get to that level like on the first time that you visit,” he says.