Indonesia’s e-commerce player Bukalapak is abandoning its physical goods marketplace to refocus on digital services like mobile credits, tax payments, and streaming vouchers. The pivot, announced on January 7, signals an attempt to stem financial losses and streamline operations amid intense competition from giants like Shopee and TikTok Shop. The phase-out of physical sales will conclude on February 9, with sellers barred from listing new items starting February 1.
Bukalapak’s retreat underscores its struggle to compete in an e-commerce market increasingly dominated by players with deeper pockets and more robust logistics capabilities. ByteDance’s TikTok Shop and Sea Group’s Shopee have captured significant market share, leaving Bukalapak grappling for relevance. Muhammad Farras Farhan, an analyst at Samuel Sekuritas, told Bloomberg the move seemed less of a strategy and more of a “cry for help.”
Slipping finances and a market in flux
The decision is also rooted in Bukalapak’s dire financial situation. Once a promising unicorn that raised USD 1.5 billion in its 2021 IPO—the largest in Indonesia’s history—the company has seen its stock plummet over 85% since its debut. In 2023, Bukalapak reported a net loss of IDR 1.4 trillion (USD 86 million), while its revenue fell 14.8% year-on-year in the third quarter of 2024. Physical goods sales contributed less than 3% of revenue, making the marketplace a high-cost, low-return operation.
While focusing on virtual goods may help Bukalapak reduce its burn rate, questions remain about whether it can stabilize operations. The company continues to face fierce competition and shifting investor sentiment.
Speculation about a potential acquisition by Temu, a subsidiary of China’s PDD Holdings, briefly boosted Bukalapak’s stock, but the company swiftly denied any such discussions. According to TechNode Global, Maybank Investment Bank had suggested Temu might acquire Bukalapak or Blibli to circumvent regulatory challenges, echoing ByteDance’s acquisition of Tokopedia in 2023.
A different path from Tokopedia
Bukalapak’s rejection of acquisition rumors suggests it is steering clear of the playbook used by Tokopedia. ByteDance’s majority stake acquisition of Tokopedia allowed TikTok to bypass regulatory hurdles in Indonesia and integrate social media with e-commerce through TikTok Shop. Similarly, analysts speculated that Temu, facing similar obstacles, might target Bukalapak as a gateway into the market. However, Bukalapak’s pivot to virtual goods reflects a more conservative strategy centered on cost-cutting and internal restructuring.
This approach underscores the company’s ongoing challenges in maintaining its status as a local champion. Bukalapak has long relied on its Mitra Bukalapak program to support Indonesia’s warungs (neighborhood shops), helping these micro-enterprises digitalize operations and access financial services. Despite these efforts, Bukalapak’s margins and competitiveness have been eroded by rivals with substantial logistics and pricing power.
Bukalapak’s decision to lean into virtual services aligns with its roots in financial inclusion. Through partnerships with banks like Standard Chartered and its investment in Allo Bank, Bukalapak aims to address Indonesia’s underbanked population, which represents a substantial portion of the country. Its Mitra network, spanning millions of warungs in non-tier-one cities, provides a unique channel for delivering digital financial services.
Yet, this shift does not guarantee recovery. While Bukalapak has positioned itself as a digital enabler for grassroots businesses, the profitability of this leaner model remains unproven. The company is expected to incur further losses in 2024, and with investor confidence already tenuous, Bukalapak’s ability to execute this transition effectively will be crucial.