Recap part 1 of this series.
Bukalapak and its ilk have fundamentally changed the nature of retail in Indonesia.
Wenny Lunado, a merchant in Jakarta who sells contact lenses, lists her products on Shopee, Tokopedia, and Bukalapak. For her, the basic features on all three platforms are similar, but she prefers to use Shopee because it offers more features for promotions than other platforms. Since she opened her Bukalapak account in 2018, she has only received ten orders.
Another merchant, Vyona Kusuma, told KrASIA that Bukalapak’s 3% commission on transactions is higher than Tokopedia’s 1% charge and that Tokopedia promotes her aromatherapy products and phone accessories more effectively.
Dityasa Fordante, a die-hard bicycle rider, almost always uses Bukalapak to buy accessories for his bike. The selection is wider than other marketplaces, where dropshippers are rampant.
Thanks to the development of a robust and competitive e-commerce sector, Indonesians are used to buying and selling goods on multiple platforms. That means through the years, Bukalapak has locked horns with other marketplaces, some of which entered the market from other countries.
In terms of monthly visitors, Shopee, Tokopedia, Lazada, and Bukalapak were the top four e-commerce players in Indonesia in the first quarter of 2020, according to an iPrice report. The various companies have come to define themselves as the go-to marketplaces for different segments of Indonesian society. Tokopedia and Shopee are particularly strong in urban areas. Bukalapak and Lazada, on the other hand, are popular in secondary cities and among consumers with less disposable income.
Achmad Zaky, one of Bukalapak’s co-founders and the company’s former CEO, said Bukalapak is pegged as a marketplace for people with less disposable income as well as individuals with specific hobbies and interests. He said many of the merchants that find success on Bukalapak can be viewed as grassroots entrepreneurs.
“Bukalapak is very attached to the communities and enthusiasts, which are mainly men’s stuff. We became the largest marketplace for agate transactions when the agate boom happened in Indonesia between 2014 and 2015. We’re also focused on the mass market in secondaries cities,” Zaky said.
The company has since moved beyond those confines, taking its services to other types of merchants and consumers. “Although e-commerce transactions grew rapidly, it’s only 5% of total retail sales in Indonesia. On the other hand, most retail sales are still dominated by the lower-middle-class to lower class, who live in suburbs and secondary cities. Therefore, we have laser-focused on these markets since 2018, by partnering with warungs (traditional stalls) and individual sellers, making them our agents through Mitra Bukalapak,” said Intan Wibisono, a spokeswoman for Bukalapak.
The move was designed to drive the online-to-offline sales, pushing warung customers to use online retail platforms by leveraging their existing spending habits and relationships with warungs. Warung operators can use the Mitra Bukalapak app to do things like remit money, pay bills, and purchase bus tickets for their customers. That means even if a consumer does not have access to high-speed internet, their neighborhood warung can still perform online purchases and other transactions on their behalf.
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Investment group CLSA estimates that Bukalapak’s total transactions—from Mitra and its e-commerce business—amounted to USD 3 billion in 2019.
In all, Mitra Bukalapak is meant to tap 6 million warungs that make up 65–70% of Indonesia’s retail sales, according to a 2019 report by CLSA titled “E-warung, Indonesia’s Digital Battleground.” The report also said that only 15% of Indonesia’s population has shopped online, and only 30% have completed online transactions, including credit card payments and e-wallet transfers. That means a significant portion of Indonesia’s 274 million people is yet to join the digital economy in the coming years.
Bukalapak now has 1.5 million warung partners and 3.5 million merchants through its Mitra program. That means the company is involved with the operations of 25% of Indonesia’s warungs. This represents a significant jump from 2019 when Bukalapak had 1 million warung partners and 1 million individual sellers on the platform.
Read this: Bukalapak’s reversal of fortunes (Part 1 of 3)
Mitra Bukalapak has been a hit for the company, giving it a stable source of revenue. The program counts for between 25% and 30% of its GMV as of May 2020 (although Bukalapak’s representatives declined to share recent overall GMV figures). Most of the transactions are for remittances, digital gold investments, phone voucher purchases, bill payments, as well as bus, train, and plane ticket purchases.
“From day one, we know it wasn’t easy to tap this market, because the payment options are limited and we need to help them enter the digital economy. Yet we stay focused on enlarging our Mitra Bukalapak channel, products, and features. We even made our products more focused during the pandemic. Now, we can generate more revenue, both in the marketplace and Mitra Bukalapak,” Rachmat Kaimuddin, CEO of Bukalapak said.
As many competitors are continuously offering discounts to acquire customers in urban hubs, Bukalapak realized it had to branch out and go where they could be the first to lay the new groundwork. That meant entering secondary cities and formulating new types of partnerships based on how consumers in these places spend their money—they had to redefine themselves to fit the customer, so to speak, before pulling new users into the digital economy.
In part 3 of this series, we will look at Bukalapak’s new direction after the departure of all three co-founders.