E-commerce in Indonesia has continued to grow at a robust, double digit rate. In 2015, the online retail sector grew by 31.1%, reaching a value of $1,094.8 million and by the year 2020 it is forecast to have a value of $5,417.2 million. With such great potential, it is no wonder that many international and local e-commerce players are striving for a piece of the pie. Golden Equator Capital (GEC), a Singaporean private equity and fund management firm announced its first investment from its Technology and Innovation Fund II, into Indonesian fashion e-commerce start-up Sale Stock. Jointly with Gobi Partners, GEC is leading a US$27 million Series B+ round into the start-up.
As one of the fastest growing e-commerce start-ups in Indonesia, Sale Stock provides imported, local, and in-house fashion labels for women. Its potential becomes much clearer when we examine the way Indonesians interact with the e-commerce options in the country. Here are 3 reasons why GEC believes that e-commerce in Indonesia is set to be a global powerhouse, and why its investment in Sale Stock is a step in the right direction.
1. Large Online Population
Research has shown that internet users in Indonesia have become accustomed to browsing products digitally, and nearly all of the country’s internet users aged 15 and older have researched goods or services digitally in mid-2016. The country’s youth demographic – about 50% of the population is under 30 – are more tech savvy than their predecessors, resulting in higher instances of online shopping. However, most of these users are centred in the country’s main cities (Jakarta, Surabaya, etc.) while residents in tier 2 and tier 3 cities are often neglected due to logistics and/or price challenges.
Sale Stock brings value to this developing market by providing a tech-driven platform that successfully reaches these cities by providing affordable clothing to low-to-middle income earners. The company’s vision to bridge this online shopping gap has experienced great success, and they currently carry over 15,000 stock keeping units while receiving thousands of orders daily.
2. Social Media Engagement
Smartphones are extremely popular in Indonesia, as it is difficult to expand landline internet services across the archipelagic nation of 17,000 islands. Bain and Co. published research suggesting that in rural Indonesia, 80% of total commerce is performed on a mobile phone. Due to this, it is unsurprising that Facebook has over 80 million users in the country, while the number of Indonesian Twitter users rank 4th worldwide.
With a mobile first website design, Sale Stock’s proprietary merchandising technology is powered by artificial intelligence (AI) and leverages over 1,300 data points captured during the consumer purchasing process. More importantly, the company’s AI chatbot is the first worldwide to integrate with Facebook Messenger, WhatsApp, and BlackBerry Messenger to handle customer enquiries, take sales orders, and complete purchases. This interface has led to Sale Stock’s impressive growth, with their average revenue per user (ARPU) growing 49% over the last 12 months.
3. Preference for Localised Experiences
Local and regional e-commerce players tend to perform better in Indonesia for 3 reasons – variety, convenience, and price sensitivity. Shoppers are more comfortable with retailers that they can identify with, and retailers that present their products in an accessible manner (eg. using Bahasa Indonesia, local slang, etc.) might have a greater chance of success. Sale Stock employs a simple yet friendly interface which encourages visitors to check out their immense clothing collection, while utilising highly localised customer acquisition channels and marketing strategies to retain users. Once again, this unique combination allows the company to penetrate tier 2 and 3 cities where logistics are still fragmented.
Daren Tan, Managing Partner of Golden Equator Capital, said: “Following the success of the first Technology and Innovation Fund, we are looking to invest across the Southeast Asia region in verticals where we can add strategic value—addressing bottlenecks or pain points. 70% of Sale Stock’s customers in these cities are making their first e-commerce transactions, demonstrating the company’s unique advantage and potential for growth in Indonesia’s fast evolving digital economy.”