Bukalapak targets mom-and-pop stores for growth in Indonesia

Bukalapak, one of Indonesia’s most popular shopping apps, has been making an aggressive push towards micro retailers. The company first started as a consumer-to-consumer ecommerce platform, but later turned its attention to small and medium businesses. 

The startup enables mom-and-pop stores, or warung,  to order goods from its platform — cutting out middlemen and reducing costs. The ecommerce giant was founded in 2010 by Achmad Zaky, Nugroho Herucahyono and Fajrin Rasyid, and has over 2 million warungs on its platform. 

Online-to-offline strategy

To win over more customers, Bukalapak is adopting an online-to-offline (O2O) approach —signing up mom-and-pop stores to become O2O agents. Shoppers without internet access — or who don’t feel comfortable making purchases online — visit their local agent or warung, place an order, and pay for it in cash. Stores earn a commission for each order.  

Bukalapak sees the offline space as an important channel — and trust warung’s large footprint and close relationships with customers can help connect more shoppers to the online world — even if they can’t make online payments or have never taken part in ecommerce before.  

Low but growing internet penetration

Only 55 percent of Indonesia’s population is connected to the Internet, and about 10 percent of Indonesians regularly shop online. According to the company, many of the mom-and-pop shops didn’t even have an email address to sign up, and the startup had to help them set up an account. 

Indonesia accounts for about 40 percent of the population in Southeast Asia and has the fourth-highest number of Facebook users and fifth-highest Twitter user base in the world. The large and growing population of mobile phone users and rising income make it an attractive market for technology companies looking to expand regionally. 

Payment challenges

The company identified online payments as the biggest obstacle for e-commerce in Indonesia — a country where only about 4% of the population had a credit card in 2017. Low credit card penetration in Indonesia means that many people often have to pay offline for purchases — creating a barrier for ecommerce growth.  

Fintech

Bukalapak offers a range of fintech solutions to its customer base. Buyers can pay with Akulaku and Kredivo, both platforms which allow for instalment payments — without credit cards or traditional credit history. 

They teamed up with P2P lending startups Amartha, Modalku and PohonDana to provide loans, and partnered with Investree’s BukaModal, to offer credit to its online sellers that achieve a certain sales target. They also offer mutual funds (BukaReksa), and more interestingly, a gold investment marketplace (BukaEmas) for their customers. 

However, fintech hasn’t been all plain sailing for the company. Their e-wallet was frozen, because of a central bank crackdown on e-money providers, and they are awaiting new regulations before reactivation.

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