Indonesia’s E-Commerce market will be one of the best performers in Asia in the coming decade.
With a low internet and mobile penetration, a quickly growing middle class, and a huge population, there’s still plenty of room for expansion.
Strangely, many foreign companies haven’t even heard of its biggest E-Commerce giant – Tokopedia.
Today, I’ll tell you what Tokopedia is all about if it’s open to foreign companies and how the future of Indonesia’s E-Commerce market looks like.
- What is Tokopedia?
- Why is Tokopedia interesting at the moment?
- Indonesia E-Commerce market overview
- In which countries is Tokopedia available?
- Future of E-Commerce in Asia
- Can foreigners sell cross-border on Tokopedia?
- How can sellers get paid on Tokopedia?
- Managing fulfillment and shipping on Tokopedia
- What are the most popular products on Tokopedia?
What is Tokopedia?
Tokopedia started in 2009 and is currently the second biggest E-Commerce marketplace in Indonesia. In fact, Lazada just recently surpassed Tokopedia and slightly ahead of the company, in terms of monthly traffic.
In the past years, several big companies, including Alibaba and SoftBank, have invested heavily in the company with funding reaching well above the USD 1 billion marks.
Tokopedia’s business model brings some similarities to Taobao (China) some years back.
Here, you’ll find more than 4 million sellers, where most of them sell C2C. The products are mostly in the low- to medium-price segment to cater to the local population.
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- Selling on Tmall & Lazada
- Logistics & fulfillment options
- Payment gateways
- Incorporation & trademarks
The rise of cross-border E-Commerce in Southeast Asia
Lazada, which is the biggest E-Commerce marketplace in Southeast Asia, has a different approach and focus increasingly more on cross-border E-Commerce. Simply put, they’re a bit ahead of Tokopedia and try to target bigger brands and buyers who want smooth deliveries and authentic products.
Just check LazMall and Lazada Global Collection and you’ll understand what I’m talking about.
Tokopedia will probably reach a point in the coming years when it will move from C2C to B2C and focus more on foreign (high-end) products.
Yet, as Indonesia needs more time to grow economically, this might take some time.
Why is Tokopedia interesting at the moment?
On the contrary to its competitors such as Shopee and Lazada, Tokopedia is only available in Indonesia. These marketplaces are available in almost all ASEAN countries, including Malaysia, the Philippines, Vietnam, Thailand and Singapore.
So if Tokopedia is only available in Indonesia, what makes it so interesting?
To understand this, we need to know how Indonesia’s E-Commerce landscape will change.
Indonesia E-Commerce market overview
Indonesia is the richest country in Southeast Asia and with the biggest population, having around 270 million people
The internet and mobile penetration is still low but will grow much in the coming decade
Indonesia’s E-Commerce market will grow by far the most in Southeast Asia, from a market value of USD 1.5 billion in 2015, up to USD 48 billion by 2025. Thailand, on the other hand, will have the second biggest E-Commerce market valued at USD 11.1 billion in 2025. That will be less than 20% of Indonesia’s E-Commerce market
In which countries is Tokopedia available?
As mentioned, Tokopedia is only available in Indonesia at the moment. Bukalapak is another local E-Commerce website that’s only available in the country.
With a population of 270 million and an E-Commerce market that’s set to grow significantly in the coming decade, expansions might not be needed for the time being. This is something that Tokopedia’s CEO has officially claimed.
Also, it all depends on how Indonesia will develop economically.
Sooner or later, Tokopedia and Bukalapak might need to move overseas and fight head-to-head with companies like Lazada and Shopee.
Future of E-Commerce in Asia
China will lead the pack for sure with an E-Commerce market valued at around USD 1.8 Trillion by 2022.
By comparison, China’s E-Commerce market will be twice as big as the E-Commerce market in the US, ten times bigger than Japan’s, and dozens of times bigger than Indonesia’s.
Yet the competition is way higher in China and companies often need to invest hundreds of thousands of dollars, sometimes millions, just to get started.
You should also bear in mind that there’s room for much growth in Southeast Asia. In Indonesia, only 1% of the population shop online, which is significantly lower than China’s ditto.
Therefore, it can be worth trying to penetrate the Southeast Asian E-Commerce markets to grasp market shares in an early stage.
Can foreigners sell cross-border on Tokopedia?
Unfortunately, foreign companies cannot sell cross-border on Tokopedia, as of the moment I’m writing this article. This will most likely change in the coming years when we see a bigger demand for renowned brands and foreign products.
To sell on Tokopedia, you need to set up a local company, which is not the easiest task on hand.
Don’t forget that Tokopedia is still in an early stage. As mentioned, it brings many similarities to Taobao some years ago. Even if local companies can sell B2C, most of the sales are made C2C.
And keep in mind that selling cross-border in Southeast Asia is not as straightforward as in China. It’s way more digitized and almost everything is done via cell phones.
Here, you can sell cross-border on marketplaces like Tmall Global, Kaola and JD Worldwide. But the entry requirements, start-up fees and running fees are often beyond the budgets of small brands.
Selling online in Southeast Asia is both cheaper and often easier, even if the profit potentials can be lower.
Lazada, which is the biggest E-Commerce marketplace in Southeast Asia, gives you the opportunity to sell cross-border. However, you need to have a company registered in any of the following countries to do so:
- Mainland China
- Hong Kong SAR
- Macau SAR
- Taiwan ROC
How can sellers get paid on Tokopedia?
Sellers need to open an escrow account that is integrated with Tokopedia. The money can then be transferred to a local bank account.
Yet Tokopedia has vast plans to develop its payment systems, at least starting with the shoppers.
For example, it plans to create its own digital payment solution, similar to that of Alipay and Tenpay in China. Tokopedia now offers increasingly more services in FinTech, lending just to mention a few.
It had its own E-Wallet called Tokocash, which was later replaced with a new wallet called OVO.
Lippo Group, a heavy investor in OVO and Grab, managed to close the deal with SoftBank, one of the biggest investors in Tokopedia.
Managing fulfillment and shipping on Tokopedia
Indonesia has 17,000 islands and the country is as wide as the distance from Paris (France) to Kabul (Afghanistan).
Thus, building up an efficient logistics system is one of Tokopedia’s main priorities.
Previously, Tokopedia didn’t hold any inventories, sellers were responsible to find suitable fulfillment centers and shipping companies on their own.
That said, Tokopedia has now launched its own fulfillment service called TokoCabang.
It’s surprisingly cheap and sellers don’t need to pay more than ~USD 0.2 per item, stored for more than 60 days.
The service is currently available in Jakarta, Surabaya, and Bandung, even if the company has plans to expand the service all over the country.
Interestingly, the service will be available for not only online sales, but offline sales. As such, you don’t need to be an E-Commerce seller to use it.
At the moment, you’re able to receive 65% of the products listed on Tokopedia the same day or the following day. By using artificial intelligence (AI), the company plans to increase that number to 90% in the following years.
What are the most popular products on Tokopedia?
Before you decide to enter a foreign market, it’s important that you do a market analysis, check the competition and confirm potential sales volumes.
Here, your product category plays a vital role. Below you can find the most popular products on Tokopedia in 2018:
- Mobile & Electronics: 22%
- Fashion: 12%
- Groceries: 11%
- Lifestyle & Hobby: 10%
- Home and Living: 9%
- Toys: 9%
- Beauty: 5%
- Health & Wellness: 5%
- Sports: 4%
- Mum & Baby: 4%
If you want to see a similar comparison for Lazada, I recommend you check this article.
Below, I’ve listed some frequently asked questions and my replies.
How much is Tokopedia worth?
Who is the founder of Tokopedia?
The other co-founder is Leontinus Alpha Edison, also born in 1981.