William Tanuwijaya, CEO of Tokopedia.
Tokopedia surprised everyone
yesterday when it set the record for the largest round of funding in
Indonesian startup history. Moments after the news broke of the US$100 million investment from SoftBank and Sequoia Capital, Jakarta’s social media lit up with questions and comments as Tokopedia came under the spotlight.
But this big news leaves a lot of room for speculation. There are two
questions that the Indonesian tech scene is sure to be asking itself
right now. First, does this mean Indonesia’s internet market will see
growth comparable to those of China or India? Second, do SoftBank and
Sequoia aim to replicate the story of Alibaba with Tokopedia? If so, here are some points to consider.
The company’s business model will likely diversify
At the moment, Tokopedia’s business model is only
consumer-to-consumer (C2C), which means it’s a marketplace made up of
ordinary people selling stuff. This is the same model as Alibaba’s Taobao,
which beat Ebay in China and went on to become China’s top ecommerce
site. But several years later, Alibaba diversified to
business-to-consumer (B2C) sales, providing medium-sized business and
major brands a place to open a virtual storefront with the launch of Tmall.
B2C ecommerce stores are arguably the future, as we mostly buy things
from big businesses and major brands. That means C2C stores will
eventually shrink until they find a niche size in the market – like
shopping malls versus mom-and-pop shops in developed nations. That’s
happening in China, an already quite mature ecommerce market, as Tmall
grows and Taobao contracts. B2C sites can also mean more revenue and
stronger profit for the ecommerce sites that run such open platforms for
virtual stores.
In the short term, Tokopedia could aim to become the Indonesian equivalent of Taobao. Alexa
named Taobao one of the world’s top 10 most visited websites last year
after its millions of merchants posted 760 million product listings.
In keeping with Tokopedia CEO William Tanuwijaya’s vision, however,
it’s likely that he will want to diversify the company and open it up to
serve as many buyers as possible. Inspired by Alibaba’s Jack Ma, this
would likely mean incorporating B2C (and maybe even
business-to-business) options into Tokopedia’s marketplace in the
long-run, or even launching a spin-off site (like Tmall) dedicated to
brands.
Jack Ma, founder of Alibaba Group.
Tokopedia will start to think globally
Indonesia is the fourth most populated country in the world with more
than 250 million people and an internet penetration of roughly 20
percent. The archipelago’s ecommerce sales stand at an estimated US$1-3
billion per year at present, according to The Financial Times, which
also projects the country to reach US$10 billion in online spending by
the end of 2015 (although this projection was made before Tokopedia’s
annoucement). It claims Indonesia’s ecommerce market is fast becoming
one of Asia’s most attractive destinations for investors. The data is
pretty interesting, but let’s take a moment to compare Indonesia’s local
market to those in China and India.
China’s has an internet penetration rate of nearly 47 percent amongst
its huge populace. China’s ecommerce spending is projected to hit US$360 billion by 2015, and that’s just on sites like Alibaba’s Tmall and Amazon. Come 2020, KPMG expects China’s local ecommerce market to be larger than those of the US, Britain, Japan, Germany, and France combined.
India’s population clocks in at just over 1.2 billion people, making
it the second most populated nation. Its internet penetration is at
nearly 20 percent right now. The size of its ecommerce market is set to reach US$20 billion next year,
which is nearly double the nation’s 2013 tally. By 2020, ecommerce in
India is expected to hit somewhere around US$50-70 billion, according to
a joint report of KPMG and the Internet and Mobile Association of India.
While Indonesia’s local market is sizable, Tokopedia will need to
create a global strategy to penetrate markets other than just its own if
it hopes to join the ranks of Alibaba or Amazon. Having India-based
Sequoia Capital and Japan-based SoftBank as partners is a strategic leg
up for Tokopedia, as the firm will surely need help to enter fresh
territories and navigate regulations in neighboring countries.
Seqouia and SoftBank come with priceless strategic value
This Tokopedia backing was Sequoia’s debut investment in Indonesia.
In a statement, Shailendra Singh, managing director of Sequoia in
India, mentioned his enthusiasm for the partnership and his excitement
for Sequoia’s entrance into Indonesia. Sequoia is renowned for its
relationships and involvement with some of the world’s highest profile
entrepreneurs including Steve Jobs, nearly everyone in the “PayPal
Mafia,” Google’s Larry Page, and David Filo and Jerry Yang of Yahoo. The
list goes on.
Ecommerce players would be hard-pressed to find anyone with as much
skin in the game globally as SoftBank or Sequoia. Tanuwijaya has chosen
his investors wisely. He explained to Tech in Asia that
Tokopedia was fortunate enough to have its pick of the crop. But apart
from US$100 million in fresh capital, Tokopedia can now ideally position
itself to see an Alibaba-like trajectory. That’s something worth
talking about, as a behemoth company coming out of Jakarta would lay to
rest any claims that the Indonesian market is overhyped.
The key ingredient in this new equation for Tokopedia is that both
SoftBank and Sequoia Capital were early investors in Alibaba.
Tanuwijaya, who has publicly voiced his admiration for Jack Ma, says,
“SoftBank’s close partnership with Alibaba and their experience with
building the world’s most highly valued marketplace will be invaluable
for Tokopedia.”
When asked why Sequoia Capital is particularly advantageous for
Tokopedia, Tanuwijaya explained that Apple, Yahoo, Google, Linkedin, Zappos, Airbnb, WhatsApp,
and Instagram are all companies that have delivered world-class
products and shaped the decade. They were all backed by Sequoia in their
early years.
Tech in Asia is inclined to agree with Tanuwijaya’s
decision. This newly formed trio could prove to be the perfect storm
that rockets Indonesia’s internet market into the stratosphere.
by Steven Millward - techinasia.com
