China tech giants bet on untangling logistics of Indonesian e-commerce

    JAKARTA (Reuters) – In a warehouse on the outskirts of Indonesia’s capital, supervisors at e-commerce firm Lazada use bikes or electrical scooters to zip round a ground the scale of 4 soccer fields, the place as much as three,000 workers pack and dispatch items across the clock.The warehouse is considered one of 5 that Lazada has opened throughout Indonesia to chop prices and develop its attain in an archipelago whose 17,000 islands are sprinkled throughout an space larger than the European Union.

    Chinese language tech companies, together with Lazada’s high investor, Alibaba Group Holding, have poured at the very least $6 billion into almost each side of Indonesian e-commerce.

    Lazada makes use of Alibaba’s stock administration techniques and has tied up with ride-hailing firms, typically utilizing their motorbikes to ship items in a rustic with creaking infrastructure and traffic-clogged cities.

    The payoff could possibly be large. It’s a market forecast to develop from about $7 billion final yr to $63 billion by 2027, in keeping with Morgan Stanley.

    “Indonesia, each by way of the shoppers and conduct, is a really distinctive problem and we have to adapt,” Florian Holm, co-chief govt at Lazada Indonesia, informed Reuters.

    Lazada and Tokopedia, through which Alibaba can be an investor, dominate Indonesia in buyer visitors, with greater than 117 million month-to-month web site visits every, in keeping with knowledge from e-commerce aggregator iPrice.

    Alibaba doubled its funding in loss-making Lazada to $four billion in April, underscoring its world ambition to safe a much bigger share of the e-commerce market.

    Between the funding and the rewards, nevertheless, lie huge complexities.

    The World Financial institution has stated logistical prices swallow up round 1 / 4 of Indonesia’s gross home product, citing bottlenecks in provide chains, lengthy dwelling occasions in ports and prolonged commerce clearances.

    Lazada has opened warehouses in locations like Balikpapan, on the coast of Borneo, to keep away from hauling all the things from Jakarta. Holm stated that had in some instances decreased transport prices by 90 p.c.

    Aggressive stress is rising. One other Chinese language heavyweight,, arrived in Indonesia in 2016. And the U.S. large Amazon, which opened a warehouse in Singapore final yr, could also be ready to dip a toe into the Indonesian market quickly.


    Indonesia’s e-commerce gross sales are set to rise from three p.c of retail exercise now to 19 p.c by 2027, Morgan Stanley estimates. The identical report stated there have been 159 million smartphones in Indonesia on the finish of 2016, a quantity that might rise to 275 million by 2021.

    Indonesia’s younger inhabitants and room for enchancment in transportation and communications add to the prospects for development, the financial institution stated.

    That has attracted different Chinese language firms. Tencent Holdings, which owns regional e-commerce participant SEA, has entered the fray.

    Tencent and have stakes in Indonesia’s ride-hailing agency Go-Jek, whereas has invested in on-line journey firm Traveloka.

    However Usman Akhtar, a associate at Bain & Co in Jakarta, stated Indonesian firms akin to Blibli, backed by a unit of the Djarum group, stay a drive.

    “I might not characterize Indonesia as turning into a reproduction of China’s e-commerce market, at the very least not but,” stated Akhtar, referring to how and Alibaba dominate in China.

    Kusumo Martanto, who heads Blibli, informed Reuters the corporate had seven warehouses in Indonesia with seven extra deliberate, and stated it was vital for native e-commerce firms to compete towards Chinese language gamers.

    Alibaba founder Jack Ma is on an Indonesian authorities steering committee for e-commerce, advising on areas akin to tax, cyber safety and human sources.

    Indonesia’s communications minister, Rudiantara, stated there was no battle of curiosity in Ma’s position, describing him as a “guru” who may assist promote the nation’s potential.

    However some insurance policies appear to be turning towards Ma’s residence turf.

    Indonesia, which is making an attempt to sort out a scarcity of expertise within the digital sector, dropped sponsorships for 20 college students to review in locations like Australia and the US.

    As a substitute, 10 college students will go to India and 10 to China to review this yr “as a result of the way forward for the digital financial system is in China and India,” stated the minister, who makes use of one identify.


    Caterine, a 30-year-old housewife who lives west of Jakarta, used to buy in typical shops as soon as per week, however after her child was born six months in the past, she has been buying on-line two to a few occasions per week for comfort. 

    “I desire on-line buying as a result of it’s fast. I can simply click on and click on and the products will arrive,” she stated, including she largely used Shopee and Tokopedia for items akin to diapers and clothes.

    Morgan Stanley stated supply occasions of all kinds throughout Indonesia are all the way down to about three days from 10 days, whereas deliveries in large cities can take 24 hours or much less.

    Whereas in city areas supply occasions have vastly improved, different elements of Indonesia’s e-commerce provide chain are nonetheless inefficient, stated Willson Cuaca, co-founder of East Ventures, a tech funding fund.

    “To ship items from level A to B, the logistics firm wants at the very least two modes of transport,” he stated, referring to the problems of working throughout so many islands.

    Amazon, in contrast, prefers to manage its personal provide chains from begin to end. However coming into a market like Indonesia may require it to revisit that technique.

    Amazon Singapore didn’t reply to a request for touch upon whether or not it had plans for Indonesia.

    A lot of the U.S. large’s worldwide focus has been on creating its enterprise in India, although some view its entry into Singapore final yr as a stepping stone for enlargement within the area.

    “At this second, I imagine it’s making an attempt to check the market, by promoting merchandise by third-party sellers,” stated Daniel Tumiwa of the Indonesian e-commerce Affiliation.

    Zhang Li, who heads’s Indonesian three way partnership with Provident Capital JD.ID, was not overly involved about competitors from the likes of Amazon.

    “E-commerce is a world and borderless enterprise, so we have now to arrange and do steady enchancment to make our clients blissful,” Zhang stated.

    Further reporting by Jessica Damiana and Fanny Potkin in LONDON; Modifying by Gerry Doyle

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