6 Myths of Future Online Retail in Indonesia
aCommerce took the time to study these myths harvesting the thoughts from our Indonesia CEO, Hadi Kuncoro. The six myths of future online retail in Indonesia:
1. Online Retail Will Drown Offline Market
With so many businesses and services emerging online, many people perceive this trend as the black sheep of the offline market decline. True or false?
Nadiem Makarim: “Compared to offline retail, the proportion of online retail is still very small. What you’re seeing now was not driven by this factor, but rather as an impact of the global economic condition. In the next decade, online retail proportion is still gonna be smaller and unable to compete with the offline retail sector.
Hadi Kuncoro: “Online and offline retail will always go hand in hand. There’s no way offline retail is going to drown nor be diminished. If anything, it complements each other even more. Online retail allows business players who already have an offline presence to penetrate the untapped market (i.e. rural areas and secondary cities). At the same time, it also provides convenience for consumers, as the possibility of accessing desired products is higher due to its availability on both offline and online channels.”
2. Online Sales is the Ultimate Benchmark (of Success)
When online retail is (overly) glorified, a lot of people then strive to sell as many products as possible on online platforms. When the result is not as expected, what actually went wrong?
Nadiem Makarim: “Even though we sacrifice our time and money, the outcome we see in sales might not always be as expected but this doesn’t mean that what we did was wrong. Yes, we need a digital strategy to succeed and survive online retail, but it is not compulsory to sell products. Data can also be an asset. Online players who manage to succeed these days are still coming from a specific market/player.”
Hadi Kuncoro: “The ultimate success benchmark will still be in conventional business. The emergence of online platforms will contribute to integrating offline and online business – omni-channel.”
3. If You’re the Offline Market Leader, You’ll Also Be Huge Online
Reflecting on the current condition in China, there’s a reason why the big players are mostly dominated by marketplaces. In Indonesia, big names like MatahariMall or Lazadaall dwell in the marketplace arena.
Nadiem Makarim: “No matter how big your brand is, it’s still difficult to be able to get a big number of buyers, say, reaching 10,000 buyers in one day, if you are ‘alone.’ Marketplace is one of the strategies that we can apply to achieve this.”
Hadi Kuncoro: “I personally think in ecommerce, it is not about how great one brand/company is in the market, but how they can create and grow an ecommerce ecosystem that encourages more offline players to enter online retail and therefore create a healthier, more competitive market.”
4. Desktop and Mobile Platform Will Still Be Relevant in the Next Five Years
The more online transactions occur, the more we’ll see prolonged existence of desktop and mobile platforms. But in reality, the majority of online transactions today take place on mobile site.
Nadiem Makarim: “I would suggest all of you who are currently running an online business to also create a mobile application. It is also important to ensure your business is on the ‘window display.’ When your app is on the first two pages of your consumers’ smartphone home screen, it means your app is relevant for them. Therefore, you also have to emphasize the importance of UI/UX on mobile applications.”
Hadi Kuncoro: “Well, at the moment we can focus on both of these platforms, but I believe in the long run, the most relevant platform is mobile and therefore having a mobile app is essential.”
5. Local Players Will Dominate the Market
Some might think that because they’re local players, they can win the market. But this way of thinking is not something to rely on.
Nadiem Makarim: “It is not impossible for foreign/international players with way bigger capital to win the characteristic of local market through big data.”
Hadi Kuncoro: “With the existence of free trade zone, both local and international players are able to cross borders. This will provide consumers with more product or brand options and therefore volume will subsequently increase. Combine this with order consolidation, high logistics cost will go go down and make it easier for international players to win local markets. Anyone from anywhere can dominate the market, local or not, it’s about giving customers what they want.”
6. Cheap price will easily attract market
Nadiem Makarim: “In a way, price is important, but we also have to look at other factors like, how fast your product delivery is and satisfaction in using your service, which are key success factors that must not be missed.”
Hadi Kuncoro: “Cheap prices in the early stages will easily attract an audience, especially in Indonesia’s emerging market where 75% is still dominated by C-class. But we cannot fully rely on only lower prices. In the long run, we must strengthen Brand Awareness and Value Proposition such as product quality and After Sales Service to not just attract, but drive satisfaction and loyalty from customers.”