- Big brands have greater impact, massive lines of production & no supply problems
- E-commerce can be used to move big brands abroad, increase Indonesian exports
WHEN talking about e-commerce, most of the focus has been on urging small and medium business players into this realm, although the big brands are the ones that really need a massive push.
“It is good that we are pushing SMB players to go online, but, when we talk about making an impact and grow the e-commerce industry, the push and education needs to focus on big names, the family business owners and the big brand owners.
“Why? They have massive lines of production and no issues with supply. They have the ability to go online. The only thing that deters them is a lack of understanding and the confusion on how to sail on the waters of this nascent industry,” aCommerce Indonesia’s chief executive officer (CEO) Hadi Kuncoro told the press in Jakarta recently.
aCommerce, a Bangkok-based end-to-end e-commerce service provider recently held a brand-focus event in Jakarta aimed at educating and encouraging brand owners to go online.
Currently 90% of aCommerce Indonesia’s clients are international brands, including L’Oreal, Unilever, Garnier, Adidas, RayBan, HP, Philips, AIS, and Uniqlo. There are few local brands such as outdoor equipment and clothing Eiger, Sinarmas’s Smartfren, retailer Kawan Lama Group and MatahariMall.
According to Hadi, the ideal goal is to have a significant chunk of local brands that want to push their products out of the Indonesian market.
“I have to say that the big brands are startup players in e-commerce industry. They might be big in the offline retail industry, but they are babies in the e-commerce space,” said Hadi, adding it took aCommerce a year to finally sign a deal with fast-moving consumer goods giant Unilever.
“I remember I had to prepare a presentation four months after our first meeting, to provide and immerse a broader point of view to every decision maker in the company for two days in a row on how e-commerce can benefit them, and why they need to urgently enter the space,” he said.
Big brands are startups in e-commerce space
Hadi said that compared to SMB players, the big brands’ level of know-how in digital marketing, online selling, search engine optimisation and e-commerce is low.
The struggle is real for big brands, simply because they need to prioritise the traditional channels that have been giving them trillions for the past decades.
“That is the default thinking for the brand owners. How easy would it be for you to move to a space that is new, crowded with players, will need capital, and you know in the first year you will probably get zero profit? Not easy at all.
“The task for us now is to educate big brands on why they need to urgently move to e-commerce now and only look at the return of investment later on,” said aCommerce’s chief commercial officer, Donny Maya Wardhana to Digital News Asia (DNA).
Donny said that price cannibalism, administrative complexity, multiple store management, logistics, as well as e-commerce talent are the reasons why brand owners are hesitant to go online.
“It is truly a hassle for brand owners to go online, given the uncertainty, pace of change and time needed. Why go online? Why bother when we do not have the knowledge and resources to do so?” he added.
Knowing that solving the pain point for brand owners to go online meant to delivering a one-stop end-to-end platform to cater to all their needs, aCommerce launched its ‘B2ALL’ platform.
B2ALL is a single platform for multi-consumer types. It allows brand owners to choose whom they want to target their products to; whether it is business to business, business to distributor, business to government or business to retailer.
Brand owner’s challenges
Indonesia is not an export-focused country, with 60% of its gross domestic product (GDP) coming from domestic consumption, thanks to its huge population base. However, with many good quality local brands, Indonesia should have used the momentum of e-commerce to increase its export contribution to GD, said Hadi.
Data from the World Bank shows that Indonesia’s exports only contributed 21.1% of the GDP in 2015, while neighbouring countries have much higher rates with Singapore at 176,5%, Vietnam at 89.8%, Malaysia 70.9%, Thailand 69.1% and Cambodia 61.7%. Indonesia only comes close to the Philippines, which stands at 28.2%.
“We want to at least push local brands to penetrate other countries, starting with Southeast Asia,” Hadi said, adding that aCommerce offers cross-border e-commerce services as well.
For local players, one of the struggles is how to define a new business model and pricing strategy that will boost their online presence but does not cannibalise their traditional distribution channels, said Sylvia A. Rizal, vice president consumer health division, marketing consumer health of local pharmaceutical company SOHO Global Health, on the sidelines of the event.
“It is all new to us. How is the pricing strategy? How much investment is needed? How long until we can see the ROI? How do we also maintain our traditional business channels? It will always be these questions from the top level to us,” she said.
SOHO Global Health employed 6,000 people and has 52 distribution points covering 90% of the major cities in Indonesia. It has also expanded to Malaysia, Myanmar, Nigeria, Lebanon, Mongolia, Vietnam, Suriname, Brunei Darussalam, Mauritius, Sri Lanka, and Pakistan.
“Now I myself believe in e-commerce and really want to help the company have a presence and gain more momentum in the e-commerce era, reach more people, and promote our healthcare brand wider, but I need help on how to do things, from the very beginning; the planning level, to the strategic level,” she continued.
Increasing awareness in going online
At the same event, Lazada Indonesia director Duri Granziol (pic above) told DNA that the awareness of big brand owners and retailers of e-commerce and going digital has grown significantly in the past year.
“It has definitely grown. There is more demand and we get more queries on how to enter the online space. However many are still looking at it as a trend that must be followed, rather than a need for growing their business.
“The process of them going online is still quite tough even though there is business will and awareness. Big brands will usually put junior people to spearhead their e-commerce move, who will often lose the battle fighting with senior management,” he added.
However, the good news according to Duri is that many brands that have tasted the benefits of e-commerce are now employing senior people with expertise in e-commerce.
“This is the positive trend that we are seeing now, initiated by big brands that have already committed to e-commerce. They now have people who have experience in e-commerce from China and/or India. Many big brands will follow this and hopefully the industry will grow better than ever this year,” he concluded saying that Lazada Indonesia is aiming to increase their products from 4.5 million to 10 million this year.
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