China e-commerce GMV totalled a massive RMB11.3 trn in 2020, or 12% of the country’s GDP. Indonesia e-commerce GMV of USD40b meanwhile was less than 2% of GDP, suggesting massive long-term upside on its way to 12% and beyond. Today’s guests, Brian Marshal and Andreas Thamrin, are cofounders of SIRCLO. SIRCLO’s sole purpose is to help small, mid-sized, and enterprise brands to sell online. SIRCLO seeks to help Indonesia's merchants unlock massive efficiencies and growth by mapping them to: a) new ecommerce platforms, b) integrated omni-channel strategies, c) more sophisticated "back-end" technologies and d) unprecedented amounts of big data to drive insights and seller strategies.
China e-commerce GMV totalled a massive RMB11.3 trn in 2020, or 12% of the country’s GDP. Indonesia e-commerce GMV of USD40b meanwhile was less than 2% of GDP, suggesting massive long-term upside on its way to 12% and beyond. Today’s guests, Brian Marshal and Andreas Thamrin, are cofounders of SIRCLO. SIRCLO’s sole purpose is to help small, mid-sized, and enterprise brands to sell online. SIRCLO seeks to help Indonesia's merchants unlock massive efficiencies and growth by mapping them to: a) new ecommerce platforms, b) integrated omni-channel strategies, c) more sophisticated "back-end" technologies and d) unprecedented amounts of big data to drive insights and seller strategies.
ALAN 0:11
Welcome to the 23rd episode of Season Two of the Indo Tekno podcast, Selamat datang semuanya! I'm Alan Hellawell, Founder of tech consultancy Gizmo Advisors and Venture Partner at Alpha JWC Ventures. According to online research portal Statista, China 2020 ecommerce gross merchandise value, or GMV for short, totalled an astonishing RMB11.3 trillion. This represents more than 12% of China's GDP last year. And this is up from roughly 0% 15 years prior. Indonesia's ecommerce GMV last year totalled USD40 billion, which was only 1.5% of the country's GDP, and thus suggesting massive long term upside for online sales. Today's guests, Brian Marshal and Andreas Thamrin, are Co-founders of SIRCLO, one of Indonesia's leading e-commerce enablers. SIRCLO's sole purpose is to help small, mid-sized and enterprise brands to sell online. Gentlemen, looking forward to discussing Indonesia's prospects for future ecommerce growth with you today. Thanks a lot for joining.
BRIAN MARSHAL 1:23
Hi Alan. Thanks for having me here today.
ANDREAS THAMRIN 1:25
Hi, Alan. Thanks for having me. Very excited to be able to have a chat with you. I've been a longtime follower of your podcast as well.
ALAN 1:32
You guys are very kind. I believe Brian is today sitting in Jakarta. And Andreas, you are in Sydney, if I'm not mistaken. So we've got a truly multi-country forum today. Now, Brian, maybe starting with you: Can you share with us the origin story of SIRCLO?
BRIAN MARSHAL 1:50
So back then in 2013, exactly eight years ago, I think that was the day when a lot of my friends same age with me, started their own businesses. When they started their businesses, a lot of them are looking into the online opportunities. A lot of them start from messaging apps or forums to sell online. But then, after a while, once they want to go more professional, they will look for an option to sell in webstore; to sell online. And that's the beginning of our first solution, which we call to SIRCLO Store. In 2016 or early 2017, that was the time when we expanded our ecommerce enabling business, which focused on marketplaces, which is primarily adapting to the market situation back then when marketplaces started to lead ecommerce growth. And last year, we expanded again to another business line, which is basically an enterprise ecommerce software solution, by acquiring a company named iCube. After receiving a lot of feedback and requests from enterprise clients to have a more customised and sophisticated solution.
ALAN 2:56
And just to clarify, Brian, when you say marketplaces, you're referring to Shopee, Tokopedia and Bukalapak, is that correct?
BRIAN MARSHAL 3:04
Exactly. Correct.
ALAN 3:06
Fantastic. Well, that's some very helpful background to kick off the discussion. Now Andreas, if you don't mind, can you tell us how much of our work today do you feel is portable to other markets in the region? And how much would you say really works only in Indonesia?
ANDREAS THAMRIN 3:23
That's a good question, Alan. I think being a technology company, and technology being part of our solution; that first part is a more so-called portable work, I guess, that supposedly can move across to a different region or different parts of the region. You can sell the same software pretty much anywhere, as long as you have the right local team, supporting and so on. But I think if we talk about the enabler side of the business, SIRCLO Commerce, that requires I think, more deeper thinking. How much do you want to do in the local market when you open up a new market, whether it's Singapore, Malaysia, Vietnam, and so on? How much do you want to put in there? Is it just the BD (Business Development)? Or do you want to include the account managers, customer service, store operations and so on? I think this topic has come up from time to time. But so far, we've remained focused on Indonesia, being the biggest market in Southeast Asia.
ALAN 4:13
That's very understandable. Now Brian, can you cite some facts and figures around how much we can help grow a brand's GMV (gross merchandise value), improve its efficiencies, reduce its costs, etc?
BRIAN MARSHAL 4:26
I think first of all, we cannot claim or guarantee that the success of the client is only because of us; since I think our relationships with our clients mostly are working hand-in-hand together to grow their businesses. Now, I think I can give you some examples. First one would be, we have a lot of small medium fashion brands using our SaaS (software-as-a-service) product. And we have seen a lot of cases where two times growth year-on-year is pretty common. And in some cases, we do even see two times growth month-on-month. Now I can also share with today that on the enterprise end of our clients, we help an Australian vitamin brand they had been well known offline. But then we help them start their online presence. And within the first few months itself, we have seen how they can enlarge their customer base, as well as their transactions, and not cannibalise what they did have offline previously.
ALAN 5:24
Excellent. Well, those are some great data points. Andreas, in what areas have ecommerce metrics for the average client improved most in the past year? Has it been delivery time? Has it been a reduction in return rates or there are other areas where we've seen the most dramatic improvement?
ANDREAS THAMRIN 5:41
I think generally, as the market matures, we see that consumer expectations also rise. This is driven by some of the stakeholders such as the marketplaces, when they do merchant acquisition, they do education for the merchants to serve the consumers better. Or payment platforms such as Gojek doing promotions, therefore, enabling many first time consumers to order online and experience for the first time what ordering online means. For our SIRCLO Store clients, we have seen the signup rates also increase. So over time, since we started in 2013. year-on-year we see rapid growth in the later years, the later part of the decade. This is a self service SaaS product. So it shows that the merchants are more educated. They are more ready, or they're more willing to take the jump online. For our SIRCLO Commerce products, which is the end-to-end channel management service for brands; Since we sell on the marketplace, we can see that consumer expectations have also increased dramatically. In the past five years six years, there would have been happy with three-to-four days delivery within Jakarta or Jabodetabek, or even up to a week or two for some outer islands. But now they expect same-day shipping for many orders. So as a matter of fact, we want to keep up with the consumer expectations. And therefore ever since two years ago, our warehouses already operate 24/7. Typically our orders will get processed out the door within 12 hours. So I think all the metrics are really supporting the fact that ecommerce is growing, and consumers are happy to get on board. Once they shop once, twice and so on, they will become more used to it. And therefore their expectations also increase; whether it's delivery time, or whether it's satisfaction in terms of returns or even promotions. So I think all these are very good for the ecosystem.
ALAN 7:30
Absolutely. Now, Brian, I guess a brand broadly speaking can sell through a platform like Shopee, Tokopedia and Lazada; or through its own "dotcom site". What percent of our clientele's GMV flows through these marketplaces and what percent through their own dotcom site?
BRIAN MARSHAL 7:51
Well, the number varies, depending on the nature of your business, as well as the maturity of the business itself. We've seen a couple of even small and medium brands who have loyal followers in social media. And so they prefer to have their own brand dotcom rather than selling on the marketplaces. However, on the other hand, we've also seen examples where established offline brands would like to, you know, first try on the marketplaces rather than to jump right into their own brand.com. Now, I think what's interesting to see is that even though the beginning or the starting point can be different from brand-to-brand, eventually, we believe, and we've seen cases where they will end up using all those channels effectively together. Now, I think, apart from that fact, I would also like to highlight that these are not the only two options for brands: dotcom, or marketplace in general. But I think, here in SIRCLO, we also believe that it's still early days, and we will still see more channels being brought about in the market, such as perhaps social commerce channels. Again, I would say that an effective brand would like to tap all of those channels, rather than just choosing specifically one channel.
ALAN 9:03
Yeah, I can understand the idea of leveraging whatever efficient channels exist. And I assume that evolves with time. Now, Brian, maybe a follow up for you. What is our general business model? Do we charge as a percentage of GMV? And if so, what global comps can we cite to our audience as we think about a reasonable take rate longer term?
BRIAN MARSHAL 9:25
I think here in SIRCLO, this is one area where we've been in Indonesia, we also bring innovation, in which we simplify the business model to only two components, mainly. One is subscription fee. And on top of there is a transaction fee. Now, I think that applies to all of our business units. So I'm not talking only about our SaaS offerings. But even our merchant solutions, such as our ecommerce enabled solution, also use the same formula which is the subscription fee and transaction fee. Now, in terms of the take rate itself, I would say that, I think our global competition also says that somewhere between few percent all the way up to a bigger single digit percentage, is reasonable as a take rate for our business from the total GMV that we help our clients to generate.
ALAN 10:15
That's a very healthy rate as a percentage of GMV. So that's quite encouraging. Now Andreas, do we expect the mix to shift more toward marketplace or toward dotcom, and why?
ANDREAS THAMRIN 10:27
I think with marketplaces in Indonesia consolidating, there'll be a few clear winners in the country. Just like in China, they are Tmall, and JD. And of course, there are many other more niche players. This means that they all have their own loyal consumers. For brands who want the reach, they need to be present here in all the marketplace channels. But for brands who want to maintain their loyal consumers, they also need to have a strong brand.com. But in terms of shift, there are two schools of thought. There is the China model where, because of the strength of the two major marketplaces and the "superapp" paradigms, everyone is doing everything on the super apps. This leaves rather small room for brand.coms. Whereas the US model where there's Amazon, there's eBay; retailers also have their own very strong presence on their own websites. So I think at this stage for Indonesia, it is too early to call it. There's even opportunity for new channels to come up; something which may be unique to the country or to the region. So we keep exploring things such as social commerce, or good integration with WhatsApp or TikTok. I think these are potential candidates for Indonesia to have their unique selling channels.
ALAN 11:43
Very interesting. It would seem as though you have to be very nimble, particularly given just ByteDance's recent rise through TikTok as an ecommerce channel, Andreas, what exactly were the ups-and-downs for our clients on the COVID roller coaster of 2020? In which months were the peaks and when were the troughs?
ANDREAS THAMRIN 12:04
When COVID struck in March last year, the initial reaction was the necessity to distribute essential products, such as hand sanitizers. We saw that many offline outlets suddenly had to shut down. We saw distribution companies unable to distribute their products to the consumers. And there's a huge pent up demand by the consumers. So we worked very closely with some of our principles. Since we happen to handle a lot of consumer goods, fast moving consumer goods brands, we also work very closely with marketplaces, Tokopedia, and Shopee and Bukalapak. So we were able to distribute hundreds of 1'000s of sanitizers just to name one. So April was the initial peak when this happened. This continued to happen over the months. Not as high as the first month, but it carried on as consumers had a new habit to ensure their safety. The second stage was when the retailers suddenly realised that the government-mandated store closures meant that their sales would turn to zero. They had to find a method to sell online. So this is when our SIRCLO Store solution got hit with a lot of requests and signups and onboarding. And keep in mind that this all happened with our staff having to work from home and having to adjust as well as to serve our clients remotely. This is I think one thing that I'm quite proud of; our company being able to adjust and take care of our clients, even as we ourselves had to experience this downturn. Although the spike is not as pronounced anymore, we still see growth on a month-on-month basis up to now even.
ALAN 13:33
That's great news. So Brian, what are the toughest ecommerce problems that we are trying to solve currently in Indonesian ecommerce?
BRIAN MARSHAL 13:42
I think the key word is the "fragmentation" of everything. In terms of channels, we have fragmented channels. And in terms of logistics, geographically, we also have fragmented islands, right? So I think those are the two tough challenges which we currently face. For both problems, we are currently working on some solutions. For example, in terms of the back-end platform, that's one area where we are going to invest even more moving forward so that from the merchant or seller point of view, regardless of how many channels there are out there in Indonesia, they can simplify the management through one back end. Now on the other hand, I think to serve the many and ever-growing internet consumers in Indonesia which are spread across islands, we are also working with our logistic partners to actually give a simple experience for the consumers as well as for the merchants. We have such accuracy as well as timeliness, regardless of where they are. I think those are the two main challenges that we're currently working on.
ALAN 14:47
I can understand. If you can break those bottlenecks, you can really add to the growth that we've seen recently. Brian, what are our growth targets in terms of brands on boarded GMV supported; By the end of this year 2021, and maybe by the end of 2022?
BRIAN MARSHAL 15:04
In terms of growth, I cannot mention specific numbers in our metrics. Overall, we've seen at least 100% growth year-on-year across all of our metrics in the past one to two years. And we see that there is no reason why we wouldn't get as much growth in the next one to two years as well. In fact, so far, our results in the first five months gives us hope that we can grow even more than what we expected.
ALAN 15:31
That's truly encouraging. Now Brian, we've done them in a over the past few years, with companies such as iCube and Orami. What considerations drove each transaction? And what have we learned from these two deals alone?
BRIAN MARSHAL 15:46
First of all, I think here in SIRCLO, what we do is we try to bring about a solution, whatever it is, to help the brands to sell online. And I mentioned earlier as well about how we want to actually simplify all the channels that are in Indonesia, through one point of contact, as well as one back-end. I think the acquisition of the two companies, iCube of an Orami, which happened in the past one and two years, is exactly the same. We see that those two companies have also brought about solution for brands to sell online, though they do it differently from how we have been doing it here. But I think that's exactly how they can complement the channels that we currently focused on in SIRCLO. Now in terms of the lessons, I would say that thing after this to M&A transactions, I've learned that having more leaders working together in a group is pretty helpful. Here in Indonesia, overall talent is one of the challenges as well. And having to work with more leaders, more seasoned leaders in iCube as well as Orami, together towards the same goal to help brands sell online and to solve some of the toughest challenges in ecommerce in Indonesia is really something that gives me more of a positive spirit moving forward.
ALAN 17:04
That's great to hear. Now Andreas, we seem to have three broad offerings that we've been discussing throughout this podcast. There's 1) the software, there is 2) services, and there is 3) partnering. Now do our clients usually subscribe to all three of those services? And which offering is growing the fastest right now?
ANDREAS THAMRIN 17:22
We have designed our solutions to cater for different types of clients in different stages of their business. So some clients may start with Store, our SIRCLO Store, and after a few years, they may, "graduate" to a more sophisticated solution Magento-based or omni-channel for their retail outlets. We also have clients who need us to run all of their online channels, whether it's the webstore, or whether it's the marketplaces. So we do end-to-end. We do the customer service and everything. And lastly, of course, we also have clients who are new to the game, and they require a bit more hand-holding, consultancy, more strategy, even up to the nitty gritty of the warehousing and the fulfilment. So at the moment, all three of these products or solutions, they are growing at a rapid pace due to the shifting of the sales to online.
ALAN 18:11
It's great to hear, Andreas, you mentioned "omni-channel solutions". What does that mean? And what are good examples of successful omni-channel strategies amongst our clientele?
ANDREAS THAMRIN 18:24
Omni-channel is one of those buzzwords that is used by many players in the industry. We already have strong SaaS products that serve entrepreneurs and SME's. However, when we talk to many of our enterprise clients, their pain points or their requirements, are a bit different. Many of them have come from the offline world, where they have successfully built either retail footprints or distribution networks with many warehouses across the nation. So what they need is, rather than treating ecommerce as another standalone division, is a way to leverage their network, and give a holistic approach for their customers to shop. So one example is a national player, a beauty brand, with over 60 outlets who have worked with us for about two years now. Their website, their marketplace, they are all integrated with our system. And it's all connected to their store point-of-sale (POS) as well. So this allows their stores to fulfil their online orders as well. So I think this is what we would like to define as the omni-channel solution. And this is something that we are investing heavily after the acquisition of iCube, allowing us to be the leader in this segment in Indonesia.
ALAN 19:29
That's very futuristic sounding, at least in the Indonesian context, basically, being able to merge awareness of stuff like inventory, between offline and online. I know that China has been working on that for a while, and it's good to hear of this progress that you guys have made. Brian, how much do we overlap competitively with Shopify? And with whom else do we compete?
BRIAN MARSHAL 19:52
I think in terms of Shopify, first of all I would say that, apart from competition, Shopify has been a good role model. A good inspiration. I think they've done tremendous work globally. And I think in the beginning, we had a lot of similarities. What we offer, and what we offer in SIRCLO Store was pretty much the same. Now, I think in the past couple of years, a lot of people would see our paths being different. While Shopify is focusing more on a SaaS offering, here in Indonesia, we try to adapt with the local needs and challenges and also come up with other solutions, such as the ecommerce enable solution. But interestingly, my prediction is that I think, moving forward, we will again, see how we are more similar to, and competing with, Shopify. I think if you've been following the news that Shopify has also been eyeing and investing in other areas outside of their SaaS offerings. At the same time here, ins SIRCLO, we are also I think, going to see more growth happening in the SME market as well. And in our SaaS offering, I have a prediction that moving forward we'll be more competing with Shopify. But at the same time, I think we are pretty much confident that if a local company like us can put focus on our own market, we can actually come up with more accurate solutions to our market challenges. And we've been doing that as well, I think, in the past year by integrating better with our ecosystem, with our payments, with our logistics. And we'll keep doing that.
ALAN 21:26
Fantastic. Andreas, what new service or functionality are we proudest of having delivered over the past year?
ANDREAS THAMRIN 21:33
I think just like any other startup, there's been many proud moments when we have built things from scratch, and we are able to alleviate the pain points that our users have. But if I have to pick one, I think one of the major ones that we have is when we introduced SIRCLO Commerce, our second solution. At that time, I remember I spoke to Brian, and asked: "Do we want to sell this service? Or do we want to sell the software for the users to use"? In the end, at that point in time, we decided to introduce the service, the end to end service, to the principles, to the clients; rather than just giving them the software and letting them run with it. So that enabled us to enter the big principles, the consumer goods market, the fashion brands. Because they realised that what they needed at the time was not software. But what they needed was a partner able to work with them, and fulfil all the orders, build the store, create the SKU's, descriptions, photos, and everything. So in order to be able to do that efficiently, we actually built the first API's with many online marketplaces; Tokopedia, Shopee, etc. At the time, Matahari Mall and so on, enabled us to serve the orders efficiently. This enabled us to leverage the inventory efficiently. And being able to do that means we are able to offer a simple pricing structure for the principles to sell online. Part of that solution also requires us to build our own OMS and WMS. Because at that time, there was no such software in the market that enabled us to fulfil the B2C (business-to-consumer) orders, piece-picking and so on.
ALAN 22:58
Maybe you can share with us what OMS and WMS stand for?
ANDREAS THAMRIN 23:02
OMS is Order Management System. We are able to pull in orders from every single channel and marketplace and consolidate this into sequential orders that we push into our WMS, which is our Warehouse Management System. This is the software that our team on the ground used to piece-pick every single order before we pack this and put this into an air waybill number with our courier partners before they get picked up and sent to the consumers. So that is one of my biggest and proudest moments working with Brian and SIRCLO.
ALAN 23:32
Fantastic. Brian, what are the one to two greatest innovations that SIRCLO is likely to deliver to the Indonesian ecommerce world this year and in 2022?
BRIAN MARSHAL 23:44
I think I would mention how a fully integrated back-end is not there yet in the market. Even with our work in the past eight years, I think we are still on the way to really providing a seamless and good single seller or merchant centre. I think that's going to be something that will be even more ready than ever to bring about that innovation in the market. Now, I think related to that, I would say that we will also come up with new channels on top of the marketplace channels, and brand.com. We will be introducing a couple more channels for a brand to sell online. And that will also link to their offline presence. So I think doubling back to what Andreas has mentioned earlier about our omni-channel concept, this fully integrated back end will also serve not only the online-online channel, but even the offline. I think the future is going to be online as well even for the offline merchants. Now, the second point apart from the back-end that I kept talking about just now, we also see that after eight years of our experience, we're actually sitting on pretty sizable data that we are currently working on to turn into intelligence; so that moving forward our merchants and sellers can be assisted in their growth strategy by the intelligence that our software can provide.
ALAN 25:06
Excellent. So, some interesting initiatives in store in areas ranging from O2O, back-end integration, and big data and intelligence. Well, gentlemen, absolutely fascinating to gain these on the ground insights into your many initiatives to bring Indonesia retail online. I'm looking forward to a steady stream of new innovation and functionality for Indonesia's online and O2O sellers going forward. Thanks so much for joining us today, guys.
ANDREAS THAMRIN 25:35
Thank you Alan. Great chat.
BRIAN MARSHAL 25:37
Thank you, Alan.
ALAN 25:38
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