Indonesia has become a crucible for tremendous amounts of experimentation in ecommerce business models. Steven Wongsoredjo, Cofounder and CEO of Super, has combined both the group-buying elements of global category leaders such as China's Pinduoduo, along with several uniquely Indonesian aspects such as agent-based sales. Shirking the "Jabodetabek" focus of most other ecommerce platforms, Super has instead found strong growth in Tiers 2 & 3 and rural markets in the eastern parts of Indonesia. Super estimates this unique social commerce opportunity to be USD200b in size.
Indonesia has become a crucible for tremendous amounts of experimentation in ecommerce business models. Steven Wongsoredjo, Cofounder and CEO of Super, has combined both the group-buying elements of global category leaders such as China's Pinduoduo, along with several uniquely Indonesian aspects such as agent-based sales. Shirking the "Jabodetabek" focus of most other ecommerce platforms, Super has instead found strong growth in Tiers 2 & 3 and rural markets in the eastern parts of Indonesia. Super estimates this unique social commerce opportunity to be USD200b in size.
(Transkrip Bahasa Indonesia di sini...)
ALAN 0:12
Welcome to the 25th 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. Now one thread of analysis that has run through much of the Indo Tekno podcast has been the extent to which the business plans that our guests have built have succeeded in other markets (whether China, the US or elsewhere); and on the other hand, the degree to which the offerings are really exclusive to Indonesia, a product of the unique needs and characteristics of the market itself. The e-commerce segment has a rich mix of both strategies that have worked in other environments, and features and functions that can only be found in Indonesia. Today's guest Steven Wongsoredjo, is CEO and Cofounder of fast growing social commerce platform Super. We look forward to examining Super's success, both through this lens and across other subjects today. Thanks for joining Steven.
STEVEN WONGSOREDJO 1:16
Hi, Alan. Thank you for your time. And thank you for having me on Indo Tekno.
ALAN 1:21
You're very welcome. Let's take it from the top. Can you explain for first timers in the audience what Super does?
STEVEN WONGSOREDJO 1:28
Sure. Super is a social commerce group-buying platform serving the second and third tier cities and Indonesia rural areas. We mainly do three things. First of all, we are empowering community leaders in the rural markets to become self-made entrepreneurs by selling various goods to their communities. Second of all, we facilitate them to use our app to chit-and-chat with their friends, aggregating the demand of their neighborhoods. Lastly, building hyperlocal supply chain as the backbone of the company.
ALAN 2:03
Now Steven, Super is often referred to as the "Pinduoduo (PDD.US) of Indonesia, that evokes a lot to those of us who know Chinese e-commerce. What exactly is meant by that?
STEVEN WONGSOREDJO 2:15
Sure, it means basically, we would like to become the first and the biggest social commerce platform in Indonesia, like Pinduoduo is in China. So we do learn a lot from Pinduoduo, from the group-buying aspect. That's why it makes our supply chain very efficient. But we also adopt and adapt to Indonesia's market. In our form, we do have this agents model, where our agents act like a catalyst to aggregate the demand of the community. So the thinking and the rationale came from Gojek. Early in the day, Gojek was mimicking Uber's business. But they adapt to Indonesia market through motorcycles. And I think because they made such decisions, they're now as big as they are. So the reason why we say "the Pinduoduo of Indonesia" is that we would like to become the social commerce platform of Indonesia, that is made by Indonesians in the Indonesian model itself.
ALAN 3:12
Fantastic. That's very helpful. Let's continue to peel the onion here. Can you now describe Super in terms of where we sit amongst all the forms of e-commerce that there are in Indonesia, from the large e-commerce marketplaces to the social commerce apps that exist in our space?
STEVEN WONGSOREDJO 3:30
In Indonesia, there are two generations of commerce. The first generation of commerce is like the Taobao model, a C2C (consumer-to-consumer) like business, where everything is done online. Out of those four e-commerce juggernauts in Indonesia, billions of USD have been poured into their balance sheets. And for 10 years plus, they have been operating in the market, but they could only capture from 5% to 10% of Indonesia's offline retail total addressable market. So this offline market has a huge potential. Therefore, the second generation of e-commerce is born. And now the hottest sector in Indonesia is social commerce. In the social commerce itself, there are three types. The first is the influencers model, where the influencers will have that "blog and vlog" to basically market their product. And their followers will eventually purchase the product from their blogs. The second is like the PDD model, where everything is done online. So you can see your neighbors' order in the same group on-line. The third one is the O2O (offline-to-online), where Super is sitting right now. It's the agent-based model. As I've mentioned before, the agents will catalyze their communities by aggregating the demand of the group-buy. And in the competitive landscape, our main purpose is the second tier, third tier cities and Indonesian rural areas. In fact, we have zero operations and sales in Jakarta. Everything is done in the eastern part of Indonesia.
ALAN 5:02
Gotcha. So I understand, we're talking about tiers two, three and rural areas. Can you give us our total addressable market numbers? In other words, why should we be paying attention to Indonesia second and third tier cities and rural markets?
STEVEN WONGSOREDJO 5:18
I would like to explain this from two angles. The first is the sector that we are choosing. Super started by choosing FMCG products. The second and third tier cities and Indonesian rural areas account for USD120 billion plus. It's a huge market. And at Super, we're very ambitious. We're going to add more SKU's based on the data that we've got. And we're going to add SKU's such as cosmetics, fashion and more, later on and in the future. That would enlarge our total addressable market, that is more than USD200 billion. The second angle is that the first wave of start-up's that now are unicorns or decacorns came from the western side of Indonesia, or mainly Jakarta metropolitan city. Jakarta metropolitan city has a huge GDP like USD200 billion-plus and can produce companies from the western side. Now we are in East Java. It is smaller than Jabodetabek (Jakarta–Bogor–Depok–Tangerang–Bekasi–Puncak–Cianjur), but our GDP is still USD166 billion. If we do simple math, and add more and more provinces in the eastern part of Indonesia, for example, South Sulawesi, it's going to add another USD40 billion, it's going to be equal to Jakarta. If we could take 2%-5% of the total addressable market, it will become a very meaningful business that came from the eastern part of Indonesia.
ALAN 6:42
Great. So I understand your focus on Eastern Indonesia as a core focus. Now, let's get more specific. Why would, for instance, a Unilever want to sell into the Super network versus say, into a platform that focuses more on first tier markets?
STEVEN WONGSOREDJO 7:00
Sure. In fact, one of the hottest products that has been sold on the platform came from the local product. Super mainly helps the underdog FMCG rising star player that came from the rural market. And we are trying to help to improve their sales. Why do they want to work with us? Because they have limited distribution channels due to the limited resources that they have. So that's why they want to work with us. But then, we also do work with the bigger players like Unilever. Why do they want to work with us? They have this limited distribution channel in the sense that it's really hard and complicated for them to serve the smaller markets in the eastern part of Indonesia, because their big trucks would be hard to pass the smaller roads to reach certain villages. Now, they really need to work with us because we have this hyperlocal infrastructure that would help them to distribute all of their products to Indonesian villages in the eastern part of Indonesia.
ALAN 7:59
That explains a lot. Now, Steven, part of Super's value proposition is to collapse Indonesia's famously inefficient supply chains, again, particularly in second and third tier cities and in rural markets. Aren't basically all distributors, traders and wholesalers, therefore resistant to what we're doing and somewhat threatened by what Super is attempting?
STEVEN WONGSOREDJO 8:22
Since day one, we have worked closely with the FMCG principal. So we do really need to understand what is their main problem before actually executing to the market. At Super, we do not replace someone else in the supply chain outside that supply chain because someone will get mad. So we do optimize the supply chain, meaning that all of these bigger players such as distributors, traders, and wholesalers usually exist in the bigger tier cities, and this is their main market. This is not our main market. Our coverage is of the Indonesians rural areas. Therefore, we optimize through these rural areas by also working closely with the principal and asking them which area that they haven't tapped into, or are untappable for them, because of the challenge of Indonesia's infrastructure. So we do work closely with them. They also do give us some price guidelines. So we do our best to abide by the price rules as best as we could. So in this approach, they're more friendly with us and they want to work closely with us. So, so far, we've been maintaining a great friendship and relationship with them.
ALAN 9:29
Understood, okay, so it's not a zero sum game. And a lot of our heat map is complimentary to their current service regions. Well, Steven, can you quantify through a couple examples how much cost we remove by streamlining the supply chain?
STEVEN WONGSOREDJO 9:45
Now in the outskirts of East Java, we could get around 10% to 15% of the price that we sold to the end consumers from agents to the end consumers, comparing the delta price of the nearest store. But then, now, we're expanding to the other islands of Indonesia. We're going to launch our services, I think in the next two weeks. The delta of the price is even more. This is in the outskirt of cities, for example, in South Sulawesi. The price discrepancies could reach more than 50%. So these are the loopholes that we're trying to optimize while we can be a sustainable business in the middle, and make a Win-Win and make everyone happy as well. Because the price is going to be more affordable for the villagers. At the same time, the suppliers will get more orders.
ALAN 10:32
Understood. So Steven, what are our growth targets for 2021 and 2022 in terms of GMV (gross merchandise value), and other metrics?
STEVEN WONGSOREDJO 10:42
So right now we are in one province, which is East Java. The goal in the next 12 months is to go after one more province in the eastern part of Indonesia. We want to prove that the playbook that we've been working with in East Java will work in this province. Furthermore, we also want to give a meaningful fight in these two provinces, instead of just building a narrative that we're going to cover the whole of Indonesia. In terms of another metric, we're trying to maintain at least 3x year-on-year growth.
ALAN 11:14
Understood. Well, that's some pretty fast paced growth. So Steven, just going on to something different: I'd be curious to know, what are the best selling categories on the Super platform?
STEVEN WONGSOREDJO 11:24
Sure. It's ranging from tea (any tea product), coffee (there are several types of coffee as well), as well as well milk. So those are the three biggest products sold on our platform throughout the years.
ALAN 11:39
And is that powdered milk, or are you working with fresh products?
STEVEN WONGSOREDJO 11:43
It is a powdered milk.
ALAN 11:45
Gotcha. Steven, what are the top two or three metrics that we're trying to optimize for? Is it GMV per reseller? Is it number of SKU's available on the Super platform? What is it?
STEVEN WONGSOREDJO 11:58
There are three important metrics that we monitor month-to-month. Because at first, we do want to make sure that we don't build a "leaky bucket" business. These three metrics are our agents cohort, basically calculating or measuring agent retention per month. We break down the monthly cohort. Second is order cohort; how much these agents would order after they've been joining for the first month. Of course it has to grow. The third one is the GMV cohort, whether the wallet share has been increasing or not. These are the key three metrics, the heart of Super. You can see whether the plane is going up or going down.
ALAN 12:41
Gotcha. Now, in addition to bank transfer, COD (collect-on-demand) seems to be a very common means of payment in this area of e-commerce. Why is that Steven? Is there scope also to develop online payments and other alternatives? Or is COD likely to be the way of the future?
STEVEN WONGSOREDJO 12:58
I think it has to be done step-by-step. As we all know, the current credit card penetration in Indonesia is only 5%. On top of that, the e-commerce penetration as well for the online payment is around there. Therefore, I feel that the COD is the way for us to crack the market for this financial system. But later on once we get their trust, we can work with local banks in order to bank our agents that have been trusting us to put that money in the bank. Second of all, there are several various FinTech players coming in to tier two, three cities and rural. Instead of us building another FinTech feature inside our app, we do want to partner with them, and they'll take care of our hassle. And we'd like partnering up to build the ecosystem together going onward.
ALAN 13:50
Understood. Well, Steven, how do you balance growth versus profitability? Are we a "growth at all costs and profitability much later" type of company, or is margin important to us?
STEVEN WONGSOREDJO 14:03
We do maintain balance within the group. As a startup, we need to realize that we need to grow fast. But at Super, we do it step-by-step. It means that, as I mentioned before, there are three cohorts that we've tracked and then we count the number that's been part of the dashboard target that we try to achieve per month. We also do want to make sure that each of these agents would increase their commissions as well as revenue to themselves to be at least near the minimum wage of the area that they're living in. Therefore, they'll be stickier to us and they will actually work much harder in the end. So, before we expand to the newer area, we will usually like to see this number instead of just grow at all costs and optimizing in the end. We've seen several cases where this approach would then be so fruitful and end up good. So we've tried to do it step-by-step, remaining cautious but still growing fast.
ALAN 15:01
Now Steven would have been the most surprising behaviors that you've seen on the Super platform?
STEVEN WONGSOREDJO 15:06
This is funny in a way. In the early days of Super tracking agent cohort, order cohort and GMV cohort quite consistently, we found certain cohort went down pretty bad at the third month. But later on this number could pick up again. We thought that this was competition, but we are aware that we are the only one that is doing social commerce in this area. So we did some survey and found that some of these agents, once they get a lot of money, they'll take a holiday, they'll go spend that money to buy a new motorcycle, and those things until their money is out. In the end, once their money is out, they come back to Super. So this surprising fact allows us to launch Sedulur Super Programme or in English the "Superfamily Programme". At Super, we also have the responsibility to make their quality of life better, by educating them to manage money. So if they got a lot of money, it's good. They can purchase something for their leisure. But they need to remember that they still have kids, that they need to nurture and grow. And finally, they need to save some money for their kids to go to college someday.
ALAN 16:15
Wow, an excellent initiative to foster financial literacy and financial responsibility. I wasn't aware that you guys were involved in that. Now, Steven, when we last spoke, you made the distinction between FMCG or "fast moving consumer good" brands that are sold through the Super platform and "white label". How are these different and what is our likely mix between branded FMCG and white label by let's say next year?
STEVEN WONGSOREDJO 16:41
We're trying to grow our white label product to be like 5%-10% of our revenue mix. Long term, we have two expansion plans. One is the vertical expansion. Second is horizontal expansion. For vertical expansion, social commerce is just the way for us to enter into the market. But in the next 10 years, we would like to become the Walmart of Indonesia without having a retail store, and having a very efficient marketing. Like Walmart in the US, one of the profit generators is the white label department. We do now also have that white label department. We name it Super Eats. They do also have the middle mile. Those are the warehouses where they will distribute all of their goods to the retail which is the Walmart itself. We do also have those things. Our middle mile is those warehouses and hubs that we locate near the villages that we cover. And our retail is basically our Super agents. But, in the long run, we would like to do horizontal expansion by working with the third party P2P lending, platform users, digital goods providers and so on. But we wouldn't take the principle risk. Instead, we're going to crop every single profit that they're going to make through our platform.
ALAN 17:54
Some very interesting dimensions of diversification that you have in mind. Now Steven, onboarding sellers is very costly for a lot of platforms. We meanwhile talk about acquiring resellers very cost effectively. Can you explain this advantage in greater detail?
STEVEN WONGSOREDJO 18:10
The most beautiful thing about social commerce is that we would be able to utilize "social capital", to stimulate the virality, therefore can reduce your CAC (customer acquisition costs). There are two of the greatest initiatives that we've tapped at Super, and it's been done so well for us to do an expansion in the market. That is first: we do offline mini-roadshows, where we do have the acquisitions team that we employ villagers to work directly with us. Therefore, we have the "warmer approach" to go after small villages in the eastern part of Indonesia. And out of this mini offline roadshow, some of those folks will join us. Second programme is: we do a finder's fee programme, like a referral programme. Agents who refer will get the bonus. So these are two of the best acquisition strategies on our platform.
ALAN 18:58
Thanks for clarifying that. Now, Steven, we talk about being "hyperlocal", in our supply chain, in describing our resellers, and even our white label products. What exactly do we mean by hyperlocal?
STEVEN WONGSOREDJO 19:13
Super has one of the most powerful Big Data. We are able to record some of the eastern part of the province. With multi millions in USD in transactions per month, we would be able to understand what is the demand of this area, and launch some hyperlocal products accordingly. So it would be more targeted, the business would grow much faster, and the end users will get the things that they want to get. Now if we're talking about the reseller side, as what I've mentioned before, we have the villagers directly work in our acquisitions team. And the villagers came from their villages directly means that they will talk using the same language and dialect and they can use that trust to stimulate transactions and to stimulate community leaders to be part of the platform. So for example, in the next two weeks, our service is going to be in one of the islands of Indonesia in the eastern part. We wouldn't send the East Java team to go to the eastern part of Indonesia. We're going to come down and build the local team to be able to build another community of group buying over there, instead of basically exporting all of the East Java team to be there. Business could grow much faster.
ALAN 20:28
Steven, just a little more color to the Super experience: can you profile the "average agent" on the Super network, by gender, by age range, by interests and other activities?
STEVEN WONGSOREDJO 20:41
So our agents mainly are female in the range of age from 25 to 34. They may be one of these mini-influencers in their neighborhoods. So these are the people that we have because somewhat we can use and utilize their social capital. The rest of the community will put so much trust on this individual and we can sell our products throughout this community here.
ALAN 21:05
Steven, really enlightening to hear of the many innovative means by which Super is successfully addressing these unique challenges that doing e-commerce in Indonesia presents. Thanks so much for joining us today.
STEVEN WONGSOREDJO 21:16
Thank you Alan for having me, and have a good week ahead.
ALAN 21:20
Likewise. We hope our listeners have enjoyed today's episode. As always, please consider sharing any feedback that you have about the Indo Tekno podcast with us. Terima kasih telah mendengarkan. Sampai jumpa lagi!
Transcribed by https://otter.ai