"At the end of the day, somebody needs to aggregate neighbourhood demand" in order to become the dominant solutions provider to Indonesia's massive small retailer segment, states Ula Founder and CEO Nipun Mehra. Ula is founded on the provocative assumption that "the traditional store actually has a massive advantage over modern retail formats." The successful model will play to these existing strengths, not replace them, in bringing the mom & pop into the modern retail era.
"At the end of the day, somebody needs to aggregate neighbourhood demand" in order to become the dominant solutions provider to Indonesia's massive small retailer segment, states Ula Founder and CEO Nipun Mehra. Ula is founded on the provocative assumption that "the traditional store actually has a massive advantage over modern retail formats." The successful model will play to these existing strengths, not replace them, in bringing the mom & pop into the modern retail era.
(Transkrip Bahasa Indonesia di sini...)
ALAN 0:12
Welcome to the 26th 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 Alpha JWC Ventures. Now we at the Indo Tekno podcast have, over 55 cumulative episodes, sought to survey all major parts of Indonesia's internet economy. One area we could devote every single episode of this weekly series to over the next year, and still just scratch the surface, is the modernization of the SME and the traditional retailer in Indonesia. SMEs account for more than 60% of Indonesia's gross domestic product, or GDP, and 97% of its domestic workforce. They are the backbone of the domestic economy. Modernising the country's mom & pop retailers, making them more efficient, meeting their financial needs and simply preventing them from being eclipsed in Indonesia's longer term growth are thus critical. Today's guest, Nipun Mehta, Founder and CEO of Ula, is committed to infusing Indonesia's traditional retail industry with technology, with modern retail best practices and with data science in order to revitalise this linchpin to the Indonesian economy. The company's first two offerings, of a rapidly growing menu of SME-centric solutions are firstly, helping that mom & pop store expand its number of SKUs (or different products) from an average of 200 to now well in excess of 5000 SKU's. Secondly, the company has also built a payment credit business for small retailers, providing a working capital line to loyal stores to further aid buying within this previously cash strapped segment. Nipun, thanks for joining us today.
NIPUN MEHRA 2:07
Thank you for having me, Alan.
ALAN 2:08
Now Nipun. Hopefully I've characterised Ula correctly, at least its first few steps. Now if we work in reverse chronological fashion, we see elements of your past career that definitely now look like key puzzle pieces to get you to where you are today. Can you share with us those roles that help explain why you founded Ula, and that have informed some of the unique elements of our business plan?
NIPUN MEHRA 2:34
Sure. I think there's so much to talk about today. I'm super excited. Like I said, thank you again for having me. One quick anecdote from me. I graduated from Stanford in 2004. And I had a bunch of friends who were graduating the following year in 2005. So I went to their graduation ceremony. And it was the famous famous Steve Jobs speech. And I happen to be in the audience. And I heard it live. And one of the themes was about "connecting the dots". And I would not have imagined how dots would connect in my life at the time when I was sitting in the audience. But here in 2021, they've connected in a way that I least expected. But now retrospectively, they all make sense. I started out by joining Amazon. Now, I was interviewing for Amazon 2003. For some of the older folks on your podcast might remember that 2000, 2001 was a very rough time for Amazon. A lot of friends told me, "Don't go to Amazon. This company may not survive". And yes, if you look at Amazon today, it's hard to believe that that was a potential worldview at the time. And it was. But for me, what I prioritised wasn't living in California. It wasn't a safe job. I was just mesmerised by the idea of what Amazon was trying to do. So I packed up my life in California and moved to Seattle, where I spent the next four years in what was the supply chain technology team. Now why I bring this up is because at that time, as 20-something olds, we were given a very tough challenge of having to write the system's the algorithms that will give instructions on the ground on how much inventory is required, which warehouse it sits in, how does it move around in the network, and how do you keep the whole thing balanced? So you're using the minimum amount of inventory to service the maximum number of orders, and placing inventory close to customers so they can get it faster, and it can be cheaper. It was a super complicated problem. And now imagine doing that for millions of SKUs across different categories and across different regions in the world. Phenomenal exposure. Then in 2008, I went to business school, but we'll fast forward through some of that stuff. But the next big thing that came into my life was an opportunity when post-business school I was at BCG in Chicago. I got introduced to the founders of Flipkart. Now at the time in 2011, Flipkart was I would say a medium sized company, and time would tell eventually, whether this company would do well or not. But I got along really well with the founders, especially one of them, who I continue to be friends with. And one thing led to another and I just felt that the emerging economy and ecommerce...something is happening. And this was 2011. Again, a bunch of people told me "Don't give up life in the US. Who does that? People aspire to come back to the US? Why would you graduate from Stanford and Wharton and then go back?" Well, I did. Again, I think it was a turning point in my life and one of the best decisions I could have ever made. But at Flipkart, retroactively looking back, is when the seeds of what would become Ula started to develop. So I was running the P&L for what was called the general merchandise business. This included categories like books, and toys and FMCG products and beauty and personal care products. So if you look at this category, there's some very unique things about it. Most of the order sizes in typical buying behaviour are low ASP. The selling price is very low, let's say sub $15 baskets, sometimes $10, sometimes even lower. So I kept trying to figure out how do I make this P&L work. And it's incredibly hard. You cannot ship diapers that easily. You just don't make that much money. You can't sell a toothbrush. You can't sell a small bottle of shampoo and make money because the last mile delivery costs and the overheads involved are so high that ecommerce, the Amazon Flipkart style of e-commerce, actually struggles in that business. It works beautifully for a category like mobile phones, and to some extent, I would say even in apparel. But it struggles with the low price categories. And those were the ones that I was running. And not to mention that Amazon launched in 2013 in India, and then it became harder. But one set of retailers that always, always survived was the small mom & pop store. So I started exploring some of that theme. But back in 2013, when I was doing this, smartphone penetration in that segment was nothing. Most people didn't even know what a smartphone was. And it was impossible to bring them into any form of technology to integrate with Flipkart. And so I let go of that. And then I joined Sequoia Capital as an investor, where I think two very important things happened. My friends from Flipkart started this company called Udaan, which is one of the bigger companies in India. And they're obviously friends and colleagues from back in the day. So I was quite excited about that company. The second thing that happened was that in that process in 2014-2015, I got introduced to Indonesia. And Indonesia, for me at the time (was of course outside-in) looked like an amazing market. And so many interesting things were happening. And I think at the time, Sequoia, we wrote the first Series A check into Gojek, and so on. I started learning a lot about this market. Now fast forward to 2018. I was trying to figure out what I wanted to do. I wanted to do my own startup. I took sort of a middle role, so to speak a "soft landing", in a company called Pine Labs, which is one of India's largest payments companies, where I built their working capital product and also drove a part of their fundraise. And then I finally decided that I needed to build something of my own. And the idea of retail and how it is evolving in India, in Indonesia, was always very, very fascinating. So I remember it was Chinese New Year in 2019 when I came to Indonesia. What followed was probably one of the most amazing journeys on my life. I walked into crowded markets with a translator in tow, talking to lots and lots of retailers. I think I had spoken to a few hundred. I was just trying to show them the Udaan app, showing them the Khatabook app, and trying to just see what is the response, understanding their pain points, understanding how they work. And when I walked away five months later, I was convinced that we were looking at one of the most interesting opportunities in the world. And then I put together my founding team. And that's how we started Ula. So a rather long answer, but I think it was important to shed some light on the turning points in my life that brought us here.
ALAN 8:52
Wow, that has got to be one of the richest and most cohesive responses that we've gotten to the founder question. I'm pretty sure your autobiography will write itself here. Now one thing I find fascinating about the company's messaging is how you characterise the advantages of the mom & pop store. Many pundits refer to the many inadequacies and problems with offline retail. I see that you guys have written "The typical store has a massive advantage over modern retail formats. Nearly zero opex (operating expenditure) and individual on-to-one relationships with their customers." Can you share more colour around this much more positive assessment of the small retailer than I have seen elsewhere?
NIPUN MEHRA 9:35
I think this is one of the most counterintuitive things, that it takes a little bit of nuanced understanding, especially to Western audiences. First, a quick macro thing: the US modernised its retail before the dawn of the Internet. And China modernised frankly, for the most part during the internet, but before the smartphone. I would say Indonesia is only now starting to modernise. So the answers that applied In the pre-smartphone or even pre-internet era may not be the same answers that apply in the smartphone era. What do I mean by this? If you think about the cultural and the traditional way of retail, it is very, very, very neighbourhood-like. So most Indonesians, and I'm not talking about big city Jakarta, where you have shopping malls and so on. Even small neighbourhoods within Jakarta, or in the tier two, tier three, and maybe even some more rural cities, there is a strong sense of community. People shop with their neighbourhood retailer. And these retailers don't view their customers as one more transaction. It's a relationship. And that relationship, they know where these people who shop live, they have personal relationships there. They know where the kids are, how old the kids are. They know so much. In the modern retail world, in the e-commerce world, you would give an arm and a leg for that kind of a relationship. It's hugely important to have that. But then on the other hand, you think about the fact that they're only selling some small basket like bread and eggs or oil means that relationship is highly under-monetized. The second thing, which I think is pretty phenomenal, and very hard to replicate, is there are millions of these guys, and most of them are small, one shop kind of presence. And even the shop may sometimes just be an extension of the home. So if you think about the opex advantage that I talked about, there is no rent. There's no air conditioning, utility bills, nothing. There are no salaries, because it's only the family that is working there. And there are no taxes, because obviously they don't even meet the tax bracket levels. So here you have this phenomenal advantage, which can add up to about 600, 700, 800 basis points if you compare to say, a modern retailer like Alfamart. And in retail, anybody would tell you that even if you have 100, 200 basis points advantage on your competitor, you should be winning. With an 800 basis point advantage, it should be a no-brainer that you should be winning. But yet they don't. So the question then becomes how do we tie in all of this together? The fact that this is a once in a lifetime change at the SME level where smartphones are being adopted, their first window into the internet. They're all on content companies like WhatsApp or YouTube or TikTok. The next step is commerce. And then you add up this advantage that they have and say, "Okay, what does retail of Indonesia gonna look like in 2030? What is ecommerce in itself going to look like in Indonesia in 2030?" And those are the kinds of questions and the puzzles that one wants to answer. And that's our mission at Ula is how do we take this highly cost efficient, widely percolated retail model, which is so culturally integral to Indonesia, and bring it into a more modern smartphone era to create maybe a new form of modern retail or new form of e-commerce? Whatever we want to call it.
ALAN 12:52
Fantastic. Well, I wanted to talk about another seemingly unique element of the business model. Nipun, the common evolution of many solutions providers in, let's call it the "retail tech" space, is to spend their first few to several years with a core solution. Whether it's a marketplace connecting buyers and sellers, or bookkeeping solutions for the warung. And only after a significant track record and scale compiling data on the retailer, do they almost invariably move over to financial services to the retailer, the wholesaler, etc. Ula seems to be developing working capital and other financial solutions in tandem with the first effort to expand SKU selection. How have you been able to do that?
NIPUN MEHRA 13:39
In our line of business, we can give it modern era technology names, but commerce and credit have been tied at the hip for decades, if not centuries. Every time, no matter what business transaction happens, there's always a conversation around payment terms and so on, and how much money is needed to fund how much business. So it's not that we are inventing this, or we're doing something which is very unique, much as I would like to believe so. I mean, the methodology is unique, but the principle is not. And I actually firmly believe that it's a virtuous cycle. You've seen this in our data, which I'm happy to share in a bit. But the virtuous cycle is that when you offer someone a wide basket of products, if they don't have the money to buy that product, then what good is offering that product? So credit reinforces commerce. And then on the other hand, let's take one of the FinTech companies, and I'm sure they do a really good job, but one of the areas that they lack is the relationship with the store. For them, it's when a request for working capital or something comes in. There is no third party data to say how they perform. So what Ula is doing is we work with, for example, some of the FinTech companies or P2P companies that we're in conversations with on the one hand. And then we have this rich history of data on transactions and we have human relationships again, going back to underscore this. We have human relationships of our team with many stores, especially some of the older stores. So probably the one place where I would make a slight technical correction is, we're not building this simultaneously. I mean, we are at the macro level. But at the micro level, there's a merchant lifecycle that happens. And only after we've got conviction that there is loyalty to the platform and some sort of demonstrable quality of the relationship, then we flip a switch, and mostly it is automatic, where pay-later products show up.
ALAN 15:34
Understood. Now Nipun, how do we think about financial services longer term? Will largely be a marketplace for third party financial services? Or will we assume more of a principal role going forward?
NIPUN MEHRA 15:47
I think the current understanding right now is to keep it more as a third party financial services enabler than taking balance sheet on our own. Because we do see ourselves first as a commerce company, which is hugely aided by FinTech. But I would imagine that if we have the payment history on, hopefully someday millions of customers, that in itself behaves like a credit bureau. So if I fast forward five years from now, sure, we could always add the balance sheet element. But if I look at where we're at right now, the fact that we can already tell the relatively better creditworthy customers from the not so good, less worthy customers; is a very strong signal that is emerging even in the short life of our data. So if we amplify that, or as we grow five years later, I would imagine that we could partner with so many different entities of different types to offer different types of loans. It doesn't just have to be a pay-later product. And also it keeps us fairly asset light in that sense; in that by partnering, we don't have to manage a lot of the other side of FinTech, which is supply of capital, which is regulation and so on.
ALAN 16:51
Understood, now Nipun, as you may recall, I've mentioned to you in previous conversations, that I've studied in some detail the efforts in China to bring that fractured, small-scale offline micro merchant to use many of these futuristic offerings. I evaluated Alibaba's LingShouTong (零售通, LST) effort, Ule's (邮乐) logistics network built to supply mom & pops, and similar incentives from JD.com and others. None of them succeeded, largely because of the capex involved in fitting this small retailer with new POS devices, and opex and logistics involved in supplying them with product, all which proved extremely costly. How does the Ula solution compare to this first generation of B2B efforts?
NIPUN MEHRA 17:39
That's a great question. And it's also a very pertinent question to the space. I have a view on this. First of all, I do want to caveat that while I know the LST model, and I know that it took a certain shape, I would wonder is that the best way of running a B2B type of model. With due respect to Alibaba. Obviously, I have huge respect for their business. But it's hard to justify, especially when you look at the small mom & pop stores of Indonesia. And to be honest, this model has been tried in Indonesia by other companies, and it had exactly the same outcome, which is that the payback period on the capex is not justifiable. So our model was never to take on any capex. In fact, I would say that if I were to fast-forward a little bit into the future on where Ula is going, or where we want to take it, is to leverage the advantages of the current stores, which is the ones that we just talked about a little while ago. And by bringing them more into this force-fitted, modern retail look-and-feel, you're actually undermining the things that make them special. They're flexible. They're low cost. There are so many beautiful things about the space. It may not look pretty to the eyes. But that's not the reason why customers shop at their stores. The customers shop at their stores because that's where they shop. That's their relationship. That's where they've always shopped. So just because it looks fancier, it is not going to change anything. And I believe firmly that the better way to build a business, I would say is even to take the China analogy. I was reading somewhere that even Xingsheng Youxuan and Nice Tuan started by offering additional SKU's to convenience stores. And then over time, of course, with the WeChat ecosystem, they became somewhat different, more social commerce things. But the starting point was always that because culturally, that's how emerging economies around the world have always shopped; with their neighbourhood retailer.
ALAN 19:32
Understood. Now it seems as though it is indeed necessary to build some supply chain infrastructure that is catered to bigger and heavier B2B order baskets than simply for instance, B2C ecommerce. How do we do that? Do we outsource to third party logistics companies or 3PL's? What's our solution in getting product to the mom & pop?
NIPUN MEHRA 19:57
Another very relevant component of ecommerce. Let's step back one bit on what is the problem that we have to solve? And why do you need this in the first place? What we find is that service perception is a very, very important thing in the life of a store, contrary to what many people believe. It's not that if you let them make a quick buck, that's the answer. And therefore, you should just discount everything. There's usually a default relationship, and we aspire to be the default relationship. And sure, if someone wants to offer a quick buck here and there, we'd welcome our customers to go take advantage of it. It's in your interest. But the service perception is so difficult to manage. It is incredibly hard. How do you manage on-time info across 1000s of SKUs? And that is the challenge which we've taken. Probably this is not the forum to share that data. But we have retention data. We see about 300% plus and rising GMV (gross merchandise value) retention. What that means is that people are shifting their buying towards Ula, because they see the advantage of it. So we feel the need to do that for now is also coming. We have to provide the service quality. And for that we need a little bit of infrastructure. Now, at the same time, you have to also balance it with costs, because this is a thin margin business. So the right answer for us by trying different things ended up being outsourcing to 3PL's, but not 3PL which is organised, large and institutional. Again, that informal sector in Indonesia is very, very strong. There are plenty of fairly good quality local 3PL providers, and they know their neighbourhoods like the back of their hands. So what we ended up doing is almost building a platform where we bring local 3PL's into the platform. And we allow them to start taking business from us. Over time I see this becoming its own advantage. Whether we monetize it or not is a different question. But the network of local 3PL's and our apps and our processes imposed on that network, again yields the same sort of results that you would expect a more formal sector 3PL provider to yield.
ALAN 22:01
Understood. Now we talked about the China precedent. I want to talk about India. India, on the other hand, enjoyed some success when it comes to B2B platforms for small businesses and shop owners. Where exactly have been the greatest successes and which of these models can also succeed in Indonesia?
NIPUN MEHRA 22:21
Because the underlying pillars of bottoms-up innovation, of WhatsApp versus say a WeChat, or the state of the economy, the GDP per capita, the cultural fabric, the relationship-driven business, are very similar to India. In fact, that was one of the reasons why I as someone who grew up in India, chose to work in Indonesia, because it didn't feel too far from home. I see those analogies playing out a little bit more strongly in Indonesia than in China, simply because it's a slightly different setup. And I think one of the reasons why it's working now in India is, going back to the point that I was making earlier, India also for the most part is modernising its retail in the smartphone era. So the solutions that you can imagine are very different from the solutions that you would have imagined in, say 2007 or 2008, when there was no smartphone. But you did have internet. You had websites. You had ecommerce. It was just different. In fact, I'm convinced that we're only scratching the surface of ecommerce in India. I don't think the answer is going to be the Amazon or Flipkart model, at least not for the masses. It'll have to come with some sort of tweaks and nuances and changes, which I think those two companies also are already making. In fact, they've built a massive infrastructure by themselves to deliver to small local areas. The larger point that I'm trying to make is, innovation is bottoms-up. The retail business is modernising in the smartphone era. So we are seeing very new forms of ecommerce that are emerging, whether it is B2B ecommerce directly, such as Udaan, whether it is companies like DealShare or CityMall and other such startups, which are taking a different lens to aggregation. Because at the end of the day, somebody needs to aggregate local demand. And that's where all the puzzle is. And it's the most important puzzle.
ALAN 24:08
Fantastic. That's very interesting. Now Nipun, as a VC and startup advisor, I have found very few business models that are able to generate revenues serving the warung and SME space. How will small retailers pay for our services longer term? Do we have any strong proof-points in monetization, whether it's a subscription service, maybe commission driven revenues, or spreads on financial services or even other services? Or is monetization basically still unproven in this segment?
NIPUN MEHRA 24:41
Let's split this answer into two parts. There is the macro view. The macro view is fairly easy to understand. You have on the one hand, Indonesia, for example. It's a $300 billion market. The revenue pools upstream of a retailer probably are in the $15b, $20b, $30 billion range. $30 billion of revenue pool translates to, give-or-take, two to three billion of profit pools. Again, it depends on category and it depends on region, but broadly speaking. So the money is there. And if you include the retail value pool, that also in itself adds to the profit pools available for any company you tap into. I don't think there is doubt on that. I think there is a question that is: how do you approach the segment to be able to take advantage of the value pools that are in retail? And right now I'm speaking about retail. I'm not talking about the general SME. Of course, there's lots to be done even for the painter, the plumber, the lawyer, the doctor. It depends on different skill levels and different types of SME's. In retail, for us, the proof points are already there. We know that people are willing to pay for a product that helps them either save more money or make more money. And there is enormous comfort around that. They've always done that. So it's not anything new. There is money to be made in financial services. Because again, the alternative, which is the informal sector credit, is so much worse than the formal sector. The problem so far has been that the formal sector was unable to reach this group of people. Now it can, thanks to efforts such as ours, or other data-focused companies that are in the market solving for their sectors,. If I imagine, again, for five years into the future, for example, a good analogy actually would be the Amazon example. Where, once they have the distribution scale; private labels, ads, and data monetization all started to become an enormous part of their revenue. And these are very high margin, straight-to-bottom-line revenues. So it comes down to how you build scale. It comes down to how sticky is your user. It comes down to are you helping them make more money? Are you helping them be more successful? And if you're able to do that, I feel monetization is not a problem in this segment at all, at least not in retail.
ALAN 26:46
Gotcha. So there is a willingness to pay if we can help the small business owner save costs or grow revenues, or ideally both. So that's encouraging to know. Now Nipun, shifting topics, what has been our most successful channel to onboarding new clients?
NIPUN MEHRA 27:04
As with most things in Indonesia, it's a such a relationship driven business, especially in the middle and lower tier and outside the big cities. You have to start with a human being. So the most successful channel that we've seen, and we've experimented with lots of channels, has actually been to start off with human connections. Now the human can be present in person like a salesperson, or it can be a virtual engagement. Sometimes it's a chat, sometimes you watch this video and come back, and so on. But there is some element of human connect that is required. Now what we see after that is people, once they've experienced the service, so we actually have a merchant lifecycle process that goes as: registration, acquisition, activation and retention. When people graduate into the retention phase, then we start seeing less need for the human connect. So it's almost like a funnel.
ALAN 27:55
That makes sense. Nipun, I've read reports that some mom & pop retailers, particularly in markets, like Jakarta, have been completely inundated with mobile app-based solutions. Whether it's apps from specific brands such as P&G and Unilever, or the "Mitra" (meaning "partner" in Bahasa Indonesia) the mitra apps from ecommerce platforms such as Tokopedia or Bukalapak, B2B marketplace apps, bookkeeping apps, etc. What will the handful of apps in this currently crowded space do to win mindshare of the small store owner in the end?
NIPUN MEHRA 28:31
This is exactly what we see playing out in the field. It is a battle for the space on the phone. It's a battle for the space in the mind. And that's why it's so important to have sticky users. And what I mean by that is, imagine again, for the broader audience, this segment of store owners, for example, they're operating on low end Android devices. The memory in that phone is actually so little, and whatever space that is first goes to apps like WhatsApp. It'll always go first to WhatsApp. So you're actually fighting for very few megabytes of space. And I've seen some companies that have created 30mb, 40mb, 50 megabytes (sometimes even more) payloads. Not just low end Android devices, I forgot to mention. Even the signal, the 4G signal, is so choppy in most parts of Indonesia, that if you're not super-optimising your app, it is very likely that it'll be the first one uninstalled. Second is the space for the mind. Space in the mind, time-and-time again it has been proven, that if you matter to a business, they will keep you first. So we focus for example, on customer stickiness. We want to get to a big part of their business because we know that once we reach say 15%, 20% or even higher of somebody's share a wallet, we have the mind space. At that point, no one can kick us out. And as I was saying earlier, we aspire to be the default relationship. So it's okay for us to have have a few stores. You will notice that we don't talk about having tonnes and tonnes of stores at once. We don't talk about tonnes and tonnes and tonnes of GMV. Nothing. Just focus on a few customers. Let's get them to be sticky on our platform. Trust Ula. Build that relationship, at least as far as we can. And as much as we'd like to do that for everybody, with some people were more successful than others. And wherever we are successful, so many different opportunities opened up. And that's been our philosophy.
ALAN 30:25
Again, makes eminent sense. Now Nipun, how his usage of the Ula solution trended at various stages of the pandemic, between the beginning of 2020 through today?
NIPUN MEHRA 30:37
I think we are a little bit of a unique piece over here, because we actually launched in January, 2020. And when we launched in January, 2020, it was early Jan. And we had heard that there as a virus or something happening in China. But it was not known to be such a big deal. Anyway, we we started with lots of hopes and dreams. And then two months later, suddenly, we were caught in a storm. I often give the analogy that we were a little boat in a big storm. And navigating through that was one of the most amazing things that I think the team has done. And frankly, this is where I would like to really, really acknowledge the efforts of my co-founders, because as travel got restricted, I got stuck in Singapore. But my co-founders did the heavy lifting through the pandemic. And what happened was something very interesting, which we had not expected coming into May last year. That was when the first shock of COVID started to recede, and the Ramadan festive month had ended. We found ourselves at a point where our businesses took off. Why? Because what we did not know at the time was everybody talks about how B2C groceries took off. But the same thing applied for the small store as well. They could not go to work. They could not go to a crowded market to source their inventory anymore. That was out of the question. They were scared. They didn't want to order in big, bulky baskets. They wanted to order multiple small baskets. They shifted their buying from more luxury care products to more daily care products, daily use products like rice and oil and so on. Because that's what their customers were buying. So suddenly, the equation changed. Now, I wish in hindsight, we had been bigger. If we had launched in January 2019, it would have been a very different answer. But even at our small scale, for us, our business doubled between May and June because people realise that this was just a far superior solution.
ALAN 32:23
Interesting. So you did see some very strong growth through the ups-and-downs of the pandemic. Nipun, do you have any preliminary cohort data on the expansion of SKU's or product range that the average client has seen? Maybe uplift and GMV growth, margin improvement or other KPIs?
NIPUN MEHRA 32:41
I have anecdotal evidence that some of the smaller guys have seen up to 20% improvement in their income, which is quite a bit. And some of the larger guys maybe more like sub-10%. But it's getting there. And this has come mostly from having better availability of product. Lost sales or lower
ALAN 32:57
Understood. Now Nipun, when might we see Ula and other markets within the region?
NIPUN MEHRA 33:03
Ah, that's one of the tricky ones for any founder. I think we are just considering the fact that Indonesia in itself is a monster market. It's huge. And we're only operating in one small part of Indonesia. And that does not even include Jakarta yet, because we're not in Jakarta. yet. The headroom is so high and so large that I think that's a "can that we can kick down the road". We don't need to worry about other markets yet. But I wouldn't rule it out.
ALAN 33:28
That doesn't sound particularly controversial. You do definitely have a very large backyard there.
NIPUN MEHRA 33:33
Just shedding a slight personal anecdote for your audience. I spent a considerable amount of time in the US. And I was repeatedly challenged that "Why do you think India is the next big thing? Why do you think India is the next big thing?" I just have between data and gut, I trusted myself and I took a leap. Once again, in 2018, everybody asked me "Why Indonesia? Why Indonesia?" People don't understand how big this is. I thought the decade of 2010 to 2020, and beyond of course, would be India's story. And I think the decade of 2020-and-beyond is going to be Indonesia's story. And I just did not want to miss that story.
ALAN 34:09
I'm in the same boat. You're "preaching to the choir," as they say. Now Nipun, describe to me what Ula might look like in three years' time. Not just in terms of customer span, but maybe in terms of services rendered and main sources of revenue.
NIPUN MEHRA 34:24
This is definitely I would say an evolving answer. But I know the long term direction. It's like you want to go from New York to LA but you're figuring out how to get there. So let me describe what LA for us looks like. And this is probably the best way to circle back to the introduction itself. When I was at Flipkart, I realised no matter how we tried, we could not make a low basket size work. And the reality of Indonesia is that people in Indonesia, the masses of Indonesia that constitute most of the market, I would argue maybe 80% of the market, don't buy in $25 baskets. They buy in $3 to $4 baskets. And buying in $3 to $4 baskets means that you cannot serve as using the same Amazon Flipkart type of template. That model does not work. Different models have to take shape. What will ecommerce look like in 2030? Is it going to be pure B2C-style where you need $20-$25 of minimum basket size to make money? And if so, then how is that going to cater to the masses? Consumption is increasing at 8% to 10% a year. That means about $100 billion are going to get added to the traditional retail market in the next five years. So where does that bring us? How do you take a neighbourhood where a bunch of people are actually shopping in $5 basket sizes? B2B ecommerce works great once you get to $25, or B2C also works great when you get to $25. So somebody somewhere has to aggregate the demand. Because the economy isn't going to grow as fast as consumption is. GDP per capita isn't going to improve that much. We don't have a WeChat or Alipay or any of those instruments in Indonesia. So when I imagine Ula in the future, I see us being the friend of the retailer. Because the retailer is fundamentally aggregating neighbourhood demand. He's the guy or she's the person aggregating those $5 baskets into $25 orders. So as long as we're able to help our retailer source better and smarter, give them the money or help them get the money to source what they need for the neighbourhood. And finally, give them the tools that they need to make revenue. In some future version of this podcast Alan, I would love to come back and explore all three in hopefully more depth, but especially the third one. Because if we are able to prove some of the hypotheses that we are working on right now, I think we're looking at a very different form of retail.
ALAN 36:40
Great, I will book you for July of 2026. I'm looking forward to that.
NIPUN MEHRA 36:45
Likewise.
ALAN 36:47
Excellent. So Nipun, some really interesting and provocative insights and some very exciting solutions that you have shared with us. That makes me think that the small retailer may not just survive, but in fact, thrive in years to come in Indonesia. Thanks so much for joining us today.
NIPUN MEHRA 37:02
Thank you so much. Once again, thanks for having me.
ALAN 37:05
You're very, very welcome. 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!