In the eyes of locals, Bukalapak is a place where you can buy large quantities of bargains. There was Shopee before and Tokopedia afterwards. How did this company become a "unicorn" in Southeast Asian e-commerce?
Author丨Zhao Xiaoxiao
Editor丨Kong Lujiao
Picture source丨Photo Network
10 years ago, in the capital of Indonesia, , Jakarta , three founders of a company were discussing fiercely: Should we close the business, or continue to move on the road of e-commerce?
A year ago, they were dreaming of creating a super e-commerce platform in their narrow office. However, the benefits brought by this business are insignificant. The company once failed to pay wages and faced a severe cash flow crisis.
BukalapakIndian means "stand up". This name may sound unfamiliar to ordinary people, but in Indonesia, it is known as the four major e-commerce unicorns in Indonesia, together with Shopee, Tokopedia, and Lazada, and is one of the most popular e-commerce platforms in the area.
Bukalapak was founded in 2010 and became a "unicorn" company with a market value of more than US$2.5 billion in 2019. In ten years, three young people have put their "stands" all over Indonesia and currently have more than 70 million users.
How was this company born? What are the stories behind it?
In GGV's English podcast Evolving for the Next Billion, GGV managing partner Tong Shihao and GGV vice president of investment Dimitra Taslim had a wonderful conversation with Achmad Zaky, founder and chief strategy officer of Bukalapak, sharing Bukalapak's growth history and wonderful stories.
"big business opportunities" in the "small shop"
Dimitra Taslim: We want to know the story about Bukalapak. What is its starting point?
Achmad Zaky: Bukalapak was founded in 2010. It was originally just an e-commerce platform. Now it has developed into a comprehensive life app and has become the fourth unicorn company in Indonesia.
Bukalapak's business philosophy is very simple: through the bridge of e-commerce, there is no small business that is difficult to do in the world. We planned to empower small businesses at the beginning of our establishment. Indonesia is the country with the largest proportion of small and micro enterprises, and there are very few medium-sized enterprises. What Bukalapak wants to do is to help small businesses grow into medium-sized enterprises.
Tong Shihao: In , Indonesia , e-commerce is growing rapidly, but the penetration rate of the Internet is still very low. Less than 10% of people who have the habit of online shopping. How to discover the other 90% of people who do not shop online?
Achmad Zaky: This is the first major challenge we encountered when starting a business.
More than half of Indonesian people live in rural areas and do not know about online shopping. Some people have no conditions to shop online because they do not have the Internet access. In addition, Indonesia has not yet entered the era of "cash is king", and even online shopping, it prefers cash on-the-payment.
When the first wave of e-commerce developed, we creatively promoted it through media channels such as TV, with the goal of allowing more Indonesians to understand the Internet and e-commerce.
For the second wave, we seized the B2B rush period and established the O2O platform Mitra Bukalapak, and mobilized small stores such as street kiosks, husband-and-wife shops in rural areas to become a member of the sellers of the Bukalapak platform.
These small stores have a general term in Indonesian - Warungs (traditional Indonesian couple shops). Warung is a core and unique existence in Indonesian lives. Roadside stalls, small cafes or restaurants are all Warung. 95% of Indonesian people will go to these small stores to shop.
Mitra Bukalapak is a special APP that can help Bukalapak obtain people who are not able to access the Internet and provide them with convenience. This is how we slowly obtain resources. Currently, we have more than 5 million merchants, 70 million registered users, and 12 million daily active users in Indonesia.
A Indonesian mom-and-wife store (Warung)
Photo source: Bukalapak official
Tong Shihao: As one of the largest e-commerce platforms in Indonesia, what mainly sells in Bukalapak? What are the advantages compared to other e-commerce giants?
Achmad Zaky: The first ones to be launched are electronic products such as phone cards and headphones. In addition, we also provide daily necessities such as water, cigarettes, instant noodles, etc. To this day, we have covered many types of household products, men's clothing, etc.
Compared with other platforms, we all provide users with cheaper prices, faster distribution and better product quality. Bukalapak has also launched a series of financial technology services. Nowadays, users with good credit and performance in Bukalapak can obtain loans, apply for credit cards, and even buy and sell gold on the platform, which are our advantages.
The biggest advantage is that we can provide brand services. If a brand wants to advertise in Warung, we can use data to provide analysis for the brand to help it understand the sales status of the product and optimize sales channels. In addition, if the order placed in the morning and does not arrive that night, a return service will be provided.
Dimitra Taslim: In Indonesia, how big is the market size of Warungs? What is the customer base?
Achmad Zaky: There is no count of how much Warung is in Indonesia. It is full of every corner of Indonesian lives and is scattered in the streets and alleys of Indonesia.
Indonesia is completely different from other developing countries. Three-fifths of Indonesia live in non-urban areas (rural areas). The way these people shop in their daily lives is not to go to large supermarkets, but to grocery stores and kiosks around them. This kind of street stall-like Warung economic system accounts for 70% of Indonesia's offline economy, which is a large proportion in Southeast Asia.
Usually in developing countries, Warungs' growth is slowing, but in Indonesia it is still growing. Warungs doesn't require a lot of money to build, and most of them are located near stations. If you drive to and from get off work frequently, you will usually prefer to buy it in a convenience store. It is not only convenient and fast, but also cheap.
Tong Shihao: How did you grow up without money at the beginning?
Achmad Zaky: I like to talk about this topic very much. Some people say it is the worst time, but for me, it is the best time and the most effective time.
After graduating from ITB (Massachusetts Institute of Technology in Indonesia), I couldn’t find a job for a long time. In desperation, I returned to my hometown Sula Karta, a small town full of husband and wife stores. After wandering around for a while, I returned to Jakarta. This time I pulled my friend Nugroho Herucahyono to decide to start a business.
We are studying computer science and want to use the bridge of e-commerce to make no small business difficult to do in the world. Bukalapak's initial idea was born. Later, another friend of mine, Fajrin Rasyid, was called to manage finances and the company was established.
Bukalapak Three early founders, from left: Zaky, Rasyid, Herucahyono
Picture source: Bukalapak Official
But at that time we didn’t have a computer, and no one believed in the Internet. It was extremely difficult to persuade small urban merchants to join the e-commerce platform. Only about one-fifth of the invited merchants are willing to try it. Later we tried to advertise on Facebook, add strangers to friends on social media, and even send spam to all companies. Among the 100 companies, 5 companies may come to sign contracts and sell them. This is how we grew up.
Many people who were friends with Bukalapak were cycling enthusiasts. At that time, cycling was very popular in Indonesia. Bukalapak launched a lot of bicycles and parts as needed. For a time, Bukalapak was regarded as the first choice shopping platform for Indonesian bicycles and parts. Later, Bukalapak gradually expanded its business to many fields such as cameras, air tickets, and train tickets.
One year after the company was established, that is, in 2011, we encountered funding problems and were forced to close our business, we received a financing of US$288,000 from Japanese investor Takeshi Ebihara. With this money, the company has been deeply engaged in the cycling community on the one hand, and on the other hand, it extends its community strategy to other sections.
Later we successively obtained investments in Ant Financial and GIC, and our business scope and capital have been well expanded and accumulated. We regard Bukalapak as our own children, and we work day and night to realize our dreams.
Dimitra Taslim: We also want to learn more about culture. You come from ITB. For many people who don’t understand, this is the cradle of many engineers and technical managers. How did you meet the first two co-founders? What is the connection between which university you are in and the entrepreneurial ecosystem?
Achmad Zaky: I met my co-founder in high school, we were friends in high school, we competed against each other in competitions like science or Olympics. We also attended the same university and were in the same class, and we were once opponents.
When I started Bukalapak, no one believed me, only he believed it. So, he has no friends, and I have no friends, so let us start building this company together. This is how we met. We have known each other for a long time.
Dimitra Taslim: In 2016, you posted a blog about "less is more". What does this mean? How do you balance the problem between diversification and focusing on the industry you are in?
Achmad Zaky: What we really focus on is small and medium-sized enterprises. Everything we add on the platform is actually to create a network effect in the seller. The initial core of Bukalapak is to create an online marketplace, allowing small and medium-sized enterprises to promote their business through online sales and change people's lives.
By "less is more" I mean that you have to do the most important thing every day, keep your work simplified, and only one point is really important because it makes you keen and know what you want most, and ultimately achieve your goals. This is the key.
Because when you become strong, you will look for more opportunities and you will also raise more funds, but at the same time you are prone to becoming greedy, unable to concentrate your thoughts, and even forget what your original intention is. This is my basic idea, and you must truly focus on one thing you do.
Capital accumulation and overseas ambition
Dimitra Taslim: Earlier, we interviewed the company's kirana store is very similar to warungs' model, and Udaan's financing and growth are very fast. What do you think of the competitive relationship with this company?
Achmad Zaky: After all, the key is productivity and efficiency. When Rockefeller started the oil company, he worked hard to drive productivity and increase efficiency until he became a monopolist, which was a very inspiring story, especially for startups.
Usually, the number one player will scare the second or third player, and if you are not afraid, choose to fight and stay productive, you will survive.
Dimitra Taslim: Faced with the internal and external competitive environment, what changes will Bukalapak in its future layout?
Achmad Zaky: In May 2019, we launched a new application BukaGlobal, which officially began to enter the overseas market. We chose Singapore , Brunei , Malaysia , Hong Kong, and Taiwan, among other countries and regions, because there are a considerable number of Indonesians in these places, and they all know Indonesian culture very well.
In addition, we have reached a cooperation with Singapore's e-commerce logistics startup Janio to help us handle end-to-end cross-border logistics business. Next, we will also develop into the Middle East market with a large Muslim population, making Bukalapak a central platform for introducing Indonesian products, and at the same time helping to enhance the business development of small and medium-sized enterprises.
Dimitra Taslim: Recently, Bukalapak received financing from Singapore's sovereign wealth fund GIC and China's Ant Financial. What do you think the biggest change will bring about financing?
Achmad Zaky: When you were a kid, you could do anything, play around, or have many failures. But now with the support of reputable investors and shareholders, we must be more cautious. We can still try again after failing, but we must first ensure that we will not be hurt, which is the key.
financing is a kind of growth, but what is important is the accumulation of capital. In addition, we must learn more from investors. What we get from investors should not be just money, but also a lot of hidden value.
Tong Shihao: For those entrepreneurs who are not familiar with the Indonesian market, what can you share with them?
Achmad Zaky: Indonesia's culture is different, and the business environment is also good, especially the sinking market has great development potential. Secondly, the people are also friendly, and India's companies are very localized, which is why Bukalapak can do so well in the local area. We can integrate local culture well. Everyone likes our brand. It is a domestic brand and the pride of the local area. Therefore, the first thing to do to start a business in Indonesia is to respect the local culture.
Local Bukalapak Source: Internet
Tong Shihao: From a small company to a unicorn in Indonesia, Bukalapak's growth has not consumed a lot of money. Few companies can do this. How did you do it?
Achmad Zaky: First of all, Bukalapak is a traditional local brand, with 99% of employees being locals, and the labor cost is relatively low; secondly, we empower small and medium-sized enterprises to help them expand their sales channels, and they will be more willing to actively participate.
The most important thing is that we are not only a transaction-oriented platform, but also focus on building emotions with them. Sometimes I go to the seller community to inspire them to sell more things and listen to their problems. They will be grateful and promote Bukalapak with sincerity. This has saved us costs to a certain extent.
Tong Shihao: You have established a C2C model in the entire Indonesian market and helped nearly 5 million small stores in the local area. How did you build such an effective corporate organization?
Achmad Zaky: Correct values and corporate culture are very important.
From a cultural perspective, it is not only the company's corporate culture, but more importantly, the local culture. What you do and the talents you choose must conform to the characteristics of local culture. The second is data-driven performance and transparency. We distribute all metrics openly and transparently to everyone in the company so that they can learn how to improve their metrics. If we already know that someone is not performing well, we can help them; in addition, we must have the ability to learn and constantly learn and try new things.
The most important thing is the third point. Indonesians like to use a phrase called Gotong-royong. This word translated into Chinese means "mutual assistance". Indonesia is a very socialized country, and we are like a huge family, which means we can’t survive on ourselves, we have to work with other friends to produce the effect of one plus one greater than three.
Bukalapak partners photo source: Internet
"Now is the best time to start a business"
Dimitra Taslim: What impact does the outbreak of the new crown epidemic have on Bukalapak? How do small startups deal with this epidemic?
Achmad Zaky: Under the background of the epidemic, Bukalapak's development and income are very considerable. Because people are unwilling to go out to shop, e-commerce platforms have become the best choice. The demand for e-commerce has shifted from non-essential to necessity, which is also the reason why Bukalapak has become stronger among fast-moving consumer goods.
Start-ups will be greatly affected in this crisis, such as P2P, O2O and other industries, and even offline shopping malls. But there are new tracks, and online education is a good example.
Therefore, in this crisis, I believe that more and more great founders and great ideas will be born. The epidemic is a test for entrepreneurship, and startups that have finally passed the test will usher in big business in the future.
Dimitra Taslim: Every crisis contains many opportunities, such as Alibaba or JD , which all started after SARS in 2003. What is your biggest focus in Indonesia at present? In addition to online education, will you pay attention to other areas?
Achmad Zaky: We are still looking for other fields, as you said, great startups will emerge from this era of epidemic. Bukalapak has also experienced very difficult moments, and usually at this time, it will make the founders more creative because they must find a new way to solve the difficulties. This is the mentality that founders should have in the era of epidemics. They will be more creative than those who have not experienced the epidemic.
Generally speaking, baby boomers who grew up during financial depressions will have a much higher savings rate than millennial consumers because they know what it feels like to be tough times without jobs, productivity and salary drops. In such a crisis period, when the opportunity cost of entrepreneurship is low, more people will start a business, and the survivors will be the most creative and resilient and the most efficient.
This is the founder we are looking for. We have found some of them and are trying to find more and more founders with this mentality, which is good news for the entrepreneurial ecosystem.
Dimitra Taslim: For startups, do you have any good advice to help them get through this time?
Achmad Zaky: The epidemic will eventually end. For start-ups, first of all, they have to really look at their own metrics, such as CAC (Customer Acquisition Cost), which may be twice as expensive during the pandemic, because demand drops, purchasing power will also affect the business, retention will be low, and loan value will be low, so it is very important to adjust and observe these metrics.
Secondly, it depends on the cost. After the indicators are adjusted, net consumption should be reduced, such as labor or office costs, and cash should be saved. As for now, cash is the king because you can't guarantee whether you can get the next round of funds.
Finally, make the right decision. During the pandemic, many leaders will face layoffs, but this difficult decision must be made because saving a company is more important than treating and pleasing everyone. For those who are fired, I believe that they will become great founders in the future and find a better job.
Dimitra Taslim: As a leader and founder of venture capital funds, what have you learned during the epidemic?
Achmad Zaky: Before this, we made a lot of investments, but the results of money may not be good, and that's what I learned.
Affected by the epidemic, the entire economic and entrepreneurship situation in 2020 is a bit like those in 2010 and 2004. The situation at that time was very ideal for people to start a business, because it was driven by the founder rather than money. So you have to be a great founder and find very creative solutions, not just pour money.
The global economy will eventually be changed by a disruptive idea that founders are not just focusing on the money invested and the growth benefits of the business. Therefore, for entrepreneurs, fundraising will be a good growth. Now for investors, it is difficult to get high returns, and it is also difficult to find big winners like Facebook and Google, because they pay too much attention to money and think too little.
I hope the founders don’t focus on finding investors, but focus on creating great products and creating greater value with less money, so that they can achieve a win-win situation.
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