Patiently spinning a flywheel

Why does free shipping matter to Shopee’s strategy? That was one of the many questions highlighted during a fireside chat that Momentum Works hosted at the end of last week.

At the briefing, “Marketplaces — Blooming ecommerce in Indonesia”, we explained and elaborated on several of the insights from the Blooming Ecommerce in Indonesia report. 

More than 200 people attended this exclusive event, demonstrating the keen interest from industry stakeholders to be updated about what is happening in ecommerce in Indonesia. 

The top three cities of our attendees are Jakarta, Singapore, and (somewhat unexpectedly) Beijing. 

Here are some of the highlights of the briefing – you can obtain the full presentation deck, as well as the Blooming Ecommerce in Indonesia report, by emailing us hello@mworks.asia.

Blooming ecommerce Indonesia briefing - key questions

It is big enough now

While ecommerce penetration hovered around 2% in 2016, we estimate that it now accounts for 20% of the retail industry in 2020. 

Blooming ecommerce Indonesia briefing - Market size

GMV of main marketplaces in Indonesia almost doubled: 

Blooming ecommerce Indonesia briefing - ecommerce GMV

While COVID-19 seemed to have been the main driver of ecommerce growth in 2020, we believe that the investment in infrastructure, as well as seller network and consumer adoption – which were both driven by entrepreneurial activities of key players across the ecosystem – also played a big part. 

They set the foundation for growth in 2020. 

Blooming ecommerce Indonesia briefing - History 2010

Blooming ecommerce Indonesia briefing - History 2020

Leading players

Shopee, Tokopedia, Lazada, and Bukalapak are the major players in the market. In GMV terms, Shopee and Tokopedia form the 1st tier, Lazada and Bukalapak are the second – the gaps between the tiers are widening. 

Blooming ecommerce Indonesia briefing - main players

Some friends are arguing that GMV should not be trusted as it is artificially inflated. However, anyone who understands the history of ecommerce, especially that of Taobao and Alibaba, would know that this argument, while holding some truth, does not alter the macro dynamics and competitive landscape of ecommerce. 

We looked at how these four companies have each differentiated themselves, intentionally or unintentionally: 

Blooming ecommerce Indonesia briefing - Differentiation

While there is a clear distinction between regional and local platforms, they all share one thing in common –shareholding by a major Chinese tech giant: 

Blooming ecommerce Indonesia briefing - shareholders

Yet, we have also noticed how the intensifying competition in the ecommerce scene has motivated each of them to imitate the best features of their rivals, such that they are becoming increasingly similar in fulfilling their users’ expectations:

Blooming ecommerce Indonesia briefing - User expectation

Or in using free shipping: 

Blooming ecommerce Indonesia briefing - Free shipping

Or in untangling: 

Blooming ecommerce Indonesia briefing - untangling

Shopee’s rise 

Our friends involved in the industry all seem to agree, in private, that Shopee is winning. There are lots of proxies to signify this – for example, the search interest in Shopee across Indonesia:

Blooming ecommerce Indonesia briefing - User heat map

Or the virality of their baby shark and other earworm ads: 

Blooming ecommerce Indonesia briefing - Shopee Ads

And achieving virality with a campaign that costs much less compared to that of their competitor’s: 

Blooming ecommerce Indonesia briefing - shopee cost efficient

The flywheel

Aside from these surface-level features, we believe that Shopee has a lot in common with Amazon and Pinduouo – in defying all the doubters to consistently execute a strategy that does not bring profit for a long time but will eventually prevail. 

Blooming ecommerce Indonesia briefing - Amazon

They have essentially created a flywheel (a la Amazon), but with free shipping as the main spinner: 

Blooming ecommerce Indonesia briefing - flywheel

While pundits are still obsessed with the “first-mover advantage”, we thought the following quote from the person who essentially created Oppo, Vivo, OnePlus and RealMe is quite telling: 

Blooming ecommerce Indonesia briefing - First Mover

The Q&A session of the briefing was particularly active, with more than 30 questions asked for a short span of time. We could not answer all of them because of the time constraint – but we find many of them interesting and thought-provoking. 

Therefore we will write a separate piece on TLD about the key questions asked, and our perspectives.  The Blooming Ecommerce report, as well as the presentation deck used for the briefing, is complimentary to industry stakeholders. If you wish to get a copy, please email us: hello@works.asia

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.