Indonesia’s second largest media group Emtek is in talks with Alibaba Group to form a partnership, three different people aware of the development confirmed, and the possible deal could also see the Chinese e-commerce giant invest in local marketplace Bukalapak.
The potential deal between Emtek and Alibaba has several contours.
First, Emtek holds a significant stake in Bukalapak, Indonesia’s third largest e-commerce player, and the latter has been on the road to raise capital for a while now, according to several industry executives aware of the developments.
Following its (Alibaba’s) acquisition of the region’s largest e-commerce player – Lazada – in a deal that was valued at $1.5 billion, and considering that Lazada has significant plans for Indonesia, any deal that will see the Chinese giant becoming a significant stakeholder in Bukalapak, will put Alibaba in pole position to take on the largest e-commerce player in that country – Tokopedia.
But, the executives quoted above, said, that the talks between Emtek and Aliababa were not centric to Bukalapak alone, but involved a larger game plan of cracking the biggest pain point in the region – payments. More importantly, Alibaba is therefore learnt to be looking at a JV with Emtek for the latter’s digital platforms, which could be key to its e-commerce success in Indonesia.
Emtek, through its digital arm, PR Kretaif Media Karya (KMK), had bagged the licence to develop new BlackberryMessenger (BBM) applications and services for Android, IOS and Windows Phones in June 2016, and it also owns and operates several other portals such as Liputan6.com, Vidio.com, Bintang.com, Bola.com and Karir.com and propertypotal.com.
As much as it will be about logistics, distribution and warehouses, the key to e-commerce success in this region will be fintech (payment) platforms, an area that Lazada has struggled with in the past, and continues to do so.
To put this argument in context, when this region’s largest ride-hailing platform Grab recently committed to investing $700 million in Indonesia, the capital was not aimed at escalating a price war with Go-Jek, or more incentives to its drivers, but largely towards enhancing and developing its payment platform.
A JV with Emtek will enable Alibaba to leverage the BBM platform, which continues to be the most popular messaging app in Indonesia, across both iPhone and Android users. Several different reports and surveys have show that BB commands up to a third in market share when it comes to messaging platforms in Indonesia, as well has having the highest reach among Android smartphone apps in that country, at 90%.
One of the executives quoted above pointed out that BlackBerry Messenger (BBM) and Bukalapak already had a partnership called BBM Shopping that allowed users to browse products offered by Bukalapak, and make payments to complete transactions without ever leaving the app.
What has caught Alibaba’s attention is that Emtek is modelling the strategy for BBM in Indonesia in line with what China’s WeChat has successfully achieved. WeChat has now become a one-stop shop for watching video, getting celebrity updates and shopping online, and more. Currently Chinese users use WeChat to navigate their daily lives, integrating social media, payments, web browsing and messaging into a single application.
Bringing Alibaba to the table could speed up Emtek’s plan of making BBM into a platform that is similar to that of Wechat. Besides, this will also help Alibaba’s other biggest investment in this region – Lazada – crack the payments frontier.
Big picture, Alibaba, will have its hands on two of three largest e-commerce players in Indonesia.
Experts predict that the South East Asian e-commerce market is all set to face a fierce battle as top players will continue to engage in price wars to get a larger e-commerce market share. Apart from the top three e-commerce players, Indonesia is already seeing stiff competition, with newer players like China’s second largest e-commerce firm, JD.com, the Salim group and even global giant Amazon firming up plans for this region.
When contacted, Alibaba spokesperson said, “the company would not wan to comment on market rumours”. Emtek too said that the company did not want to comment on market speculations.
In a recent interview with DEALSTREETASIA, Bukalapak COO did confirm that ‘ they are open to strategic partnerships, if it helped the company grow. On being asked if the company is in talks with Alibaba, Bukalapak in an email reply said, that it was currently ‘focusing on extensification of its business.’
Alibaba has continually shown interest in South East Asia and the Indonesian market as well over the last few years. In 2015, Alibaba signed an agreement with Indonesia’s largest online payment provider, Doku, to fast track and simplify payments made for Indonesian customers.
Jack Ma, the founder of Alibaba was even asked to be the advisor to Indonesia’s e-commerce steering committee in September 2016.The company is even building a strong logistics network in South East Asia through Singapore Post in which they invested $249 million few months back. And their most recent was their $1 billion investment in Lazada last year. Clearly with this new entry also, Alibaba Group will move towards its plans of focussing more on South East Asian markets, and shedding their home-market reliance.