Indonesia’s Bukalapak eyes breakeven in 3 years, riding on new products & small town coverage

Bukalapak
Bukalapak co-founder and president Fajrin Rasyid.

Indonesian online marketplace PT Bukalapak.com, which counts China’s Ant Financial among its minority investors, expects to break even in three years, as it adds new product segments and expands coverage in small towns, a top executive said.

The company, which counts Singapore sovereign wealth fund GIC Pte among its investors, became an unicorn – or a firm valued at $1 billion or above without tapping the public market – after its last fundraising round in late 2017.

Bukalapak, which started eight years ago by selling items including bicycles and some used items on its online platform, will explore a possible listing in the home market after becoming profitable, Chief Strategy Officer Teddy Oetomo said.

“Probably in the next three years, if we don’t change our game plan,” Oetomo, a former Credit Suisse banker, told Reuters on the sidelines of the International Monetary Fund’s (IMF) meeting on the Indonesian resort island of Bali this week.

“If we don’t promote new features, which probably means I will not grow that fast, but it will be a lot faster for me to reach break even,” he said, without disclosing how much losses the e-commerce company was currently making.

Bukalapak‘s profit expectations come at a time when a rapid surge in smartphone usage and rising middle-class income in the Southeast Asian economy has made it a battleground for investors including SoftBank and China’s Alibaba.

Bukalapak‘s bigger rival marketplace in Indonesia Tokopedia has backing from both Alibaba and SoftBank.

The country’s other two unicorns are ride-hailing company Go-Jek and travel site Traveloka.

Spending by consumers in the Indonesian e-commerce market is projected by consultancy Mckinsey to surge from $8 billion last year to as much as $65 billion by 2022, similar to the growth trajectory experienced in China between 2010 and 2015.

Online commerce penetration in the Southeast Asian country will rise to 83 percent of internet users in 2022, from 74 percent now, Mckinsey said in its report in August.

The growth prospects have enthused Bukalapak to diversify from a computer only-based platform to push customers to use its mobile app that, Oetomo said, has helped the company expand its product offerings and client base outside the major cities.

In addition to goods ranging from computer mouse pads to low-end Toyota cars, Bukalapak, which means open stalls, now also offers financial products including mutual funds, trading in gold and is looking to add more, Oetomo said.

The company has also built an army of agents, or “mitra” as they are called locally, who use their own smartphones to place order for goods including train tickets and electronic items for those in smaller towns that do not have phones with internet.

Bukalapak has a network of over 300,000 mitras that have mom-and-pop physical stores and another 600,000 that act as individual agents.

“Tapping into that very grass-root is something that I have not seen anyone else do,” Oetomo said, adding those initiatives have seen its net merchandise value – the value of goods sold after deducting expenses and fees – rise 180 percent in 2017.

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Reuters