Indonesian social commerce sees casualties as startups, VCs rush to fill gap left by e-commerce

Surabaya, Indonesia. Photo by Hobi industri on Unsplash

Even as social commerce players in Indonesia continue to attract VC funding, a steady flow of investor capital into the company is not a sure-shot path to survival. Case in point: Meesho.

The cash-loaded Indian reseller platform announced on March 19 that it is exiting Southeast Asia’s largest market.

After raising a $125 million round in 2019, Meesho was understood to be in advanced talks in December 2020 to raise a new round of $150 million. Despite its capital firepower, the company retreated from Indonesia only a year after setting foot in the market.

While the reason for its shuttering could not be ascertained, market insiders suggest Meesho had tried to superimpose its Indian model in Indonesia with little success.

In an interview with KrAsia just a few months after its expansion into Indonesia, Meesho’s VP of international business Prateek Agarwal had said it plans to build out “the same model that we have in India” with tweaks in language, logistics, and payments.

Similarly, another social commerce startup, Mucho, which has managed to escape the media spotlight, appears to have also pulled out of the market. Backed by Chinese VC firm Qiming Ventures and groomed to be Indonesia’s answer to China’s social commerce giant Pingduoduo, Mucho ceased operating its group-buying platform last year after two years of business, DealStreetAsia has learned.

Both companies did not respond to DealStreetAsia’s queries on the matter.

Given the similarities it shares with India and China and a social commerce market expected to reach up to $25 billion in 2022, according to McKinsey, Indonesia is understandably seen as the perfect place for companies to replicate the success of the likes of Meesho and Pinduoduo.

However, as many of the players have begun to learn, Indonesia poses its own unique challenges.

Indonesia: A unique market

“The technology used might be the same, but the behaviour of the [Indonesian] people is different,” says Hadi Kuncoro, CEO of PowerCommerce Asia, an e-commerce enabler company that builds reseller platforms for clients.

Given the nascent phase of the industry, all stakeholders in the social commerce market including customers, resellers, as well as suppliers, must be treated with care, Kuncoro added.

For Indonesia-focused social commerce startup RateS, its understanding of the market’s unique characteristics prompted it to adjust its reseller model, from initially building a network of individual resellers towards a “group sell” concept where resellers are directed to sell in teams. This way, RateS incentivises team leaders to help the company recruit, manage, convert, and educate team members.

Additionally, it has also managed to side-step Indonesia’s notorious logistics hurdle by setting up warehouses in multiple regions and using team leaders as pick-up points and distribution hubs in rural Indonesia.

“It’s not as simple as acquiring suppliers, acquiring resellers, and then hoping that the resellers will help market the products to their own networks/customers,” said RateS chief strategy officer Albert Ho.

While social commerce is still commonly associated with merely the advancement of social media platforms like Instagram, Facebook, Whatsapp, and most recently Tiktok, into the commerce realm, Indonesia is quickly learning the multi-dimensional aspect of the term.

The country has seen startups like Avana, Toko Talk, Desty, and even Gojek (through GoStore) functioning as social commerce enablers that help to facilitate sales activity on social media. Meanwhile, some influencer marketing companies also count themselves as social commerce platforms.

Rise of social resellers

However, the social commerce segment that appears to be attracting the most venture capital is the reseller and group-buy model that targets customers in tier 2 and tier 3 cities that have barely been exposed to e-commerce and online shopping.

“Around 85% [of people in Indonesia] have never done online shopping due to various factors such as internet access, unfamiliarity with digital apps, and trust issues. For these people, the resellers are there to provide them with the products that they need,” said Iqbal Muslimin, co-founder and CEO of Evermos, which last raised an $8.25 million Series A round in late 2019.

Focusing on the large Muslim market in Indonesia, Evermos provides a platform that connects brands offering halal and sharia-compliant goods to its extensive network of over 200,000 resellers. The company equips resellers with features that enable them to sell on social media and messaging platforms, as well as through offline social interactions.

Like Vertex-backed RateS, which sells e-commerce, FMCG, and digital products to around 500,000 registered resellers spread across 400 cities in Indonesia, Evermos makes money through premium memberships and cuts slim margins from sale transactions on its platform.

The two companies, together with Woobiz are native to the social reseller model and have been joined by players moving into the space wanting a piece of the action, though focusing on different niches.

Expand Table

Social commerce reseller platforms in Indonesia

CompanyCategoryLast FundingInvestors
RateSe-commerce products, FMCG, digital productsUndisclosed Series AVertex Ventures, Genesis Alternative Ventures, Alpha JWC, others
EvermosMuslim products$8.25 million Series AAlpha JWC, Jungle Ventures, Shunwei Capital
RaenaBeauty products$9 million Series AAlpha JWC, Beenext, Beenos, Strive, others
SuperFMCGundisclosedArrive, Alpha JWC, Insignia Venture, others
AvanaFashion and merchandizeundisclosedGobi Partners, XL Axiata
WoobizBeauty, fashion, foodundisclosedunknown

Super, backed by Insignia Ventures, set out as a B2B commerce startup that helps mom-and-pop shops in rural areas replenish their FMCG goods. It has since invited individual agents to earn income by selling goods to their communities. Meanwhile, influencer commerce startup Raena has pivoted into a reseller platform selling beauty products in Indonesia. The most recent entrant into the social reseller space is social commerce enabler Avana, which earlier this year tapped the reseller business as an additional distribution channel for its brand partners.

“Social commerce is a wide sector with numerous verticals or sub-sectors…Each segment has a large potential and deep category expertise is needed to excel in each segment, especially because the ‘social’ part requires extra effort to understand the market they are trying to tap into,” said Alpha JWC Ventures managing partner Jefrey Joe, whose firm is on the cap table of Evermos, RateS, Super, and Raena.

E-commerce firms may join the fray

As far as the group-buy model is concerned, VCs in Indonesia have chosen to place bets on platforms selling fresh produce and FMCG such as Chilibeli and Kitabeli.

According to Akshay Bhushan, partner at Chilibeli investor Lightspeed Ventures, which also invested in China’s Pinduoduo, the collective purchase strategy employed by these platforms allows for the aggregation of low-value orders but fulfilled in a cost-efficient manner which often even horizontal commerce players are unable to do.

Interestingly, however, Indonesia’s horizontal e-commerce players, which count as some of the largest tech companies in the land, have recently made moves to tap into Chilbeli’s category of fresh produce and FMCG to meet the demand in the e-grocery segment, which has skyrocketed in Q2 2020 registering 5x+ growth year-on-year thanks to COVID, according to research firm Redseer.

Marketplaces like Tokopedia, Shopee, Blibli and Lazada have made investments in supply chain and sourcing, while also teaming up vertical e-grocery players to ensure adequate supply. In fact, Chilibeli itself has partnered with Lazada to sell its products on the e-commerce platform.

The move into grocery resurfaces the question around the potential dynamic between e-commerce and social commerce companies, which has been looming over social commerce players selling typical “e-commerce products” such as fashion and electronic goods.

While many would argue that e-commerce mostly targets more tech-savvy customers in tier 1 and tier 2 cities, which are largely different from the demography served by social commerce companies, the two models are pitted against each other on the supply side. As Indonesia matures and digitalization becomes more widespread, the demand side is also bound to see a more significant clash between the two groups.

“Going forward, when more people become familiar with technology and online shopping, social commerce could eventually evolve into e-commerce. It would be a natural progression, but it’s a very very long time away,” said Evermos’ Muslimin.

One of the ways for social commerce companies to maintain their social model and continue to empower resellers and agents is to sell exclusive products that are not sold on marketplaces, he added.

At the same time, the idea of these cash-rich e-commerce companies making serious inroads into social commerce cannot be ruled out. Several e-commerce companies have already established themselves in the online to offline (O2O) space to tap into the offline market, though largely through mom-and-pop shops in rural areas.

Bukalapak, one of the pioneers in the O2O space, says it is an “all commerce” company that aims to provide businesses channels, including through online platforms and online to offline platforms.

Having taken the “e” out of e-commerce to delve into the offline market, it would be easy for them to throw in the “social” element into the mix to diversify their distribution channel and expand their presence in the country.

“There’s always possibilities of vertical expansion, and we believe once these e-commerce giants are satisfied with their marketplace and warung procurement, they might want to try to do social commerce as well. It will be interesting to see how this will play out, including the possibilities of M&A of the younger companies,” said Alpha JWC’s Joe.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.