Mitra Bukalapak Makes More Sense
With 17,000 Indonesian islands scattered between the Asian mainland and Australia, the archipelago is a vast country in many ways. A country that is so diverse that it contains a megacity, yet which also has shimmering reefs, beautiful beaches, spectacular crater lakes, tiny fishing villages, lush volcanic slopes and farmland and paddy fields which stretch as far as the eye can see. More than 75% of its 270 million population live outside of the five largest cities, and cash remains “king”, with close to 80% of the country’s point of sale purchases settled in good old fashioned Rupiah notes.
Servicing this populous can be challenging. Coast to coast it is about the same size as the USA, though not being one land-mass puts a heavy emphasis on quality infrastructure and logistics to get the right product to the right consumers, in good time and most crucially at the best price. Fortunately, the country has 64 million Micro, Small & Medium Enterprises (MSMEs) spread out throughout Indonesia, and many of these are Bukalapak customers who have helped move the country towards transacting more and more business online.
In this land of opportunity, Mitra Bukalapak is connected to almost 9 million Mitras across Indonesia, many of which are Mom & Pop stores (traditional convenient stores known as warungs). Mitra means “Partner” in Bahasa and Bukalapak truly define the meaning of the word as they look to utilise their technology to help sell goods and services to parts of the world’s fourth most populous nation, that previously didn’t have access to e-commerce.
In 2016 Bukalapak rolled out its Mitra strategy to facilitate the cash payment by an end-consumer, who wanted to settle their online transaction. That was the genesis, but over time it became so much more than a payment channel, as many more services and products were offered via this Mitra gateway. With the Bukalapak app, these traditional convenience stores are now able to purchase wholesale FMCG products — at better prices, and which are delivered quicker — for sale in their shops. They can better manage their inventories, increase store SKUs and tailor their offering to their local market to make more revenue.
Since those early days of selling snacks, convenience food, instant noodles and mineral water, there’s been a lot of innovation. If you were to go to a store now, you’d find that you could buy travel tickets for the bus or train, send your packages, pay your electricity bill, move remittance money to your family and buy gaming vouchers, amongst many other services. Bukalapak is constantly adding to these services — be it physical or digital — so that in effect, they’ve now become versions of the local bank branch, post office, travel agent and logistics hub.
The vast majority of these 64 million MSMEs are located outside of Indonesia’s five largest cities, which is where 70% of the country’s GDP is generated and 97% of the workforce is employed. Via the 9 million Bukalapak registered Mitras, we have one of the widest offline touchpoints across Indonesia to service this vast economy, wider even than that offered by the banking system’s 100,000 ATMs and 3,700 offices of Indonesia Post.
In light of our reach, 73% of Bukalapak’s business today, denoted by our TPV (Total Processing Value, namely paid-GMV), originates from outside Indonesia’s Tier 1 cities. This is a total contrast with Indonesia’s e-commerce industry where 70% of the GMV originates from within Tier 1 cities (Frost and Sullivan).
Mitra Bukalapak has really empowered these traditional Indonesian convenience stores. Since downloading the app, the average store has tripled their sales and has experienced a five-fold increase in the number of customers, given the huge range of additional goods and services they now sell and provide to their end customers. More effective sourcing, from vast SKU choices, and goods which are actually delivered to their door by the wholesaler, combined with additional revenue streams from the services offered means the warungs are now able to create jobs and employ additional workers.
Given the vast benefits, based on Nielsen’s survey, Mitra Bukalapak currently command the leading market share in Indonesia’s online-to-offline (O2O) platform. 42% of all warungs who compete for O2O business, use the Mitra Bukalapak app. That is comparable to the size of the next three largest competitors combined.
For general trade (groceries and FMCG) in traditional convenient stores, Mitra Bukalapak has the majority market share (55%), again, broadly comparable to the combined market share of the next three largest players. In the virtual products category, which are sold by traditional convenient stores, Bukalapak commands a 52% market share — larger than the combined market share of the next 4 largest players. Only in phone credit top-ups does Mitra Bukalapak not command a leading market share — but these products are lower margin. This focus on higher margin virtual product is a particular focus as we look to move away from commoditised services such as top-up phone credits. Indeed in 2Q21, top up phone credits represent only around 7% of Mitra Bukalapak virtual product TPV.
It is evident that Mitra Bukalapak offers the widest and most complete offering to our Mitras to help them make more money. Despite holding a dominant market share in all the key categories, we won’t rest on our laurels and will strive to improve further. The current competitive landscape denotes that many of the other players are largely focused on one or two categories and have a relatively weaker share in other categories. For example, some competitors are highly focused only in general trade (FMCG) to Mom & Pop stores but weak on virtual products and vice versa. Mitra Bukalapak’s current leadership is based on its ability to offer a broad range of product and service to the warung owners. Consequently, Mitra TPV has delivered double-digit QoQ growth — which is a metric that we’ll strive to maintain.
One of our sayings at Bukalapak is “keep it simple”. This resonates down to our apps and products as well, so that 90% of our Mitras, use only one single app — Mitra Bukalapak. Their loyalty to Bukalapak is primarily driven because they now have the chance to make more money. They know their local customers better than anyone and via tailoring their offering to their local village community they’re finding that customers are returning more regularly and spending more. It’s up to us to continue to bring the warungs new products and services so that the bond with their customers in the local community is continually enhanced. We can’t wait to continue our partnership with them.
