Choose which battles to lose so you can win the war

Quote by — Tokopedia CEO William Tanuwijaya, Photo Credits: NUS Enterprise Blk71

You would expect to learn about e-commerce from a sharing session by the CEO of Tokopedia, one of Indonesia’s largest e-commerce marketplaces. However, the biggest take-away from the hour-long session was actually how to make choices in life.

Last week, William Tanuwijaya took to stage at Kopi Chat hosted by NUS Enterprise and joined by young entrepreneurs from NUS incubator, The Hangar.

After briefly sharing about his journey growing Tokpedia — from a university recruiting booth that no one graced to the leading e-commerce marketplace in Indonesia — William took questions from the floor. Here are the biggest highlights:

Build a sustainable business, not an immediately profitable one

In response to a question on why Tokopedia does not offer Cash On Delivery (COD) services for buyers, William dropped what was perhaps the biggest contrarian insight of the night.

Indonesia has many islands — 17,508 to be exact — and if Tokopedia were to offer COD across Indonesia, it would be extremely costly. Especially so for goods returned. For this, William asked the audience to imagine: a courier traversing seas, jungles, horrible traffic only to reach the hands of buyers and be delivered all the way back. Even though COD opens up more consumers to Tokopedia, it is simply not a sustainable business model.

Cutting through the fog, he gave us his analysis of the problem: While Indonesia has a credit card penetration rate of about 3%, the real reason why consumers prefer COD is because “they don’t trust merchants”. Clearly, the solution is better directed towards increasing trust.

To solve this: Tokopedia reveals sales figures to consumers, offers a robust system of shop reviews and trust badges to help consumers make better purchase decisions. In addition, consumers get the next best thing after COD — payment at local convenience stores.

Wrapping the point up, William also explained why Tokopedia rarely offers discounts. Slashing prices to gain market share contradicts his philosophy of building a sustainable business. However, he did say there was one caveat: discounts are only given to change a consumer habit. For example, Tokopedia gave discounts for consumers to switch from web to mobile app.

Choose which battles to lose

Regarding Tokopedia’s expansion plans outside of Indonesia, William borrowed concepts from Sun Tzu’s The Art of War.

If building a startup is like waging a war, then making decisions is like choosing your battles. In Tokopedia’s case, different markets represents different battlegrounds, and its strategy to survive is to lose the battles outside Indonesia. Ironic as it seems, this is one of the reasons why Tokopedia was able to out-compete and out-last its Indonesian competitors.

He explained that some of his competitors have bigger ambitions than he had. They chose to venture outside Indonesia early on. This creates two problems:

  • They are unable to serve the local consumers well; and
  • They run out of cash faster.

By losing the battles outside, Tokopedia retained home-ground-advantage and has grown to the billion dollar business it is today.

Another way to look at it is the overall market potential. According to William, only 1 per cent of Indonesians shop online. That means there is still huge potential left. Tokopedia need only look within Indonesia for the next big playing field.

Fundraising requires luck, lots of it

The highly anticipated question on fundraising did not offer silver bullets to the head-scratching problem. Instead, it points back at fundamentals — build a sustainable business.

The CEO, who has raised up to US$250million to date, admitted he has never written a single business plan. However, that doesn’t mean the rest of us shouldn’t. He quickly added that he should probably pick up the habit of doing that.

From William’s perspective, luck was a huge factor in him raising millions. In fact, Tokopedia is one of the luckier startups to have investors pursue them instead. Here, William recounted the story of how Sequoia Capital’s Tan Ying Lan called him before his flight to Japan, found out which flight he was on, and appeared at arrivals to make him an offer. Coincidentally, William was in Japan to seek investment from Softbank too. Thus creating the ultimate happy ending when both deals received resounding yes-es.

Turns out that was only two of three pieces of good news during that trip.

Don’t juggle all 5 balls at once

The analogy of the 5 balls of life was first coined by then Coca Cola CEO, Brian G. Dyson. It speaks of five aspects of a person’s life — Work, Family, Health, Friends, and Spirit — expressed as balls that we juggle. Among them, four balls are made of glass. One ball is made of rubber and it represents work.

William cited this analogy and described his startup journey as a bouncy rubber ball: from lows when the company was close to running out of money, to highs when they achieved the 1 million merchants mark in August last year. Startups will face failure. That is why it is important to persevere and bounce back. But other aspects of life don’t have the elasticity like work. If they fall, they shatter.

It came very close for William when he declined accompanying his wife (then girlfriend) to Japan for her medical school graduation. William told us that he felt guilty afterwards. He had often postponed holidays with his wife because a particular quarter was “too important for Tokopedia.”

He admitted that it was really hard for him to juggle his five balls of life all at once and if this had carried on, he would have broken some of them. His solution is to set aside two balls and focus only on juggling the other three well at any time.

Tokopedia closed the quarter out-performing expectations. William set aside his Work ball, flew to Japan and surprise-proposed to his lovely wife.

As he would proclaim, she said yes, thus completing a hat-trick.

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