LDN - Business

SoftBank-backed Tokopedia bets on logistics, AI for Indonesia growth

[July 26, 2019] By Fanny Potkin and Ed Davies

JAKARTA (Reuters) - Indonesian e-commerce unicorn Tokopedia is investing in two logistics companies and using artificial intelligence to predict buying behavior as part of an effort to speed delivery and slash shipping costs in the world's biggest archipelago.

Tokopedia founder and chief executive William Tanuwijaya also said the firm is in final talks to invest in an agritech startup that works with farmers and has been buying stakes in smaller marketplaces offering everything from wedding services to secondhand phones.

"The customer in Tokopedia is going to be able to buy directly from farmers and fishermen," Tanuwijaya told Reuters in an interview.

Tanuwijaya expects Tokopedia to lift the proportion of one-day deliveries to 95% from the current 65%, while cutting costs for merchants in a country of 17,000 islands where logistics costs can be exorbitant.

Backed by $2 billion in funding from investors including SoftBank Group Corp's Vision Fund and Alibaba, Tokopedia aims to create a "super-ecosystem" with a wide range of services, including lending and payment services for both consumer and merchants.

Unlike rivals such as homegrown Bukalapak, regional e-commerce retailer Lazada that is owned by Alibaba, and Singapore-based Shoppee, Tokopedia is strictly a marketplace and holds no inventory in its own warehouses.

Southeast Asia's biggest economy, buoyed by a youthful and increasingly online-savvy population of 260 million, is among the world's fast growing e-commerce markets.

E-commerce sales reached $12.2 billion last year and are poised to hit $53 billion by 2025, according to a 2018 study of Google and Temasek Holdings.

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Founder and CEO of Indonesian e-commerce firm Tokopedia, William Tanuwijaya, gestures as he talks during an interview at Tokopedia headquarters in Jakarta, Indonesia, July 25, 2019. Picture taken July 25, 2019. REUTERS/Willy Kurniawan

While Tokopedia, which gets its name from the Indonesian word for 'store', does not provide annual sales data for its 6 million merchants, sales in May during the Muslim fasting month of Ramadan hit a record $1.3 billion.

Tanuwijaya declined to say when Tokopedia would be profitable, pointing to the current focus on growth, but said "it doesn't really need external investors anymore...or to raise capital to just sustain our businesses".

Tanuwijaya hails from the town of Pematang Siantar on Sumatra island, a place that he says "still doesn't have a mall". Tokopedia claims some 90 million monthly users.

Now Tokopedia is taking a page out of the playbook of U.S. and Chinese tech giants by digging into its troves of customer data to help predict consumer behavior.

Using AI, Tokopedia vendors will now get "almost real-time" data predictions on consumer demand in towns or regions, Tanuwijaya said. For a fee, Tokopedia will help store their goods in advance of purchase in partner warehouses across the country.

"More than 1% of Indonesia's economy already happens on Tokopedia," Tanuwijaya said. "We want to make it 5 percent."

(Reporting by Fanny Potkin & Ed Davies; Editing by Jonathan Weber and Muralikumar Anantharaman)

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