Multiply’s announcement on Friday sent a shock across the e-commerce industry in Indonesia prompting questions of the market’s viability of sustaining such a business. Indonesia remains a massive potential for growth for Internet companies but it’s a delicate market to handle with characteristics not found on other, more established markets.
Treading the Indonesian e-commerce waters require different skills from the more established markets and a deeper understanding of the market and its behaviors. Companies will fail spectacularly, others will exit quietly, but some will rise having learned of the failures and go on to lead the market.
We recently spoke to Lazada CEO Maximillian Bittner about Lazada’s decision to enter the Indonesian market in early 2012. He said that when the company launched in Indonesia a year ago, it was “absolutely the right decision to make at absolutely the right time.”
Lazada even built the base of its regional operations in Indonesia with hundreds of employees under its wings. The company wants to be the prime destination for Indonesian e-commerce and to achieve that it wants to win consumer mindshare by being in the country early. It even decided to create a marketplace.
Rocket Internet’s co-founder and head of Southeast Asian operations, Stefan Jung, told DailySocial during the id-byte roadshow in Jogjakarta earlier this week that the group firmly believes Southeast Asia will develop into a strong e-commerce market and is prepared to weather the storm in the early years.
Multiply’s decision to move its headquarters from Florida to Jakarta last year was also a vote of confidence for Indonesia’s market and it also gambled on arriving in the scene early but apparently MIH, its South Africa-based owner, sees a better investment in online classifieds, hence the increased stake in Tokobagus recently and the decision to shut down Multiply.
Multiply’s closure is a surprise in timing more so than its eventuality. The company had just introduced a rebrand and a redesign in March, following the shut down of Multiply’s blogs in December, to sever ties with its social network past.
Multiply CEO Stefan Magdalinski had been mostly upbeat over the past year and the recent overhaul of the site showed intention to move forward and establish Multiply as a major name in Indonesian e-commerce. It also claimed to have achieved a significant growth throughout 2012.
It had recently completed pre-orders for Samsung’s much publicized Galaxy S4 and had been aggressively courting new customers by becoming a discount site for many consumer electronic products, especially for high profile mobile devices such as the iPad, iPhone 5, and BlackBerry Z10.
On the other hand, a number of its merchants had been complaining about shipping costs that have yet to be repaid. Ever since it launched its marketplace, Multiply had been offering free shipping costs to its customers and recently extended the offer to June 2013.
Shipping costs of course have to be covered and in practice the merchants had been the ones fronting the payment to the shipping companies but Multiply would repay those costs. There have also been questions regarding its cash flow and unnecessarily large overheads but we have yet to be able to confirm that to the company as it is taking no questions for the time being.
Dolly Surya Wisaka, former senior manager services operations at Multiply is sorry to see the company go under but he feels that the company has contributed significantly to the emergence and growth of e-commerce in Indonesia. He said to DailySocial, “Multiply has helped educate consumers on e-commerce as it should be, where previously people had been content with traditional point to point transactions over the Internet.”
Wisaka praised the company’s willingness to explore strategies such as offering free delivery and free transaction fee to raise the number of transactions made through its website. By partnering with consumer electronics vendors, communication services companies, and motorcycle dealerships, Multiply became an even more trusted marketplace destination.
Multiply was perhaps overly aggressive in attempting to establish the market but it had done so to accelerate the acceptance of e-commerce among Indonesians, according to Wisaka. The company had to bear the burden of rising costs along with each transaction but it was necessary because of the potential that the market has to offer.
The formation of the Indonesia E-Commerce Association, which is headed by Multiply’s country manager Daniel Tumiwa, is something that the company believed necessary.
Tumiwa had said to DailySocial prior to the establishment of the association that if Indonesia wants to have a healthy e-commerce industry, “all the e-commerce captains have to agree to raise the water level”, so to speak.
Looking back, it seems like Multiply had the right idea but it may have built the boat the wrong way in starting the journey.
Antonny Lim, CEO of Merah Putih Incubator, in which DailySocial operates, said on Friday that the group still believes that e-commerce in Indonesia will grow. Blibli, a shopping site operating under GDP Ventures, the overriding group of Merah Putih, was set up with a multi year outlook and is being funded and operated accordingly.
There are many believers of e-commerce in Indonesia despite the market’s extremely challenging nature. After all, according to Andi S. Boediman, former executive at Plasa and co-founder of Ideosource incubator and venture fund, Indonesians collectively spent USD 30 million just on ebay in 2012.
As Amir Karimuddin said in his analysis late yesterday, the prevailing model in Indonesia right now seems to be the classifieds type, led by Tokobagus, hence MIH’s decision to focus on the site. This type includes forum merchants such as those found trading on Kaskus message board and those defying Facebook’s terms of service by turning their Facebook pages into storefronts.
These are signs of an early stage e-commerce market and it will take some effort to get the market to “upgrade” to proper online stores across the board, and when that happens, those who survive will reap quite the benefit.
