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Sep, 2020     

Indonesia eB2B – Maths Behind The Models

Brands are experimenting with offering direct discounts to retailers and also terms of payment (credit) to drive volumes, not focussing on margin realisation. This is being done through their existing distributors, which highlights the importance of the offline distributor in the scheme of things.


1. eB2B players in other developing economies such as India have evolved gradually in terms of sourcing channels while in Indonesia, the first entrants moved rapidly to “Phase 3”

eB2B players in India started with connecting wholesalers to retailers and then distributors to retailers thereby enabling the offline ecosystem. This strategy helped them achieve scale and gain insights on demand.

After they had reached a desired scale, they were able to leverage their position to partner directly with FMCG brands.

However, in Indonesia, leading eB2B players explored direct brand partnerships early on in their journey. While this strategy had its benefits (E.g. higher margin realisation, quality control), this also resulted in challenges like product stockouts, among others.

Newer eB2B players in Indonesia are however following a phased approach for sourcing (similar to what was observed in India).

eB2B Business Model evolution

2. Lower satisfaction levels were reported among retailers in Indonesia when compared to India – frequent stockouts were one of the main challenges

In the initial days, retailers reported low satisfaction with eB2B players due to lack of credit availability and product stock-outs. Both these aspects are related to going asset heavy without having the required scale.

This reflected in the NPS scores for eB2B in Indonesia which were significantly lower, when compared to India.

Retailer NPS – eB2B Players

% of Respondents, N=800 for India; N=400 for Indonesia

3. COVID resulted in decline of GT sales initially in Q2’20; however despite this, eB2B managed to grow steadily

GT sales dropped steeply during the initial lockdown phase of COVID. e-B2B players however managed to grow steadily because of the convenience factor and wide assortment of products when compared to local wholesalers.

When the lockdown came into effect, retailers started to depend more on eB2B channels due to limitations in offline movement.. eB2B players also started to increase their supplier base to service the demand uptick and new product categories that were seeing more demand.

General Trade or Warung sales have started to pick up in in the later part of Q2’20 & in Q3’20. Ease in lockdown measures, longer opening hours, stricter social distancing and sanitization measures along with the close proximity of Warungs, has helped in them being preferred purchase channel for essentials.

With sales share of GT channel increasing couped with increased comfort of retailers with online ordering, eB2B players are poised for strong growth.

Channel Share – FMCG
% of Sales

4. Leading Brands have increased focus on GT sales recently offering discounts and terms of payment directly to Warungs through their distributors

Brands are experimenting with offering direct discounts to retailers and also terms of payment (credit) to drive volumes, not focussing on margin realisation. This is being done through their existing distributors, which highlights the importance of the offline distributor in the scheme of things.

e-B2B players however feel that this is a temporary trend to drive more traction and revive the channel fully, and that it cannot be done at scale.

Note: For comparison, Revenue/Cost levers mapped based on % contribution to GMV and not absolute figures.

5. With multiple forces in play, the growth trajectory and monetization trends (function of sourcing channel) are expected to follow an interesting path

eB2B players have managed to grow amidst declining GT sales and brand preference towards offline distributors.

Leading eB2B players have shifted focus towards increasing the supplier base, i.e., partnering with wholesalers and distributors rather than on increasing margins. Newer eB2B players are focussing on being enablers, i.e., assisting the offline ecosystem (Distributors/Wholesalers) in selling products.

These developments should help eB2B players scale rapidly and become an important part of the retail ecosystem.

The choice between sourcing channels is quite an important one and has far reaching implications from a cost and revenue standpoint.

The other key choice to make is between owning inventory vs functioning as a pure marketplace – this also is related to your sourcing channel mix.

The opportunity is definitely huge, and this is an interesting space to watch out in the next 2-3 years – this market has the potential to multiply in size by 3-4x by 2025.

Reach out to us if you find these insights helpful and would like to have more deeper discussions.

Key discussion points for eB2B in 2020

1. Will 2020 be a breakthrough year for eB2B FMCG retail in Indonesia?

2. Will eB2B players have to focus more on achieving scale and less on margin realization to reap benefits in later stages?