How do you beat a competitor with pockets thousands of times deeper than yours? That was a predicament Bukalapak CEO Achmad Zaky faced during the company’s early days in 2012, when a “European player” entered Indonesia and started to flood the market with generous subsidies.
“It made me sad. I thought Bukalapak was going to die because the money they had was really huge,” Zaky said of the unnamed rival during a fireside chat at Tech in Asia Jakarta 2017.
But the consumer-to-consumer (C2C) marketplace would emerge “bigger” four years later as its competitor bled in the costly subsidy war, he said. “Subsidies don’t work. They bankrupt your company.”
To this day, Zaky said they haven’t exactly played the subsidy game, unlike competitors who burn crazy amounts, “maybe 50 times more than us.”
While he didn’t drop any names, Bukalapak is racing against other marketplaces like Shopee as well as Alibaba-backed Lazada and Tokopedia in Indonesia.
“Actually I’m quite happy they’re giving out subsidies. When subsidies come, I ask my sellers to get products from those guys because they’re cheaper, then sell on our platform for the normal price,” he quipped.
Subsidies only bring about “short-term” growth, he said. If you want to attain healthy growth, you have to focus on providing a great customer experience, developing your product, and building a robust team.
Your team, in particular, is crucial. He believes Bukalapak has built a strong engineering culture that’s data- and returns-driven. “If I’m paying you one rupiah, you should contribute two rupiahs to Bukalapak.”
He added that startups must keep a low burn rate – what he called the cockroach spirit. That’s what Bukalapak did to become “the most efficient” C2C marketplace in Indonesia, he said. “Focus on those fundamental things and magic will happen, your company will grow. Trust me.”
He shared some of the company’s other achievements to date:
- It’s now one of the largest marketplaces, with 2 million small and medium enterprise (SME) sellers and 5 million unique daily users
- US$1 billion in gross merchandise volume, with revenue in the tens of millions of dollars a year
According to him, their mission to bring value especially to SMEs is at the core of Bukalapak’s strategy.
“A lot of SMEs are finding it hard to make money offline because the cost is really high. This is the problem we solve – we help smaller players become competitive against malls through the internet.”
To this end, Bukalapak has set its sights on untapped second- and third-tier cities in Indonesia. These cities “don’t even use Facebook,” Zaky explained. “That’s the opportunity for us.”
“I can’t mention it right now but we’re building something to crack this market. Indonesia is not just Jakarta. We are a big country.”
He remains unfazed by the presence of foreign ecommerce companies in Indonesia, saying that Bukalapak, as a local player, has an advantage. “I really believe that only Indonesians who lived here for 20, 30 years truly understand the market,” he said.
He thinks it’s too early for the ecommerce industry to consolidate, given that the market is still small. Indonesia’s GDP per capita stands at only US$3,000 per year, he said. “The market will boom if GDP per capita reaches US$,5000 or US$,6000. Maybe in 10 years we could be equivalent to a fifth of China.”
To get there, he said Bukalapak needs to be patient and very smart in spending.
Zaky also weighed in on what’s ailing startups today. “I think the problem right now is we don’t face hard problems. We have so much money going around. It’s totally different when I founded Bukalapak – I had no money, no people, no office.”
“Face the bad times. Don’t settle for the easy way. Behind a problem are a lot more problems you have to solve one by one to be a great entrepreneur,” he urged young #startup founders.
This is part of the coverage of Tech in Asia Jakarta 2017, our conference that took place November 1 and 2.