President Joko 'Jokowi' Widodo, accompanied by Bukalapak co-founder and chief executive Achmad Zaky, left, review the booth of a Bukalapak partner stall during the e-commerce platform's ninth anniversary in Jakarta on Jan. 10, 2019. (Antara Photo/Puspa Perwitasari)

Bukalapak Secures $50m in Fresh Funding as It Doubles Down on Warung Initiative


JANUARY 17, 2019

Jakarta. Bukalapak, one of Indonesia largest e-commerce firms, has secured a new $50 million investment from a fund led by South Korea's Mirae Asset Daewoo and web portal Naver Corp.

The fund should help the company, which celebrated its ninth anniversary last week, to continue expanding and compete with its closest rival, Tokopedia, for domination in a market of 260 million people.

"We hope that with the support from this partnership, we can further accelerate our steps to innovate through technology to encourage small businesses in Indonesia to move up the ladder," Fajrin Rasyid, co-founder and president of Bukalapak, said in a statement.

Surging smartphone use and rising middle-class incomes in Indonesia have turned its e-commerce industry into a battleground for foreign investors.

Global management consultancy McKinsey and Company has projected that spending in Indonesia's e-commerce market may increase to as much as $65 billion by 2022, from $8 billion in 2017.

"Naver is very strong in technology, so there is a lot we can learn from them," Teddy Oetomo, chief strategy officer at Bukalapak, said by telephone.

Bukalapak expects to break even within the next three years, as it adds new product segments and expands its coverage to small towns, Teddy previously told Reuters.

The company, which counts Singapore's sovereign wealth fund GIC and China's Ant Financial among its investors, became a unicorn – a privately held startup company with a valuation of $1 billion or more without tapping the public market – after its last fundraising round in late 2017.

Betting Big on Traditional Outlets

During its birthday celebration last week, attended by President Joko "Jokowi" Widodo and several ministers, Bukalapak announced a Rp 1 trillion ($70 million) investment in the development of a network of warehouses and logistical services to cater to mom-and-pop shops, or warungs, across Indonesia.

The warung used to be the main point for urban and rural Indonesians alike to get their daily necessities, but it has faced significant challenge from large convenience store chains over the past few decades.

Bukalapak has been tapping warungs since 2017, equipping them with a digital platform to enable them to sell digital products and make financial transfers. Achmad Zaky, co-founder and chief executive of Bukalapak, told the Jakarta Globe earlier that the company will establish a logistical network to help warungs become more efficient.

Of the 4 million sellers on Bukalapak's platform, more than 500,000 are warungs, which enjoy access to a digital and modern accounting system, cashless payments and benefit from a just-in-time stocking system that puts them on par with modern retailers.

These innovations did not go unnoticed. Bukalapak has secured a deal with the government, allowing it to disburse state-subsidized microloans through warungs.

"Bukalapak is a company that has a heart, has a social spirit, [which] not only focuses on profit. This is an example. Thank you for contributing to building the Indonesian economy," President Jokowi said.

Additional reporting by Reuters