L.E.K. Consulting: ~IDR 742 Trillion FMCG Retail Sales Drive B2B E-commerce Growth in Indonesia

JAKARTA,Indonesia,March 23,2021 -- The complexity in the Indonesian FMCG retail landscape is driving the growth of B2Be-commerce in the sector. A significant investment opportunity has emerged in this ~IDR 742 trillion market which recorded a 7% CAGR from 2015-2020,according to global strategy consulting firm,L.E.K. Consulting.

There are ~4-5 million GT (General Trade) outlets i.e.,mom and pop stores and ~35,000 MT (Modern Trade) outlets like chain hypermarkets and supermarkets. These retailers depend on a complex supply chain consisting of producers,distributors,wholesalers,and semi-wholesalers to procure their inventory. B2B e-commerce players are driving down this complexity and creating value by streamlining the supply network.

Moreover,there are robust demand drivers that have buttressed B2B e-commerce further. Firstly,retailers are increasingly aware of technology as a potential solution to their many pain points. In addition,Indonesia's digital penetration has increased by ~30% since 2015 to ~75% in 2020. Furthermore,improving infrastructure such as in logistics with a large number of start-ups,such as Ninja Van,Sicepat Ekspres and Tiki,are key in complementing the B2B marketplace ecosystem with last-mile delivery,hence improving the infrastructure in the country. Lastly,COVID-19 has induced behavioural changes in consumers as unnecessary travel was foregone during lockdowns and B2B e-commerce became the obvious choice for stock replenishment.

As a result,several B2B platforms have emerged across the e-commerce and marketplace models,such as Grab Kios,GudangAda,GoToko and more. Each model presents unique advantages and shortcomings for operators which are explored in detail in the report. Manas Tamotia,head of L.E.K. Consulting's Southeast Asia Technology Practice commented,"Within Indonesia,we found GudangAda,a marketplace to be largest in terms of transaction volumes,whereas e-commerce players like Mitra Tokopedia and GrabKios enjoy more engagement on their apps as they have multivertical capability to offer services outside B2B e-commerce (e.g.,P2P lending,bill payment,phone credit top-ups). Similarly,in a broader context,we discovered that the marketplace model has been successful in other countries like China and India,with substantial traditional trade."

As B2B e-commerce operators disrupt the conventional Indonesian FMCG retail sector,new value creation opportunities for all stakeholders emerge. L.E.K. Consulting's actionable insights provide vital context to navigate these pivotal shifts in the market.

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Contact

Manas Tamotia,

L.E.K. Consulting,

m.tamotia@lek.com