JAKARTA: In a warehouse on the outskirts of Indonesia’s capital, supervisors at e-commerce company Lazada use bikes or electric scooters to zip around a floor the size of four soccer fields, where up to 3,000 staff pack and dispatch goods around the clock.
The warehouse is one of five that Lazada has opened across Indonesia to cut costs and expand its reach in an archipelago whose 17,000 islands are sprinkled across an area bigger than the European Union.
Chinese tech firms, including Lazada’s top investor, Alibaba Group Holding, have poured at least US$6 billion into nearly every aspect of Indonesian e-commerce.
Lazada uses Alibaba’s inventory management systems and has tied up with ride-hailing companies, often using their motorbikes to deliver goods in a country with creaking infrastructure and traffic-clogged cities.
The payoff could be huge. It is a market forecast to grow from about US$7 billion last year to US$63 billion by 2027, according to Morgan Stanley.
“Indonesia, both in terms of the customers and behaviour, is a very unique challenge and we need to adapt,” Florian Holm, co-chief executive at Lazada Indonesia, told Reuters.
Lazada and Tokopedia, in which Alibaba is also an investor, dominate Indonesia in customer traffic, with more than 117 million monthly website visits each, according to data from e-commerce aggregator iPrice.
Alibaba doubled its investment in loss-making Lazada to US$4 billion in April, underscoring its global ambition to secure a bigger share of the e-commerce market.
Between the investment and the rewards, however, lie enormous complexities.
The World Bank has said logistical costs swallow up around a quarter of Indonesia’s gross domestic product, citing bottlenecks in supply chains, long dwelling times in ports and lengthy trade clearances.
Lazada has opened warehouses in places like Balikpapan, on the coast of Borneo, to avoid hauling everything from Jakarta.
Holm said that had in some cases reduced shipping costs by 90 per cent.
Competitive pressure is growing. Another Chinese heavyweight, JD.com, arrived in Indonesia in 2016.
And the US giant Amazon, which opened a warehouse in Singapore last year, may be prepared to dip a toe into the Indonesian market soon. — Reuters