E-Fashion Rush
    Category: Companies & People By : Yessar Rosendar Read : 2318 Date : Tuesday, August 11, 2015 - 21:07:34

    Courtesy of Zalora

    The current situation of e-commerce in Indonesia is similar to a gold rush, as there are many investments coming into the market including major investments such as the $100 million investment in Tokopedia by Softbank. The hotbed of e-commerce is reflected at the national online shopping day initiated by Rocket Internet last December that attracted 80 e-commerce sites, while the same event held three years ago had only six participants. “Asia is an exciting region for e-commerce, it is by far the most fast-growing in the world and Indonesia is becoming a part of it,” says Magnus Grimeland, regional managing director and co-founder of the Zalora group in an exclusive interview last June.

    In his role, Magnus is responsible for the overall coordination of the group, and is directly responsible for the Zalora Marketplace business across Asia-Pacific and Zalora Indonesia operations. Prior to Zalora, Magnus was with McKinsey for six years where he became an associate principle, working across the U.S., Russia, Ukraine, India, Asia and Nordic regions in global telecom, media and high-tech industries. Before this Magnus was with the Royal Norwegian Navy Special Operations (equivalent of U.S. Navy Seals). Magnus also got his BA from Harvard University.

    Zalora was established in 2012 and is headquartered in Singapore. It aims to benefit from the growth of digital buyers in Asia, with the online fashion retailer offering clothing, shoes, accessories and beauty products to eight countries in Southeast Asia including Malaysia, the Philippines, Singapore, Thailand, Vietnam, Brunei, Hong Kong and Indonesia under the Zalora brand and to Australia and New Zealand under the brand The Iconic. Since its launch in March 2012, the company has grown its business with revenue of $130 million last year, a 70% increase from the previous year of $76 million. The number of transactions has increased more than 90% from 2 million in 2013 to 3.9 million last years, with a number of customers doubled at the same period from 1.3 million to 2.7 million.

    According to Magnus, Indonesia will be a $5 billion market in the next two years from a total of around $40 billion market across Asia. The investment came late in Indonesia because of the lack of infrastructure. Now that infrastructure includes logistics, the market has improved and is combined with growing Internet penetration, so investments have started to catch up. According to Markplus research in 2014, Indonesia had 75 million Internet users in 2013, a 22% increase from 61 million the year before and projected to pass 100 million this year, “With these investments, the e-commerce growth will be faster,” Magnus says.

    For Zalora, Indonesia will play a key part of its growth, as Magnus projects it will be the company’s biggest market, followed by Malaysia and the Philippines. From the $5 billion market expected in 2017, Magnus projects much of that will be fashion products, as consumers buy fashion more frequently than other goods, such as electronics. “The Indonesia market is our biggest contributor, especially in the Lebaran period. For sure the future potential is the highest,” Magnus says. The future does look bright for the company. Google Indonesia released a study about e-commerce last year, based on a survey of 1,300 Indonesians and concluded a solid future for the local e-commerce industry, as half who currently don’t shop online are interested in making online purchases and will probably do so in the next 12 months. Two out of five of those non-adopters will consider buying fashion items online.

    Zalora’s local website, Zalora.co.id, was established in 2012. According to Alexa, Zalora is ranked 83th among sites in Indonesia and the most popular e-commerce website for fashion on the list. “We already have a brand that is known, and we just want to be stronger and stronger, bringing more brands to our customers,” Magnus says. The brand has also launched its own Zalora fashion brand and its own Muslim collection, Zalia, last year. Other than building the brand, it has two other pillars that supported its recent growth: one is enhancing the customer experience such as by providing express delivery in Jakarta and other big cities. The other is investing in more editorial content so customers can access its look books and its own magazine for reference. “There are no other regional online apparel retailers like us,” Magnus says.

    However Zalora’s growth is not without a challenges: One typical obstacle faced by e-commerce players in Indonesia is the payment solution. Credit cards penetration is still low in Indonesia, thus bank transfers account for 50% of payments for Zalora. Bank transfers, however, has a disadvantage of a time gap between customers paying for items, raising the risk of customers changing their minds and walking away. Zalora tried to cope with this challenge by diversifying its payment solutions by adding a cash on delivery system that has a low cancellation rate, as people will likely buy the items after it is handed to them by a courier. “I believe bank transfers will slowly go away and be taken over by other payment solutions in the future, as it is not convenient,” Magnus says.

    Despite focusing on enhancing the customer experience, Zalora is upbeat about its profitability in the long run. It has diverse channels that generate revenue, from the lowest margin from commission in its marketplace to higher margins for its own brands. According to Magnus, fashion has better margins compared to electronics, where most of the margin goes to the producer. However, in fashion, Magnus notes that a company has to be able to predict the market to have a nice profit, which is hard to do. “Currently we are comfortable with our scale and profitability, so now we can focus on improving our service and grow as fast possible,” Magnus says.

    With such favorable conditions, Magnus has high hopes for the Indonesia market and he visits the country every two weeks. With a high growth market such as Indonesia, Magnus gives a higher target for growth compared to other markets. “Our aim for Indonesia is a double-digit growth every month and to double in size every six months,” Magnus says. He says that being big is essential for an e-commerce player. “If you are not big enough, you will be below the radar from everyone else,” Magnus says.