Funding crunch fails to slow Indonesia's expanding D2C space

In The Checkout this week, we look at the latest state of Indonesia’s D2C space and dive into Shopee’s strong results for Q1 2024. [Read from your browser]( The Checkout 🛒  --------------------------------------------------------------- Welcome to The Checkout! Delivered every fortnight, this free newsletter breaks down the biggest stories and trends in ecommerce. You can find past issues [here]( or [sign up here]( to receive future newsletters. Also, If you’re not a subscriber, get access by [registering here](. IN FOCUS In today's newsletter, we spotlight: - [The direct-to-consumer landscape]( in Indonesia amid funding drought - Shopee starting 2024 with strong results amid TikTok Shop’s threat --------------------------------------------------------------- Hello {NAME} Many new F&B brands are appearing on online food delivery platforms in Indonesia. These D2C players aim to ride on the momentum of people ordering food online, a trend that increased dramatically during the pandemic. Most F&B players are not backed by VCs. But in recent years, some F&B startups, especially coffee chains, have attracted the latter's attention. Jago Coffee, Kopi Kenangan, Flash Coffee, and Fore Coffee are some examples. The D2C trend has also reached other consumer sectors, such as beauty, personal care, fashion, health, fast-moving consumer goods, furniture, and even electric vehicles. All are using online platforms to sell their products directly to consumers. Funding into the D2C space in Indonesia is drying up compared to a few years ago, though. Yet, new names continue to emerge. In this week’s Big Story, my colleague Budi maps out Indonesia’s D2C space, complete with a list of players in each category, funding details, and the latest trends in the industry. The story also highlights Indonesian brands expanding regionally and also some regional brands coming into the country. Meanwhile, in the Hot Take, I analyze Shopee’s strong results for the first quarter of 2024, demonstrating its continued success despite the rise of TikTok Shop in Southeast Asia. -- Jofie  --------------------------------------------------------------- THE BIG STORY [Mapping Indonesia’s leading D2C brands]( Between 2020 and 2024 so far, direct-to-consumer players in the F&B sector attracted the most funding, followed by those in FMCG.  ---------------------------------------------------------------  THE HOT TAKE Shopee thrives despite TikTok Shop’s rise Here’s what happened: - Shopee’s gross merchandise value [jumped 36% year on year]( to US$23.6 billion in Q1 2024. - Its revenue rose 33% to US$2.7 billion from Q1 2023. - Adjusted losses of US$22 million in Q1 2024 were a fraction of the previous quarter’s US$225 million, but still worse than the adjusted earnings profit of US$208 million from a year earlier. Here’s our take: Shopee began 2024 with a strong set of results after ramping up [investment]( amid intensifying competition in August 2023. For the first quarter of 2024, the ecommerce giant posted a positive [adjusted EBITDA]( of US$11.5 million in Asia, although other markets remained in the red. Forrest Li, founder and CEO of Shopee’s parent company Sea Group, stated that the operational priorities for the ecommerce arm this year are “enhancing” price competitiveness, “strengthening” its content ecosystem, and “improving service quality” for buyers. During the company’s Q1 2024 earnings call, Li claimed that Shopee had become “the largest livestreaming ecommerce platform in Indonesia'' based on the average daily orders made during livestreams in the period. This comes amid TikTok Shop’s efforts to regain growth momentum in the country after being temporarily closed from October to November last year. Indeed, Shopee has made huge investments in livestreaming and short-form videos. It offers many discounts for purchases made through Shopee Live or Shopee Video - something its rival Lazada doesn’t do. See also: [Shopee ramps up short-video efforts, but can it fend off TikTok Shop?]( Meanwhile, TikTok Shop appears to be less aggressive in Indonesia compared to before the closure. Several consumers told Tech in Asia that they have been using Shopee more frequently than TikTok Shop after the latter merged with Tokopedia, as “the discounts have become fewer.” Some TikTok Shop sellers also pointed out that they haven’t been able to achieve the same sales levels as before October 2023, with many moving to Shopee. In November 2023, venture builder firm Momentum Works [projected]( TikTok Shop’s market share in Southeast Asia to reach 13.9% that year. Shopee led with 45.9%, followed by Lazada with 17.5% and Tokopedia with 14.2%. GoTo CEO Patrick Walujo has repeatedly stated that the merger of Tokopedia with TikTok Shop will make them the market share leader in ecommerce in Indonesia. However, in February, Walujo said Tokopedia’s market share had been [diminishing]( especially among price-conscious consumers, due to a reduction in incentive spend. To recapture these sellers and users, TikTok Shop and Tokopedia likely need to become more aggressive, both in pricing and in seller and affiliate acquisitions. They have the benefit of Tokopedia’s strong ecommerce ecosystem, including logistics and payments, to compete harder with the market leader. But for now, Shopee continues to be the leading ecommerce player in Southeast Asia, including Indonesia.  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ [Report: aCommerce mulls share sale at up to $300m valuation]( Shareholders, including co-founder and CEO Paul Srivorakul, have contacted potential buyers and are reportedly working with a finance consultant for the possible sale, Bloomberg reported. 2️⃣ [Indonesian ecommerce firms Sinbad and Tjufoo merge, aim for IPO]( The two firms will retain their respective brands while sharing a new parent company called Horizon Group. 3️⃣ [Carsome hits first EBITDA positive quarter in Q1 2024]( The used-car marketplace didn’t disclose hard numbers, but partly attributed the development to a “significant” improvement in gross profit per unit. 4️⃣ [AnyMind’s revenue jumps 60%, posts $2.3m in operating profit for Q1]( The Singapore-based ecommerce enabler’s gross profit also improved by 57% year on year to US$24.3 million. ---------------------------------------------------------------  EVENTS HAPPENING You can also check out a curated list of trending tech events [over here]( and Tech in Asia’s signature events [here](. 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