Going rural: The playbook for Indonesia's B2B ecommerce startups

In The Checkout this week, we look at the challenges of those aiming to digitalize Indonesia’s mom and pop stores. [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: - [Why startups helping Indonesia’s warungs digitalize should focus on rural areas]( - What Google’s investment in India’s Flipkart says about tech investment today - [How Lazada is helping its retrenched employees]( --------------------------------------------------------------- Hello {NAME} My neighborhood has a number of [mama shops]( - small mom and pop stores that sell groceries and daily necessities. Frankly, I hardly patronize them. If I need something quick, I usually visit a convenience store like 7-Eleven or Cheers instead, even though the latter sells items at higher prices. I’m not alone, which is why the number of such mama shops in Singapore is dwindling. Warungs are the equivalent of mama shops in Indonesia, and over the last decade, many startups have tried to digitalize their operations. However, the going has been tough. As my colleague Jofie notes in this week’s featured story, several startups like Ula and GoToko - the joint venture between GoTo and Unilever - have given up and left the market, while those that remain are still not profitable. Players that focus on rural areas have tended to do better - fast-moving consumer goods brands, which are already established in urban areas, are more likely to partner with these startups in rural areas where they have yet to penetrate. Even then, education among small-business owners remains a challenge, and outreach to warung owners often involve on-site events in villages to be effective. Jofie’s story is a sobering reminder of just how hard it is to be an entrepreneur and how funding alone isn’t enough to turn what might seem like a great idea on paper into a successful reality. This week’s Hot Take looks at the other end of the scale, analyzing US tech giant Google’s investment in Flipkart, India’s largest ecommerce platform. I take a closer look at what this deal says about big tech investments in today’s world. -- Simon  --------------------------------------------------------------- THE BIG STORY [Digitalizing Indonesia’s warungs is hard, but focus on rural areas helps]( Urban areas are already saturated with conventional distributors that leave warung digitalization startups little room to work with.  ---------------------------------------------------------------  THE HOT TAKE Google’s Flipkart investment is a sign of the times Here’s what happened: - Flipkart [announced]( this week that Google would join its latest funding round as a minority investor. - [Reuters]( citing a source, reported that Google’s investment might be worth US$350 million, valuing Flipkart at US$37 billion. - Earlier in May, executives from Walmart, which owns a majority of Flipkart, were said to be mulling the right time for an IPO. Here’s our take: At a reported US$350 million, Google’s investment in Flipkart, India’s [largest ecommerce platform]( is relatively small compared to the billions it is shelling out for other initiatives like [subsea cables]( [data centers]( and [AI startups](. Yet, the move is significant, especially in what it says about the direction and motives driving tech investments today. First, it comes at a time when big US tech has soured on investing in China, given geopolitical realities and US [government restrictions]( on investment in the country. India is one of the main beneficiaries of this shift, along with countries in Southeast Asia that have seen large investments from the likes of [Amazon]( and [Microsoft](. Second, while Google’s investment was for a small (less than 1%) stake in Flipkart, the deal - along with a “cloud collaboration” with the India ecommerce giant - marks [the end of Flipkart’s exclusive cloud partnership]( with Microsoft’s Azure, one of Google Cloud’s main competitors. Today, many investments go beyond financial considerations, with the investor and target company sharing a broader strategic goal. For example, Microsoft’s investment in OpenAI wasn’t just about making a financial return on a promising upstart. In exchange, the tech giant became OpenAI’s [exclusive provider]( of computing power, which the latter needs in spades to train and run its large language models. Finally, Google’s backing of Flipkart is a reminder of Walmart’s tech prowess. The retail giant from Arkansas might once have seemed like a prime victim of the disruption caused by ecommerce. Instead, it has leveraged its physical footprint, vast troves of data, and investments in areas like [robotics]( to stay ahead of the game. With its ownership of Flipkart, Walmart is well-positioned to win in India, a market that might grow to [US$325 billion by 2030](.  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ [Adani Group plans to enter India’s ecommerce space:]( Adani, which is reportedly looking to launch ecommerce and payment offerings via its travel booking app Adani One, will be competing with industry giants like Amazon, Google-backed Reliance, and Flipkart. 2️⃣ [Thailand-based aCommerce cut net loss by half, grew revenue 18% in 2023]( The company achieved EBITDA breakeven across all four quarters of 2023, said CEO and co-founder Paul Srivorakul. 3️⃣ [Alibaba looking at $5b raise through bond issuance: report]( The move echoes that of rival JD.com, which recently announced plans to issue convertible notes to raise over US$1.7 billion, Bloomberg reported. 4️⃣ [Pinduoduo more than doubles revenue, grows operating profits by 275% in Q1]( The company’s cash, cash equivalents, and short-term investments hit US$33.5 billion as of March 31. 5️⃣ [Taiwanese luxury marketplace bags over $3m, eyes SG entry:]( PopChill, which also operates in Hong Kong, is also looking to hire 18 to 20 people. ---------------------------------------------------------------  FYI [Lazada SG’s retrenched, non-union employees to receive $888 for training support]( The payment was negotiated by the National Trades Union Congress (NTUC) and will be disbursed by August 31. ---------------------------------------------------------------  EVENTS HAPPENING You can also check out a curated list of trending tech events [over here]( and Tech in Asia’s signature events [here](. [Saigon Summit 2024 : Charting Vietnam’s Tech Future on May 30]( Put your startup on the map at our signature trade show, Startup Showcase, and get the attention of hundreds of tech professionals. Your next investor or business partner could be among the crowd! Only 30 slots are available, and the competition is fierce. [Sign up before May 3]( and make sure your startup doesn’t get left behind! [Tech in Asia Conference Kuala Lumpur 2024: Malaysia on The Rise on July 24-25]( We've got everything covered from macro trends shaping the landscape to the hottest emerging tech. Join us for inspiring keynotes on the Main Stage, deep dives in the Founders Summit, and actionable insights across dedicated growth tracks. Don't miss out - [purchase your tickets]( today! [Product Development Conference (Jakarta, 25-26 June 2024)]( In this edition of Tech in Asia’s flagship conference for product talent, get access to keynote presentations, interactive Q&As, and networking opportunities that help you to build, launch, and scale world-class products. Early-bird tickets are gone, but fear not—you can now grab first-release tickets at 50% off! Better yet, bring 2 friends and secure an extra 20% off. [Secure your spot now](. [Tech in Asia’s Founders Meetup in Vietnam on May 30]( Founders Meetup is returning to Vietnam as part of the official closing party of Saigon Summit! Unwind and connect with founders, startup leaders, and investors from across the region at this premier networking mixer. Early bird tickets are fully redeemed – [get yours at US$12 now]( --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? 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