At theStartup Grind Jakarta a few time ago, Hadi Wenas, the Ex-Managing Director of Zalora Indonesia who now serves as CEO of aCommerce Indonesia shared his experience in buiding Zalora Indonesia to be one of the biggest online fashion store in Indonesia that made around 2000 order each day, before he left Zalora to build a new startup, which is aCommerce Indonesia. Hadi Wenas can be reached at [email protected]
So, what lessons can we earn from Hadi Wenas’ experience in building Zalora Indonesia? Check out the article below.
For those of you who do not know, Zalora is a company invested by Rocket Internet. Rocket Internet is a company builder that is well known with their penchant for imitating other business models that have been proven to work. However, they not only emulate the business model of course, they also improvise on the execution and implementation of the business. That is what makes a company invested by Rocket Internet can grow very fast and big, like Lazada and Zalora.
Wenas said, “Rocket Internet is also known for the way they conduct business which is fairly ruthless. They quickly change the direction of the business that they feel can not work. If there is a business model that does not run, they will immediately turn it off and replace it with a new business model. And this is all done in a fairly short time.”
Back to Zalora, Zalora is a company that was built by the founder of five people. One of them is Oliver Samwer which finally invites Wenas along with his co-founder (Catherine Sutjahyo) to establish Zalora Indonesia under the flag of Zalora International.
Under the control of Wenas, Zalora Indonesia can grow very rapidly. By the time he was still working in Zalora, Wenas admit that Zalora Indonesia produces the biggest number of transactions (not the value of transaction) compared to Zalora in other countries, such as Zalora Singapore and Malaysia. However, the value of the transaction from Zalora Indonesia is still less when compared with Zalora Singapore and Malaysia.
Reasons Why Growth of Zalora in Indonesia is Very Fast
Wenas admit that the rapid growth of Zalora can not be separated from a large amount of funds invested by Rocket Internet. With the large amount of funds, they can do anything on the internet marketing to increase their business turnover. For example, Zalora boost their marketing efforts to reach the highest limit, meaning they continue to pour money in order to achieve greater traction so that traction can not rise again or in other words has reached its highest limit. When they know the limit of growth, they will reduce their marketing budget in stages to measure the level of effectiveness, whether the growth will continue to increase or continue to decrease. They do this way to sustain the growth with a marketing budget which is not so big.
As we all know, there are many marketing channels spreading out there. Its up to you to decide which one you want to use as your marketing path later. But, is there are certain marketing channels which produce the best conversion? Wenas argues, “nothing is certain, you have to try it one at a time to measure the conversion rate you got from any marketing that you use. From there you will find which marketing channel could give you a grater conversion result than others. In Zalora case with abundant funds, we do marketing on every channel. If there is a non effective channel, we move the budget from the inactive channel to a channel with much better conversion. It makes our marketing become more efficient” he said.
Tips: For those of you who does not have abundant budget, it is better for you to start from the lowest-cost channel first. If you have mastered it, then you just go to another channel.
In addition to marketing frenzy, one of the things why Zalora can grow big that quick is sourcing. “Without the sourcing team (team that find and select the products), Zalora can not be this big, they are who chose a product with good quality so that we (marketing team) can do marketing on a large scale. Without them, we could not sell anything. For the problem of competition, you could say that at that time Zalora has no significant competitors because not many online stores that use the consignment of goods in their warehouse. Our rivals at that time arguably is the department store in which case are offline stores ” he explained.
Dengan memiliki keunggulan di konsinyasi, Zalora bisa mengirimkan barang dari supplier langsung ke alamat si pembeli, ini memungkinkan Zalora untuk memiliki kontrol penuh pada barang yang mereka jual. Tapi pada awalnya, Wenas mengakui bahwa tidak semua supplier mau menggunakan sistem konsinyasi karena mereka belum percaya dengan Zalora. Jadi, mau tidak mau, beberapa barang di Zalora masih ada yang mengandalkan dropship.
By having the advantage in the consignment, Zalora can deliver goods directly from the supplier to the buyer’s address, this allows Zalora to have full control on the goods they sell. But at first, Wenas recognizes that not all suppliers want to use a consignment system because they have not believed in Zalora. So, inevitably, there are some stuff in Zalora that still rely on dropship.
Zalora’s Strategy to Entrance Market
Not wanting to be an online store that is similar to other online stores, Zalora offers three things to their prospective customers, which are most wide products, COD, and return of goods. Those three things are Zalora’s uniqueness compared to other online stores because there is no other online store that can offer this kind of thing.
Having to run these three advantages, especially for returns of goods, turns out the return rate in Zalora is less than 3 percent, while the exchange rate is less than 5 percent. This shows that customer is satisfied after they shop online at Zalora. After running up to 1.5 years, finally Zalora add the term of returning goods, of which initially only 14 days to 30 days.
Many things change in a few years after Zalora stands, from the shipping costs which at first must meet a “minimum order” for several regions in Indonesia becoming to free to all over Indonesia. In the beginning, Zalora also sell items such as Christmas trees, kids clothes, home decor to bolster pillow, but soon they were closed because it is not profitable. Zalora is a company that is agile, they will continue to adjust to what is desired by the market. This includes their principles in running the business.
E-Commerce Market in Indonesia
Comparing to China, McKinsey survey noted that thepenetration number of people shopping online in China amounted to 32%, while Indonesia is only about 7%. This large different of amount is very much due to the phenomenon of online shopping in Indonesia that is still in the early stage. Wenas believe that the very low number will increase to beat China in the next five years because Indonesia is an archipelagic nation.
In contrast to China where almost all areas can be reached by land transportaiton, especially train, on the other hand, Indonesia is a country that is made up of thousands of islands, this makes not all regions in Indonesia can be reached by land transportation. This is what causes the phenomenon of online shopping will increase rapidly in the next few years.
Judging from the number of visits to the Zalora website every day, Indonesian people are more likely to visit and see the goods while at the office after lunch. That proved t Indonesian often open an online store shortly after the lunch hour. The pattern is like this:
Initially they will look first at the hour after lunch, and then when the time was pointing at 4-5 pm or when its about time to go home from work, they buy the goods that they had seen earlier in the day. What happened between lunch time until late afternoon when they decide to shop online? Wenas argue this might because they are still wondering to their friend at the office about the goods they wanted to buy before they decided to buy it in the afternoon. More or less this is the pattern of Indonesian people on the internet shopping.
After building Zalora to produce more than 2,000 orders every day, Wenas went out and challenged himself again on a business idea that he considered potential if its applied in Indonesia, namely aCommerce. aCommerce is a platform that provides end-to-end services which helps the e-commerceplayers in the terms of goods delivery, digital marketing, warehouse systems, technology, and much more.
As mentioned previously, aCommerce also assist their clients in digital marketing, but differs from a digital agency in general, aCommerce only focus on helping the ecommerce players in e-commerce and digital marketing efforts (banner ads, newsletters, analytics, social media), aCommerce only focus on how many conversions resulted. aCommerce will not help you to get a lot of traffic, but the number of sales. This is what distinguishes aCommerce from Digital Agency in general.
Currently, aCommerce have already runs in four countries, namely Thailand, Indonesia, Singapore, and Philippines. With the activation of AFTA in 2015, in the future aCommerce will also address the issue of export and import goods.
By providing this service, it is expected that e-commerce businesses can focus on providing quality products, competitive prices, and a focus on building their own brand.
How to Get Traction
The first thing that remains a priority in building a startup is a product. After thinking about a qualified poduct, unique, problem solving, you must think about your market target. And you have to believe in yourself that you are better than anyone else.
For marketing, you might be able to pay for the digital agency to take care of your digital marketing such as SEO and SEM.
How to Get Investor
In accordance with our previous article on how to impress investors, Wenas said one of the first things seen in the business you run is “whether your business is already running before in other countries?” This is a question that you must answer to the investors because investors want proof and money from your business.
Besides your success stories, investors will also look at your background. Profiles of people who are in your business is also an important element to attract the hearts of investors.
Build a company that already clear where the money from and has a it’s own uniqueness.
A Piece of Advice
Many startups in Indonesia who want to build something really innovative and cool which ended up in a business that is not clear from where this business will make money. Wenas said that the real innovation was not only comes from something completely new, but can also come from something that already existed with some improvisation added.
As a person who already has a family, Wenas just want to build a company that the risk is not too large, such as a company that has a clear flow of money and had an evidence of success in other countries. “Build a company that already clear where the money from and has its own uniqueness,” said Wenas.
Building something which completely new is very difficult, even copas (copy-paste) business was sometimes unable to walk if implemented poorly. There are some successful business models overseas, but could not be run in Indonesia. For example, a mobile app coupon in Indonesia, this recent years many has tried it but now they are somewhere unknown. So, you have to be careful in imitating the business model that has been successful overseas, not everything can be run in Indonesia.