After GoTo IPO, Tokopedia eyes Indonesia’s lower-tier cities

Armed with a fresh cash infusion after GoTo Group’s IPO, Tokopedia appears to be doubling down on a familiar playbook for its next phase of growth: expanding its presence in lower-tier cities.

Among GoTo’s four growth strategies post-IPO is to strengthen a “hyperlocal” shopping and transacting experience. A Tokopedia spokesperson notes that this would help the ecommerce marketplace – still dominant in major urban areas – reach MSMEs across Indonesia and “maximize” the country’s large domestic potential.

But going outside major cities may also signal a deeper commitment by the Indonesian ecommerce firm to its Mitra Tokopedia service, a platform that helps small mom and pop shops called warungs digitalize their offerings. Rivals Bukalapak and Shopee also offer similar services with their Mitra Bukalapak and Mitra Shopee platforms.

Mitra Bukalapak, which pioneered the model, has been a linchpin for its parent company’s IPO strategy. According to third-party estimates viewed by Tech in Asia, the Mitra Bukalapak app has also benefited from a post-IPO boost in monthly active users.

But while Mitra Tokopedia and Mitra Shopee have comparatively flown under the radar, both services appear to be competitive with Mitra Bukalapak – at least based on active users of their respective Mitra apps. In fact, before Bukalapak’s IPO, Mitra Tokopedia attracted higher monthly active users in the first half of 2021.

Tokopedia did not comment specifically on these third-party figures. Bukalapak and Shopee did not respond to requests for comment by the time of publication.

Hyperlocal strategy

Tokopedia’s strategy to reach lower-tier areas is not new. It launched the hyperlocal program, which uses geotagging technology to help customers find sellers in close proximity in 2020. Mitra Tokopedia as well as the firm’s e-fulfillment service Dilayani (previously known as TokoCabang) were also launched in 2018 and 2019, respectively.

But the strategy perhaps takes on a new modicum of importance after GoTo’s IPO. Tokopedia’s take rate at 1.3% is still substantially lower than similar players.

Shopee, for instance, is said to have a take rate of around 7.5%, but unlike Tokopedia’s Indonesia-only strategy, it also has the benefit of having a regional presence. Not only does this give Shopee a larger user base, but it also lets the company penetrate more affluent markets like Singapore or Taiwan.

Tokopedia headquarters in Jakarta / Photo credit: Tokopedia

While GoTo’s growth strategies include strengthening its presence outside Indonesia, it’s likely to apply only to Gojek, not Tokopedia.

“A multiregion strategy would require significantly more resources,” says Dondi Hananto, Jakarta-based partner at early-stage firm Patamar Capital. “There are already established local players, so the cost will be too much for Tokopedia to expand.”

This leaves it with Indonesia’s own domestic ecommerce market, which still has a lot of potential. According to RedSeer data, ecommerce penetration in the country is still relatively low at 8.7% – far below countries like China at 28%.

Keeping competitors at bay