After Axioo acquisition, Indonesian phone retailer Erajaya aims to catch up with Trikomsel

Last month, Indonesian phone and gadget distributor Erajaya acquired a 51 percent stake in local electronics manufacturer Axioo in a deal worth Rp 5.1 billion (US$394,000). Following the investment, Erajaya now has access to Axioo’s licenses and manufacturing facilities.

The acquisition can be seen as part of Erajaya’s long-term strategy to “deliver an end-to-end solution for our partners, from distribution to production,” the company’s secretary Swasembada Djatmiko Wardoyo told Bloomberg Businessweek.

Beyond using the factories to assemble its own brand of phones called Venera, Erajaya also plans to offer the use of their facilities to foreign brands. Indonesia’s local content regulation (TKDN), which applies to 4G handsets, will require foreign phone manufacturers to shift aspects of their production process to Indonesia.

“In the first stage, we will use the facilities mainly for assembly,” Jeremy Sim, CEO of retail at Erajaya, told Tech in Asia. “In the second stage, which we expect to reach by the end of the year, we will transition to a more sophisticated form of manufacturing, including 4G smartphones.”

Finding the right online strategy

Erajaya’s announcement comes at a time when the company’s largest local competitor Trikomsel is also diversifying. In March, Trikomsel launched a joint venture with SP eCommerce a subsidiary of SingPost.

Sugiono Wiyono, president director and CEO of Trikomsel, has described the company’s ecommerce initiative as following a two-pronged strategy. The firm will open a “curated mall,” meaning it will have a website that offers only the brands that Trikomsel and SingPost select. This is likely to include tech and gadgets from under Trikomsel’s umbrella, but may also include other brands which SingPost already serves, like Adidas and Uniqlo.

In addition, the new venture plans to offer ecommerce services, which SP eCommerce specializes in. These include a variety of solutions for online retail such as digital technology, operations management, warehousing, delivery, payment, digital marketing, and support.

In contrast to Trikomsel, Erajaya does not plan to significantly invest into an online retail website, Sim says. “We have our Erajaya online shop, but we have no plans to build an ecommerce website or marketplace to compete with Tokopedia, BliBli, Elevenia, or MatahariMall.” Instead, Sim says Erajaya’s strategy will be to continue its partnerships with all kinds of vendors – be it offline or online.

“We have successfully opened brick-and-mortar retail stores in malls, and we will work together with new online malls,” says Sim.

“We believe the future of online retail lies in the marketplace model,” he adds. “Marketplaces specialize in online sales, but they do not handle storage and logistics. To work together with these marketplaces, we are building our own fulfillment center.” This fulfillment center, which includes warehousing, packaging, and logistics is already being tested by Erajaya, and is set to officially launch next month.

Still a lot of ifs