In Indonesia, e-fulfillment rises as an ecommerce niche

For Indonesia’s major ecommerce marketplaces, one service that has become a fixture on their platforms is e-fulfillment. Tokopedia, Shopee, and Bukalapak all have this feature, which lets sellers hand over their warehousing and related services – such as packing and shipping – to the ecommerce platforms.

This is perhaps a natural development in Indonesia, where the geographical size and quality of infrastructure vary greatly between cities.

If Amazon is anything to go by, e-fulfillment holds plenty of promise: The US ecommerce giant’s Fulfillment by Amazon (FBA) service counts 85% of the firm’s top 10,000 global sellers as users, and it has also powered Amazon’s marketplace revenues over the years.

That said, several rising startups are also eyeing this space, offering a third-party, platform-agnostic option for ecommerce sellers. While many of these startups are already ecommerce enablers or logistics players, some are entering the space from seemingly unrelated industries.

A Shipper warehouse / Photo credit: Shipper

Still, e-fulfillment is not necessarily the easiest space to enter. The warehousing part of the equation, for instance, is particularly capital-intensive. Meanwhile, margins are thin.

“Profitability may be difficult if you run it as a standalone business,” says a logistics CEO who declined to be named in this report.

A road to scale

Broadly speaking, e-fulfillment providers offer warehousing services in the form of the warehouse space and workers needed. Tokopedia’s fulfillment platform TokoCabang, for instance, takes care of everything from storing inventory all the way to packing orders and shipping them to customers via last-mile partners.

What’s even more attractive, however, may be location: Most players have a network of warehouses spread across the country, including lower-tier cities. Riady Kurniawan, founder of direct-to-consumer makeup brand Goban Cosmetics, says that leveraging e-fulfillment would easily let ecommerce sellers like him expand into other areas without incurring too much costs.

Fulfillment models in Indonesia / Photo credit: Rizqi Maulana

While online marketplaces are perhaps the pioneers in this space – Tokopedia launched its e-fulfillment service in 2019, with Shopee and Bukalapak following suit a year later – there appears to be room for third-party players. Like many others, Indonesian ecommerce sellers often do business on several marketplaces.

“The majority of marketplace warehousing fulfillment services are exclusive only to sellers on their platform,” says Budi Handoko, the co-founder and CEO of logistics firm Shipper. “This is where we can become a non-biased service provider.”

Marketplaces also typically have additional requirements that sellers must meet – like a special membership or a minimum daily transaction amount – before they can use the platform’s fulfillment services. Third-party players are usually more flexible.

Deep pockets needed