A price war looms for Indonesia’s logistics startups

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If startups were students in school, there’s no doubt that the popular kids would be ecommerce companies, thanks to their glitzy billion-dollar valuations.

But in the past couple of months, ecommerce seemed to have taken a backseat as their logistics buddies stole the spotlight. Indonesian logistics startup SiCepat raised US$170 million, while J&T Express, which operates in several markets in Southeast Asia, secured a whopping US$2 billion at a pre-money valuation of US$6 billion.

Today we look at:

• The cutthroat industry of logistics in Indonesia
• A timeline of Grab’s journey to a US listing
• Other newsy highlights such as Douyin’s move into ecommerce and China’s new regulatory measures for livestreaming

PREMIUM SUMMARY

Logistics companies bank a lot of money to survive the upcoming storm

Although ecommerce companies are thriving in Indonesia because of the pandemic, many of them remain unprofitable. To reduce their spending, a lot of these online marketplaces are cutting back on shipping subsidies and getting their best friends – logistics companies – to shoulder the costs.

• Come along for the ride: Ecommerce firms are asking for very low prices from logistics companies in exchange for large volumes. According to a source, corporate rates for ecommerce players can go as low as 40% less than the published rate.
• Making it worse… is that logistics services are a price game, as there’s not much one provider can do to stand out from the crowd unless it offers services like same-day delivery. But that’s expensive and difficult for logistics companies to do. Plus, they would be competing against Grab and Gojek, which have an advantage with their extensive ride-hailing networks.
• The road is long: Like any other tech company, cash burning is unsustainable for logistics firms in the long run. Once they become the market leaders, they will likely have to either increase prices or cut costs (by automating operations, for example) to improve their margins.

Read more: Indonesia’s ecommerce logistics giants brace for a price war

STARTUP SPOTLIGHT

Let’s go back to Grab’s beginnings

Grab will be 10 years old in 2022, and the Southeast Asian super app is celebrating the milestone with a bang by going public this year. As we marvel over its target valuation of US$40 billion, we thought that this would be a good time to look back and trace Grab’s journey to listing in the US via a blank-check merger.