Bukalapak’s shift to virtual goods: turning point or misstep?

Simon Huang also contributed to this story.

The shutdown of Bukalapak’s physical goods marketplace and consequent shift to virtual products came like a bolt from the blue.

The Indonesian ecommerce firm, however, hinted at this decision last October. In an earnings update for the third quarter of 2024, Bukalapak said it needed to restructure as it had been “unable to reverse” the steady increase of operational costs.

Bukalapak’s office in Jakarta / Photo credit: Bukalapak

Notably, the marketplace was no longer listed as one of the firm’s core businesses in its October 2024 update. In a statement on January 9, a spokesperson highlighted Mitra Bukalapak, the company’s online-to-offline unit, as well as its virtual products and gaming, investment, and retail verticals.

“We see positive business prospects in these segments,” said the spokesperson.

Regardless, closing the physical goods marketplace marks a drastic and fundamental shift for one of Indonesia’s ecommerce pioneers.

The “right” decision

It’s hard to separate Bukalapak’s decision from Shopee’s dominance, TikTok Shop’s rise, and competition from the likes of Lazada and Blibli.

Bukalapak said as much in its October update, noting that “the market and competitive dynamics have shifted significantly” in the last three years.

Even before TikTok Shop acquired Tokopedia in November 2023, Bukalapak was a distant third to Shopee and Tokopedia.

Bukalapak’s decision to shut down the physical goods marketplace was “the right one,” says Paulus Jimmy, deputy head of research at financial consultancy firm Sucor Sekuritas.

Given the tight competition and Bukalapak’s shrinking market share, there is “no guarantee of improved performance in this segment moving forward,” he adds.

In its statement, Bukalapak said halting the sale of physical products “does not have a material impact” as they contribute less than 3% to its total revenue.

Sign of desperation?

Could an acquisition be the answer?