[Podcast] William and Patrick of ecommerce giant Tokopedia on driving 1.5pc of Indonesia’s GDP
To democratise commerce through technology is the mission of Indonesia’s ecommerce giant Tokopedia, which aspires to achieve success by helping others to succeed.
Founded in 2009 by best friends William Tanuwijaya and Leontinus Alpha Edison, the firm has achieved tremendous success despite being the first of its kind in the Indonesian market. The firm’s annual run-rate GMV has reached 222 trillion IDR ($15.8 billion), which is equivalent to 1.5 percent of Indonesia’s GDP.
Tokopedia has significantly impacted the fate of many small-scale entrepreneurs since its launch 10 years ago. Eighty-nine percent of sellers on Tokopedia do not own a physical store and 86 percent of merchants are first-time entrepreneurs.
In our recent conversation with Tokopedia’s CEO William Tanuwijaya and President Patrick Cao for this episode of GGV Capital's podcast, Evolving for the Next Billion, we learnt the genesis of the company, how William struggled with terms such as "GMV" in his first round of fundraising, the legendary week of three proposals, finding his "Joe Tsai", and what the future holds for Tokopedia.
Tune into this episode of the podcast here:
HT: How did you get the idea and the courage to start Tokopedia back when entrepreneurship or startups in Indonesia was not a phenomenon like it is now?
William Tanuwijaya: As the largest archipelago country in the world with 17,000 islands, it is nearly impossible for Indonesia to have equal infrastructure across the country. Both Leon and I came from small cities with a limited selection of goods and high prices as compared to big cities like Jakarta. But after we completed our education and found jobs in Jakarta, we didn’t want to go back to our hometown, and we saw this as the vicious cycle of urbanisation. Jakarta, for example, is sinking 20 to 25 centimeters every year due to overpopulation; and Java Island is predicted to run out of clean water by 2040.
We believe that technology can serve as an infrastructure that helps us leapfrog and provide equal opportunity across the island. We imagine a future where no matter where you live in Indonesia, you can find any product or service of your choice and enjoy transparent prices as if you live in a big city like Jakarta.
We also imagine that no matter where you start a small business, you can grow to become a nationwide business owner. Hence, 10 years ago, we started the whole idea of Tokopedia with that mission in mind - to democratiae commerce through technology.
HT: What has it been like to deal with foreign competition in Indonesia? How has the partnership and collaboration with Alibaba group made an impact on Tokopedia?
WT: We believe that competition is the greatest gift for us in Tokopedia. Only six months after we launched Tokopedia, we needed to compete with eBay, the largest marketplace in the world back then. One year later, we needed to compete with Rakuten and other companies. When we finally raised a million dollars, we fought with SK Planet Eleven Street. When we raised $100 million, we eventually faced Alibaba, which acquired Lazada. When we raised a billion dollars, we needed to prepare ourselves to compete with Amazon, which is close to one trillion dollars in market value. Nonetheless, we realised that success is not about how much resources we have, it’s about how to manage the limited resources that we have.
It is no secret that the Tokopedia business model is inspired by what Alibaba did in the Chinese market and how they helped small businesses to become big brands. That is our mission as well. Eventually, our idol became our rival.
Then, our rival became our partner in 2017, when we started working with Alibaba. Through our overseas learning, we noticed a ‘time machine effect’ - a time gap that exists between the US, China, India markets, and the Indonesian market. You can really benefit from copying and localising their services to the Indonesia market. Having this ability to learn from China so closely and having Alibaba as our minority stakeholder was really a huge advantage to the rapid growth of Tokopedia.
HT: Many in western media tend to portray the reason that international players don’t win in local markets, especially in Asia, is because of government support for local players and unfair competition or business practices that favour local players. In your experience in Indonesia, how have you been able to do well against the foreign competition?
WT: The key is local innovation. In the globalisation effort of international companies, success is dependent on how well their localisation has worked on the particular market they want to enter.
As a local player, that’s what we do well - the localisation of the learnings that we gain from other markets. A lot of innovation happens for the first time in Indonesia because of the time machine effect. From Alibaba and JD, we observed that they have invested heavily in logistical and human services like Cainiao of Alibaba. Then we went back to the blank canvas and thought about the local resources here that China didn’t have five to 10 years ago. We realised we have Gojek, Grab, and Uber competing fiercely. Hence, we worked with them and got their drivers to be our logistical partners during their low-occupancy time - the gap between morning rush and lunchtime; lunchtime and evening rush. This partnership was a clear win-win for both parties.
This didn’t happen in China. However, this can happen in Indonesia with Tokopedia because of the unique ‘time gap’ between the proliferation of these two services.
This approach is shared by the evolution of our payment branch as well. In Southeast Asia now, many companies are trying to replicate China’s playbook and raise capital at the same time. However, when everyone is introducing their own payment systems, they saturate the closed ecosystem with too many currencies. Hence, instead of joining the race, we thought about taking the ecosystem approach: we knock on the doors of partners. Today we are actually working with Grab and we have a payment product named OVO in the market.
HT: What are some of the principles or philosophies that you have in place for making decisions as a team at Tokopedia?
WT: Firstly, making the wrong decision is better than making no decision at all. Hence, our philosophy is that everyone in the company needs to have the sincerity, humility, and curiosity to make mistakes. At Tokopedia, we like to sell like a teacher and learn like a student. Tokopedia can now hire very smart people from around the world. But when I work with very smart people, I realise that it’s important to have the humility to unlearn. On the other hand, as for the leaders of the company, their role is to create better leaders than themselves. This is achieved through two things: giving opportunity and trust to others. Only after one tries and fails can they grow to become better leaders. Lastly and most importantly, we always believe we can only become successful by helping others to succeed.
Patrick Cao: In creating win-win’s and building a business through partnership, not only are you taking market share from an existing TAM (Total Addressable Market), but you can grow the TAM as well. As Will mentioned, 86.5 percent of our merchants are new entrepreneurs. That’s definitely growing the pie. And if you take that across logistics and fulfillment, payments, fintech, etc, then we can grow and build the pie together with our partners to create more win-wins.
HT: When I look across the board, the emerging internet companies have done quite well in the US, Europe and places like that. Whereas in China or Southeast Asia, it has been harder. One could argue, besides localisation, there’s some correlation between how well internet companies do and how much work-life balance there is in some of the regions where they have success or not. William, you’ve been doing this for 10 years. What is your work schedule these days?
WT: This was actually our long discussion during the dinner when Patrick decided to join the company. We discussed work-life balance and we think that there’s no such thing as a work-life balance because if you want to have a work-life balance, you need to remove something from the scale. That’s what balance means, right?
What we aim for is a work-life harmony and I really learned that from when I started to have my own family.
There’s a quote, “Life is a constant game where you are juggling five balls at the same time,” and these five balls are work, family, friends, integrity, and health. Unfortunately, four out of the five balls are made with glass, only one ball made with rubber. If you are not careful to juggle this ball and that ball falls, if it’s a glass ball it will break apart.
Today at Tokopedia, we have 5,000 employees and 6.4 million merchants moving 1.5 percent of the Indonesian economy, so we cannot take that work ball easily. This is no longer a rubber ball. This rubber ball consists of millions of glass balls inside.
If it breaks apart, 5,000 people will lose jobs, millions of merchants will lose their bread and butter. This is a big responsibility, so that’s why we appreciate the opportunity to learn from a big company and good founders like the Alibaba team. Alibaba is famously known for its “work happily and live seriously” culture, which we find to be very beautiful. It’s really all about work-life harmony, it’s not a work-life balance. How you can work happily but live seriously at the same time depends on your ability to really juggle these five balls equally and treat all as glass balls.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
(Edited by Evelyn Ratnakumar)