With telecom players trying their hands at e-commerce, will Elevenia, a joint venture between XL Axiata and SK Planet, hit the bull’s eye?
The Indonesian e-commerce scene recently welcomed a new player Elevenia, a joint venture between XL Axiata (the second largest mobile operator in Indonesia) and SK Planet (a subsidiary of Korea’s largest mobile carrier SK Telecom).
As mobile network operators everywhere are attempting to build newer avenues that are outside their core business of voice, text messages or other value added services, many are trying their hands at e-commerce; however, not many success stories have made headlines. There are exceptions though, and one such is SK Telecom’s 11street.
This story inspired XL Axiata to initiate a joint venture with the Korean conglomerate. SK Planet signed a deal with XL Axiata in May 2013 and set up the joint venture XL Planet. Elevenia derives from ‘eleven’ and ‘dunia’ (dunia means ‘world’ in Bahasa Indonesia). It follows the same business model as 11street. Elevenia was started with an initial investment of US$42 million, with each partner holding 50 per cent stake.
In an exclusive interview with e27, the Elevenia Board of Directors — CEO James Lee, Vice President Madeleine Ong De Guzman, and CFO Lila Nirmandari (CFO) — talk about the ‘new kid on the block’, strategy to gain foothold in Indonesia, mobile commerce and plans going ahead, among other things.
Lee was previously the CEO of 11street, whereas Guzman and Nirmandari worked with XL Axiata.
Excerpts from the interview:
Why are so many telecom companies entering the e-commerce space?
Nirmandari: In our instance, we realised that our core business was quite mature already. So we started looking for newer avenues. From many options, e-commerce was chosen, because the dependency on the core business is minimal. We can run the project independently. Additionally, the potential for e-commerce is very good.
Where did the idea first come from, XL or SK?
Guzman: Back in 2012, XL was thinking of venturing into a new business, and it was my responsibility as a Business Development Officer. One of the opportunities that we saw was e-commerce. And as XL is a traditional telco, we didn’t know anything about e-commerce. So, we started looking for partner who could work with us. There were several potential partners, including local companies. But we found 11street interesting because it’s owned by a telecom company.
Can you tell us a bit about 11street?
Lee: As you know, I was the CEO of 11street. We started our service in 2008. Last year, our total transaction volume was more than US$5 billion. We have more than 35 million products and about 1,00,000 sellers. 11street has almost 20 million registered customers — almost 40 per cent of Korea’s population.
11street’s business model is open marketplace. The same business model was brought to Indonesia. What is the rationale behind it? Don’t you think there are already many players in e-marketplace in Indonesia?
Lee: I think the best business model for e-commerce is marketplace; we have that proven in Korea. Some players in Indonesia, which previously had merchant retail model, are also converting to marketplace. Why do you think so?
There are limitations in being a merchant player and it’s difficult to expand.
And having a lot of marketplace players is a good thing. Indonesia is still in an early stage, so it is good for the industry.
What is your unique selling proposition?
Lee: We aim to provide three things — trust, more products with better price, and more convenience. This we will do by providing secure transactions for sellers and buyers, as well as operating a 24X7 call centre.
Aren’t prices fixed by the sellers? How will you ensure the best price?
Lee: At this moment, Elevenia doesn’t want to make a profit. We are ready for three years of investment period, where we will focus on educating the users. We will focus on providing service to sellers, and work with them to give the best price to customers.
We are very serious in our efforts to support sellers. We provide a seller zone here (at Elevenia office in Kuningan, Jakarta), and in Mangga dua and Tanah Abang. Sellers can use our facilities such as photo studios, meeting rooms, etc. Also, there are trainers and photographers ready to assist them.
How much customisation and localisation did you have to undertake?
Lee: It took almost a year; especially to get the payment processes in place. We had to take a totally different approach. In Korea, 70 per cent payments are done by credit cards, wherein here (Indonesia), 70 per cent are via bank transfers.
11street is a leading player in mobile commerce; what do you think are the prospects for mobile commerce in Indonesia?
Lee: Mobile commerce is very convenient. Indonesians are very familiar with mobile and social networks. Many have started their businesses on Instagram or Facebook. So, I think the prospects for mobile commerce look good.
And will XL play an important part in this?
Guzman: Yes, actually XL is kind enough to give us access to XL users. There’s no charge when XL users browse Elevenia.
How many XL users are there in Indonesia?
Nirmandari: More than 48 million users currently.
After one month of launching, are you satisfied with the result?
Lee: We are happy. At the time of launching, our seller number was 6,000 and we had 500,000 products. In one month, we have grown to 8,000 sellers and 700,000 products. We have more than 70,000 unique visitors every day. Our highest page view so far is 1.4 million. I would say the market response is good.
Please share your marketing strategy.
Guzman: We advertise on billboard, radio, etc. and undertake many promotions. We give away Rp 1.1 million (US$95) on a daily basis. And for this month, we’re giving away trips. We also take social media very seriously. We are quite active on Twitter, Facebook, Instagram and Pinterest. We even have Elevenia care (customer service) on Twitter.
What is next for Elevenia?
Lee: For the time being, we are focusing on cultivating the market and getting more products. Our target is having one million products soon.