The Business Connector

8 months ago . 5 min read
Robert Yota
Writer at Forbes Indonesia
The Business Connector
Stevensang, Chief Executive Officer of PT GudangAda Globalindo. Photograph by Philip Mandagie for Forbes Indonesia.

Fast-moving consumer goods (FMCG) consumption in Indonesia is at an all-time quarterly high. According to the government's statistics agency BPS's data, domestic food and drink (excluding restaurants) spending amounted to Rp 930.67 trillion in the first quarter of this year, up 10.34% from the same period last year. In addition, the country's FMCG market is currently valued over $50 billion and has been growing annually at 8% in the previous years. The ongoing COVID-19 pandemic didn't seem to faze the FMCG industry in the country as a large proportion of the population either kept on shopping at supermarkets or started switching to e-commerce marketplaces to purchase groceries. On the other hand, large-scale social distancing measures (PSBB) have made it more difficult for wholesalers and retailers to conduct face-to-face transactions. With this pain point in mind, GudangAda has been able to capitalize on the situation and emerge as a rapidly-growing B2B marketplace for FMCG traders.

GudangAda was founded in October 2018 by Stevensang, who is a veteran in FMCG logistics. He spent 11 years at FMCG company Orang Tua Group - from 2012 to 2017 as former chief of retail & distribution and from 2006 to 2012 as CEO of PT Arta Boga Cemerlang, a distribution company and subsidiary of the group. And in total, Stevensang has over 25 years of experience in the FMCG industry.

"During my time in the FMCG industry, it's becoming clear that the cost increases in labor, fuel, operations, and the declining productivity due to traffic congestion, imperfect infrastructure, and other factors have caused significant inefficiency in the supply chain process between FMCG manufacturers, wholesalers, and retailers. GudangAda's vision is to empower the whole FMCG stakeholders using technology to create a one-stop solution. With our online marketplace, FMCG traders can experience faster inventory turnover, price optimization, receive latest updates on product availability, transparent transactions, and a larger customer base and product variety," says GudangAda founder and CEO Stevensang.

According to him, most mom-and-pop shops or warungs today still operate offline, which means that the shop owners often face difficulties getting the fast-moving goods it has ordered from wholesalers to its inventory in an efficient time. Furthermore, both retailers and wholesalers spend a portion of their time and money trying to find each other offline. The company earns its revenue from seller transaction fees for each time a retailer makes a purchase from a wholesaler. According to Stevensang, the commission fee ranges from 0.2% to 0.5% of the transaction value for wholesalers and up to 1% for retailers. The platform is free of charge for both retailers and wholesalers. However, a verification process is required during the registration process to ensure the legitimacy of the businesses. Stevensang claims that the company has managed to attain a gross merchandising value (GMV) of $1 billion from January 2019 to January 2020. Forbes Indonesia estimates that GudangAda has earned $5.1 million in revenue during this period.

"Our sales have been growing at a double-digit rate every month from the start of last year. Since the COVID-19 entered Indonesia in early March, our platform has even seen a 38% growth in transactions," claims Stevensang.

Now, members of the platform originate from as many as 500 cities spread across the country, with a significant proportion coming from the Greater Jakarta area, Sumatra, and East Java. GudangAda currently has no immediate plans to expand beyond Indonesia. However, Stevensang says that his company welcomes overseas FMCG companies into its platform who want to export its products into Indonesia. As of June, there are 100,000 retailers and 18,000 wholesalers that are registered in GudangAda's platform. In addition, there are more than 18,000 products FMCG products being listed by all the members. In the future, the company aims to attract more retailers, setting a target of absorbing 7-10% of the country's retailers.

Furthermore, GudangAda has recently secured a $25.4 million series A fund in early May led by Sequoia India and Alpha JWC Ventures. The company plans to invest the fund to achieve its short and mid-term targets, which are to continue scaling current operations, develop its logistics services, launch new business initiatives, conduct more partnerships, and advancing the platform's features and offerings. GudangAda recently launched a pilot logistics service that assists traders in maintaining essential products' availability in the local supply chain. The logistics service is currently available in Jakarta, Bandung, Semarang, Medan, and Lampung, and will be expanded to more major cities within subsequent months.

"The fund will also be used in our recruiting efforts to hire the best talents for both our management and on-the-field teams," says Stevensang.

The company employs a total of 500 employees. GudangAda has maintained a no lay-off policy, while continuously recruiting more talents to strengthen its logistics and tech departments. When asked about the sort of obstacles the company has been facing since its inception, Stevensang claimed that the biggest challenge has been technology adoption for most of the traditional traders as they are mostly not tech-savvy.

"Secondly, the FMCG industry has ultra-thin margins. The way to grow our earnings is by expanding the members in our platform, which in turn should increase our sales as there will be more transaction volume," says Stevensang.

GudangAda's primary marketing strategy is not only promoting its app across all major social media platforms but also investing heavily in hiring a capable business development under the helm of seasoned salespeople with decades of experience in FMCG. In the future, the company wants to focus more on its digital marketing efforts while continuously maintaining a productive offline sales force that interacts with both prospective users and members of the platform.

"We also strive for our app to offer our retailer members very competitive prices of the products listed by the wholesalers. The company also conducts industry analysis to come up with market insights, which we share to all members," he says.

Recently, GudangAda also helped distribute government assistance to remote and secluded areas, consisting of FMCG necessities. The company also launched food donation programs for low-income citizens and minimum wage workers who suffer the most from coronavirus restrictions. Moving forward, Stevensang wants his company to focus on attracting new members in its platform, especially UMKM retailers.

 "We want to focus on bringing in micro, small, and medium FMCG enterprises that can save time and money by using our application. Naturally, there are way more retail traders than wholesale traders in the country, and it is the reason why we will focus more on retailers as they are the ones that purchase products to re-stock their stores, which in turn brings more transactions and revenue for us."

Written By
Robert Yota
Writer at Forbes Indonesia