Tokopedia, Indonesia’s E-Commerce King, Partners with 11 Million Merchants; Adopts Multi-Cloud to Drive Innovation

Amazon, the global e-commerce leader, is an amazing company, yet it got a big head start when it launched its business in America where the supporting infrastructure is strong:

• The U.S. marketplace has 320 million, high-income consumers, and an economy that is 24% of the world’s total.
  
• Communications infrastructure is excellent across both wireline and mobile.  Fully 94% of the people have access to broadband.
  
• Financial infrastructure such as banks, credit bureaus, and payment services abound, enabling high-ticket purchases by credit cards.
  

Now if Amazon had first launched its e-commerce business in Indonesia, it’s certain they would have faced a much tougher climb to fame and fortune.  Here are some of the key challenges:

• With 276 million people (4th largest in world), Indonesia’s population is scattered across 2,000 inhabited islands (with 56% living on the island of Java).  Per capita buying power is one-tenth that of the U.S.
  
• Mobile phone penetration is very good, but fixed comms infrastructure is weak.  Broadband subscriptions are one-tenth that of the U.S.
  
• About 51% of Indonesia’s population is unbanked (without access to a bank or similar financial firm) compared to America’s 7%.
  
• Geography is another challenge.  Indonesia has a hot tropical climate and a history of trouble from earthquakes, tsunamis, volcanoes, and monsoon rains.
  

And yet, despite these obstacles, Indonesia’s Tokopedia, founded in 2009, has grown to become one of world’s leading e-commerce players and is now a pivotal company to growth of the Indonesian economy.  And that fact has not escaped the notice of big digital investors who have made $1 billion+ investments: firms such as: Alibaba, SoftBank Group, Sequoia Capital, and Google, to name a few.

Spurring its growth, Tokopedia also supplements its on-line marketplace with complementary businesses in fintech, payment, logistics, fulfilment and new retail businesses.

The Tokopedia business today represents more than 1% of the Indonesian economy, the 16th largest in the world.  By comparison, Amazon’s 2020 revenue was 1.7% of the U.S. economy.

Even still, Tokopedia has a stronger foothold than Amazon in the small to medium business category, partnering with 11 million merchants as opposed to Amazon’s 2.5 million (as of 2019).

And Tokopedia has just merged with Gojek, the largest courier delivery and motorbike ride-hailing service in Indonesia, to form the GoTo holding company.  The combined company can now boast revenues over 2% of the Indonesian economy.

So we’re pleased to welcome Ryan de Melo, Tokopedia’s VP of Engineering, who gives us details on the company’s business model and some key technology initiatives it’s pursuing.

One of Tokopedia’s key tech strategies is to build a strong multi-cloud architecture.  And helping them achieve that vision is Epsilon, a cloud connectivity provider in Singapore.  So Epsilon’s Warren Aw also joins in on the conversation.

	Dan Baker, Editor, Black Swan Telecom Journal: Ryan, congratulations on Tokopedia’s recent merger with Gojek.  I understand the Tokopedia business actually accelerated during the Covid-19 period.

Ryan de Melo:  Thanks, Dan.  Yes, the pandemic actually shifted Indonesia consumer behavior in the digital direction.  The number of monthly active users grew from more than 90 million before the pandemic in January 2020 to more than 100 million today.

In terms of merchant businesses we serve, that number grew from 7.2 million sellers since January 2020 to the 11 million merchants we serve today.

Our overall mission at Tokopedia is to democratize commerce through technology and since our founding in 2009, Tokopedia has been a force that pioneers digital transformation in the country.  We want to build a Super Ecosystem where everyone can start and discover anything.

We are also now home to 6,000 Nakama (Tokopedia’s employees) and ranked number 94 on the Deloitte Technology Fast 500™ Asia Pacific 2020 with 608% revenue growth over the past three years, bringing Indonesia into the list for the very first time in recent years.

We also recently reached the first position on Euromonitor International’s Report as the Best Retail Player in Indonesia and Southeast Asia with the highest market share, a combined US $11,683 million in market revenue.

	How is e-commerce different in Indonesia than markets elsewhere?

Gaps in infrastructure, access to goods and services, and opportunities are inevitable in a country like Indonesia.

That is why digital technology is important for Indonesia to bridge those gaps, which has always been the mission for Tokopedia: to democratize commerce through technology.

It’s clear today that e-commerce is pivotal to the country’s economic growth.

Given that MSMEs (Micro, Small and Medium Enterprises (MSMEs) contribute to more than 60% of Indonesia’s GDP, Tokopedia’s ecosystem alone has contributed greater than 1% of Indonesia’s GDP.  The big reason for that is we are empowering more than 90% of MSMEs.

Based on research conducted by the Institute for Economic and Social Research at the University of Indonesia’s School of Economics and Business (LPEM FEB UI) in 2020, Tokopedia has also enabled sellers to increase their sales volume with a median of 133%.

Today we are reaching more than 99% of districts in Indonesia and also support the adoption of digital payment methods across the country as the study revealed that e-wallet and mobile/internet banking were the two most preferred financial products during the pandemic.

We are strongly committed to helping the lives of many.  That’s the purpose of e-commerce innovations — to build a strong future for Indonesia.

	Warren, I understand Epsilon is supporting Tokopedia’s multi-cloud IT strategy.  Can you explain what multi-cloud is about?

Warren Aw: Dan, we’re delighted to support Tokopedia, one of the most forward-thinking ASEAN enterprises in terms of IT innovation and cloud connectivity.

Multi-cloud is quite simply the new paradigm of using the clouds of multiple vendor providers as a standard way of managing IT infrastructure.  This is a big change.  By and large, enterprises today are mainly powered by single-cloud provider architectures.

One of key software drivers of multi-cloud is the increased attraction of containers which package up applications into a single, runtime environment that is portable across clouds.  So multi-cloud fits in perfectly with where IT departments want to go.

Three of the key benefits enterprises get by moving to multi-cloud are:

• Flexibility — There are benefits to using a mix of cloud for different uses e.g.  Amazon Web Services as the primary for compute while using Google Cloud Platform for workload deployment.
  
• Proximity — Regional cloud providers that operate closer to users may offer improved performance and/or lower cost.  Also, some countries in Southeast Asia have data sovereignty laws requiring data be located inside the country.
  
• Failover — Multi-cloud environments help protect enterprises from outages, enabling an enterprise to have an available, highly scalable backup for data, workflows, and systems.
  

Now the move to multi-cloud is also driving the need for cloud networking solutions that provide dedicated and secure cloud-to-cloud connectivity with better control and visibility.

That’s where Epsilon comes in.  We currently deliver multiple high-capacity direct connections (Epsilon Cloud Connect) to AWS, GCP and Alibaba Cloud with L3 routing (Epsilon Cloud Routing) between the clouds.  This service is delivered over our global private network.

Now since Epsilon is located in Singapore, that’s ideal because Singapore is the most strategic cloud connection point in Southeast Asia — and it’s also the closest to Indonesia for cloud on-ramps.

	Ryan, what’s your perspective?  How do you see the advantages Tokopedia gains by moving to multi-cloud?

Dan, we are a big believer in leveraging the best cloud partners for different needs.  Every cloud provider has a distinct set of capabilities and specializes in different tasks and technologies.  This allows us to customize our infrastructure to meet our business needs and deliver customer satisfaction.

As a Super Ecosystem that puts forward collaboration with plenty of strategic partners, it’s never a single-player strategy for us.  With our cloud partners, we run the overall design to check the compatibility with their infrastructure for big events and promotions.

We also modernized our video streaming platform, Tokopedia Play, to optimize our retail experience during large-scale shopping events.

To summarize, having multiple cloud service providers allows Tokopedia to:

• Make use of the best services of every CSP for our product tech and business;
  
• Reduce monopoly and dependency of only a single CSP; and,
  
• Increase flexibility by having multiple CSP choices available to run every project.
  

	What’s the future tech innovation roadmap for Tokopedia look like?

With the e-commerce market growing significantly, innovation is the main key to enable our business to meet our customer needs and solve their problems.  The Tokopedia Technology Team is always committed to bringing the best solution available and also latest innovation from cloud providers, such as Artificial Intelligent and Big Data processing.

Going forward, our key technology priorities are:

1. Reinforce the company’s core infrastructure: the need for routine maintenance is important to prevent technological damage, so having a reliable monitoring and sensor system in service operations is key.
   
2. Focus on consumers to build solutions to meet our customers’ needs.
   
3. Strengthen our data platforms and our ability to handle massive data volumes.
   
4. Use Artificial Intelligence (AI) technology an effective link to enable the MSME companies we support to improve and personalize their services.
   
5. Optimize technology execution to get the best return on investment.
   

	Thanks, Ryan.  Tokopedia is an incredible success story, and given your ambitious technology plan, it sounds like there’s a lot of upside ahead for you.  Best of luck.