Global private equity firm KKR wants a bigger slice of Indonesia’s fast-growing e-commerce market.
Logistics is still underdeveloped in Indonesia and last-mile delivery companies that get goods to consumers more efficiently and in good shape present attractive opportunities for the firm, KKR managing director Jaka Prasetya told Private Equity International.
In August this year the $131 billion firm joined a consortium of investors including Warburg Pincus and Farallon Capital who altogether committed as much as $550 million to moto-hailing and services company GO-JEK. Having started as a moto-taxi business in 2010, the start-up has diversified into food delivery, courier and on-demand grocery delivery, masseuse and beautician services, and has also expanded its footprint across Asia with several acquisitions in India.
“We consider GO-JEK as both a tech business and a platform company that includes logistics. If you look at the e-commerce market, the Indonesian economy is probably 1/10 the size China’s,” Prasetya points out. “And one of the reasons why this space has not developed as fast is because of logistics; last-mile delivery is still a challenge in the country.”
“A company can produce a lot of goods but the question is: can they get them to the end user in the most economical way? Indonesia has always had a strong retail environment, and GO-JEK came up with the platform that potentially connects sellers to the end users, be it food or products or services.”
Prasetya said this is an area KKR finds fascinating – how the firm can solve so-called bottlenecks and invest in companies that bridge this gap.
“We also spend quite a bit of time on e-commerce and disruptive technologies space. We continue to weigh the pros and cons of investing directly in the space or the secondary side of them i.e. logistics or warehousing for instance.”
With a population over 250 million and a large pool of young and internet-savvy citizens, Indonesia has been called the China of ASEAN e-commerce. Indonesia's e-commerce market value is expected to swell from $20 billion to up to $130 billion in 2020, with annual growth of 50 percent, according to Indonesia’s Information and Communications Technology Ministry.