Aruna – How the “Alibaba” of Fishery plan to seize a trillion dollar market
Published on September 29, 2020
Original Post by 7.5 Degrees
Next you will see:
- The “Alibaba” of Fishery, fishermen life turns for the better
- Inviting the local heroes to go to the countryside and persuading its competitors to change careers
- China has Alibaba, Indonesia has Aruna
In April 2019, Alipay and National University of Singapore held an innovation challenge (Alipay-NUS Enterprise Social Innovation Challenge), the winner of the competition is from Indonesia’s fishing B2B e-commerce Aruna. Indonesian President Joko Widodo openly praised Aruna at the ASEAN summit for helping fishermen increase their income by 20 per cent, an innovation that should be taken seriously. In August 2020, Aruna once again draws our attention as it received US$5.5 million in new fundraising round and achieved an 86-fold increase in revenue during the pandemic compared with the same period a year earlier. How does the “Alibaba” of fishery Aruna do it ?
1. The “Alibaba” of Fishery, fishermen life turns for the better
“My parents have always worked in the fishing industry, but the family is not in good financial condition. They sent me to college in the hope that I would get a good job and stop being like them.” But Utari Octavianty, Aruna’s co-founder, said he was puzzled: Why is Indonesia’s fishing resources so rich, yet its fishermen’s lives so simple? Indonesia has the second longest coastline in the world. The fishermen work hard along this 50,000 km coastline and the fishery market creates economic value of about US$1 trillion, but the average monthly income of fishermen is only US$84, and the number of fishermen is down 50 per cent from a decade ago.
Upon investigating the reason behind it, Utari identified the pain points as well as a commercial opportunity. Lacking a transparent pricing benchmark, fishermen often ends up being exploited by the distributors. Layers and layers of supply chain further reduce the fishermen’s profits. In addition, the quality control of fish products is not managed well by fishermen, which lowered the quality of fish products and also affected its price. According to Utari, all of these factors contribute to a spread of more than 70% and so what’s missing in the middle is a platform that connects fishermen directly to their customers. Utari, who has a deep affection for the fishing industry, is determined to change that image and create a better life for the fishermen.
After graduating, Utari partnered with university friends Farid Naufal Aslam and Indraka Fadhillah in 2016 to create the Alibaba of Fishery – Aruna, to provide electronic trading platforms for fishermen and global business buyers. In addition to helping fishermen export 95 per cent of their seafood to East Asia, North America and the Middle East, Aruna also supplies restaurants, supermarkets and hotels in Indonesia. Moreover, Aruna partners with e-commerce platforms such as Tokopedia, Bukalapak, Shopee and Grab Mart, selling fresh seafood and processed seafood to consumers. With no traditional middlemen making the difference, the fishermen receive more money. With Aruna’s help, the average monthly income of fishermen has tripled to a range of US$240 to US$1035 a month.
Aruna’s has two kinds of revenue models, the primary one is to extract 10% – 20% of the commission from the transaction flow, followed by the subscription fee charged to the businesses. At the same time, in order to encourage fishermen to sell more to Aruna, Aruna also provides points to fishermen according to the number of transactions. Fishermen can go to Aruna’s offline store to exchange points for fishing gear and other supplies. Aruna currently has more than 30 offline stations throughout the island, and 2,000 fishermen from 16 provinces use Aruna.
2. Inviting the local heroes to go to the countryside and persuading its competitors to change careers
According to Utari, Aruna is characterized not only by technology empowerment, but also by community empowerment. The fishing community behind Aruna has three types of users: the fisherman who does the fishing, the fisherman’s wife who processes the seafood, and the local heroes or otherwise the account manager who teaches the fishermen how to use the Aruna mobile app. It is understood that Aruna’s account managers are mostly from fishermen’s families of millennial youth. They are more familiar with smartphones, which can help fishermen upload photos of fish products to platforms and help fishermen process transaction information.
Account managers, or offline agents, are particularly common in rural Indonesia. Since rural users are not well educated in finance and technology, some banks will send account managers to the countryside to promote their financial products and teach them how to use these products. Indonesian e-commerce firm Kudo which got acquired by Grab and Indonesian fintech firm Payfazz that received new funding earlier adopt similar marketing strategy. Start-ups like Aruna is no exception. Fishing villages in Indonesia are generally located in remote areas, where it is not easy to promote e-commerce because most fishermen are not proficient in modern intelligent technology. At this time, it is necessary to have a person who can help fishermen to be familiar with the operation of e-commerce and help to complete the online transactions.
To solve the problem of user education, Aruna has to deal with competitors. In the same week that Aruna announced the news of its fundraising round, eFishery, another platform focused on Indonesian fisheries, announced the completion of series B financing, suggesting that the trillion-dollar fishing market had already been targeted by entrepreneurs. But eFishery is not a direct competitor to Auna, because the former focuses on fish farming and the latter on fish products, Utari said.
Arunas most direct rival is the traditional offline distributor and middleman. They hold information of the fishermen in every area, and the fishermen are also very familiar with them, he said. In order to compete with these middlemen, on the one hand, Aruna needs to strengthen its ties with the existing fishermen’s community; on the other hand, Auna needs to convince its competitors and persuade middlemen to become employees of Aruna. They can be local heroes, an account manager who goes to the countryside, or they can join the quality control group, since they not only know how to deal with fishermen, but also know how to distinguish the quality of fish products, Utari said.
3. China has Alibaba, Indonesia has Aruna
In the process of development, Aruna overcame plenty of obstacles, but the COVID-19 situation this year still poses as major roadblock. The international logistics blockade brought about by the pandemic has directly cut off the financial routes of many export traders. Utari points out that the biggest problem is in logistics, but consumer demand for seafood is still there. In order to reduce the impact of the pandemic on the overall business of Auna, Aruna launched the domestic business Seafood by Aruna, a year in advance in order to supply domestic retailers and ecommerce. In addition, Aruna continues to negotiate with the government to request the opening of green logistics channels to ensure the smooth export of seafood. As a result, Aruna’s revenue rose 86-fold in this special period from a year earlier.
Utari is not only confident but also ambitious about the future. “Each country has its own advantages, entrepreneurs use this advantage to create a global company. For example, China’s manufacturing industry is developed, and then there is Alibaba. Indonesian fishing industry is developed, so we have Aruna.” While Alibaba’s purpose is: let the world have no difficult business, Aruna’s purpose can be summed up as: let the fishermen have no difficult business, let the sea create a better life for the fishermen.
It has a big impact on us, Utari said of Alibaba. After winning the Alipay-NUs Innovation Challenge, the Aruna team was invited to Hangzhou to visit Alibaba’s office and listen to Alibaba’s growth history. “Alibaba has turned China from a less digital country into a very digital country. If Alibaba’s business can succeed in rural areas, I believe we can too.”