Grocery space has an excellent opportunity to grow in Indonesia. L.E.K. Consulting in its market insight report on E-groceries in Indonesia released in January 2021 showed that consumer spending on Food & Beverages (F&B) and grocery in Indonesia reached US$205B.
E-grocery penetration is still less than 0.5% compared to China, which has 5% penetration. E-grocery is forecasted to grow at 32% CAGR, with COVID-19 also a catalyst for uptake in online groceries.
Today, grocery accounts only for a small portion of the total e-commerce GMV in Indonesia. Around the world, grocery platforms such as Ding Dong Mai Chai (China), Big Basket (India), Ocado (Europe) have demonstrated lucrative models that position these platforms for hypergrowth and unicorn valuations.
Many states that grocery is the holy grail of e-commerce because it involves a high frequency of purchase and high margin, exceedingly fresh produce items such as vegetables and fruits.
In Indonesia, consumers tend to be reluctant to shop for fresh produce and grocery products online. Although the COVID-19 pandemic has accelerated the use of technology, it seems that consumers are not too confident to shop for fresh products online. Several surveys found that consumers were worried that they would receive poor and inconsistent quality products.
Several technology players began to emerge to answer this challenge. However, Segari emerged as one of the players in the space who took a pretty unique approach.
The game plan to win the e-grocery market
Segari positions itself as an e-commerce platform that sells grocery and fresh produce items direct to consumers via an agent model for user acquisition and last-mile delivery.
Segari utilizes a network of agents (community leaders, shop owners, and vendors) who have a strong presence in their communities on the demand side.
These agents start by becoming an acquisition channel for more buyers, get buyers to fill in their orders through a web-based link, and then carry out the last mile delivery. After the first order, buyers can utilize the very same link, but the last-mile delivery will be carried out by agents, who will then get incentivized on a commission basis for every delivery in their area.
Utilizing agents allows Segari to reduce Customer Acquisition Costs (CAC), acquire users in a more scalable approach, and allow the same group of agents to carry out last-mile delivery and maintain the relationship with the end-user. Segari equips agents with the tools to acquire, deliver, and retain their users, resulting in stable retention and increases in value from existing users.
“Segari leverages its micro-warehouses and network of thousands of agents to help move tons of its fresh produce every day while maintaining its quality,” said Yosua Setiawan, Co-Founder & CEO of Segari.
In terms of price points, Segari aims to be lower than the prices of supermarkets, with the added value to customers of convenience and cheap, plus next-day delivery.
“Getting to a high level of quality and consistency is hard. Not everyone can do it, but that’s why we make it our focus. While other players may focus on wide SKU variety, lowest prices, or other areas, we build our infrastructure to focus on quality. This is what our customers love about us, and make many of them purchase from us weekly,” Yosua added.
Segari ensures that it only takes 15 hours from harvest to the customer’s home for green vegetables to give the best freshness.
“This involves extreme operational complexity. Because we do not keep inventory, we need to generate tight forecasting of customer demand and balance it with the harvesting schedule of our farmers. Otherwise, you’ll end up with 15-30% wastage, as seen in a typical supermarket. This is also partially the reason we can offer the highest quality produce at lower prices than most supermarkets”, explained Farand Anugerah, Co-Founder & COO of Segari.
Another innovation from Segari is product-walk-through. After finding the best agents in the area, agents can onboard Segari’s platform, selling products without inventory.
Agents are each given a unique link with Segari’s product catalog to share with their network who want to buy grocery items. Buyers put their orders in via the link, ordering from the mobile web-based link. Segari will source the orders just-in-time and store it in their warehouse facility, for which Segari will use their outsourced fleet to deliver to the agent’s location.
Segari has three warehouses, where they store inventory and deliver just-in-time. They have a fleet of riders that do the delivery from the warehouse to the agents.
Led by three visionary founders with strong backgrounds and credentials
“Segari’s value proposition of delivering high-quality products, through a data-driven approach and efficient micro warehouses and agent-based operations differentiates them from other platforms. We’re excited to partner with Yosua, Farand, and Farandy, three visionary founders with strong backgrounds and credentials, as they build the next localized solution for e-commerce in the grocery category,” said Adrian Li, Co-Founder & Managing Partner of AC Ventures.
Three visionary founders who lead Segari have different backgrounds that complement each other to build Segari’s business growth.
Yosua Setiawan, CEO of Segari, previously worked at BCG and Traveloka. Farand Anugerah, COO of Segari, previously worked at Grab before studying his MBA at Harvard Business School. Farandy Ramadhana was working with Amazon and Google before he takes control as CTO of Segari.
These three founders combined their expertise in product and marketing, operations/logistics, and technology/engineering into one group, with the right background and fit to launch a business with this model and in this space.
With a strong empathy, an iterative mindset, and a data-driven approach, they can build a network of agents for distribution, solve supply chain bottlenecks, and win the e-grocery market.