Unmet needs of Indonesia's online resellers yet to be tapped: McKinsey

Resellers represent an estimated 85 per cent of Indonesia’s online merchants—yet they remain underserved and under-resourced by retailers and platforms, says an article by Tertia Tay, a consultant in McKinsey’s Singapore office, and Simon Wintels, a partner.

Like distributors, resellers purchase goods for the purpose of resale rather than consumption; unlike distributors, they source their inventory from intermediaries rather than directly from manufacturers. In Indonesia, these resellers range from individuals supplementing their income with a few ad hoc sales to multi-person networks for whom buying and reselling goods is a primary basis of financial support.

Those who aspire to keep pace with distributors face significant obstacles. Without access to volume discounts, marketing tools and other perks extended to distributors, resellers find themselves at a considerable disadvantage in an overcrowded marketplace.

This gap in support for the reseller segment represents a potentially sizable opportunity for consumer goods companies and e-commerce platforms: an estimated $115 billion to $125 billion in gross merchandise value (GMV), the article says.

The online reseller market in Indonesia is sizable, representing an estimated opportunity of $115 billion to $125 billion in GMV.

Despite their potential as contributors to the digital economy and as consumers for online retailers, resellers remain underserved as a consumer class in Indonesia, and they face several critical impediments, such as squeezed margins, lack of demand knowledge and pricing influence, low visibility, fluctuating social commerce performance, the authors say.

Microenterprises represent an estimated 99 per cent of online resellers in Indonesia, but they often have limited access to working capital and supply-management tools to optimise their operations. Compounding these limitations are resellers’ lack of influence in purchase price negotiations and access to metrics such as inventory demand, the article notes.

This all creates uncertainty in procurement, preventing resellers from stocking merchandise in larger quantities. Consequently, they face a perpetual risk of running out of stock and losing sales as a result.

Mainstream marketplaces are highly commoditised and overcrowded with multiple sellers hawking similar products. Sellers struggle to differentiate themselves from one another and reach the right audience, it notes.

Online retailers can differentiate themselves by providing a curated and rotating assortment of items to create a novel experience more likely to entice customers consistently. They can also explore options such as carrying exclusive, white-label brands, either identifying a selection of proven traffic drivers or working with suppliers to offer margin advantages, it says.

Resellers would greatly benefit from privileged access to value-added services from e-commerce platforms; services such as supplier financing, forward purchasing, quick delivery, customer relationship management (CRM) insights, and marketing-campaign management could help resellers realise operational efficiencies and expand their customer reach considerably, it adds.

Fibre2Fashion News Desk (DS)