Tokopedia is a pioneer of e-commerce in Indonesia. After serving millions of consumers and merchants for more than a decade, this unicorn company is planning to go public in 2021, possibly through a merger with on-demand services and payment firm Gojek.
Right now, when users open the Tokopedia application or website, they find a broad range of services—online retail, digital payments, a ticket sales portal for trains and planes, hotel bookings, movie and event tickets, subscription plans for streaming services, and even investment products.
Founders William Tanuwijaya and Leontinus Alpha Edison came up with the idea for Tokopedia in 2007 while reflecting on Tanuwijaya’s childhood experience. Born and raised in Pematangsiantar, a city in North Sumatera, he was an avid reader. But access to new books was limited; he had to wait for relatives from a nearby town to visit and bring him new volumes. When he was older, Tanuwijaya’s father and uncle sent him to Jakarta for school. In the capital, the stores had everything he needed and wanted. That was when it hit him: small towns and big cities offered vastly different access to products. Maybe technology could even things out.
Two years later, with starting capital from an acquaintance who believed in the founders’ vision, the duo launched the online marketplace Tokopedia.
Toko is Indonesian for “shop,” and is the first half of the portmanteau that is the company’s name. The founders’ choice of this designation reflected an early objective to build an all-encompassing marketplace for Indonesians. Tokopedia’s trajectory through the years shares some similarities with that of Alibaba, which also started out as an online retail portal that eventually branched out into a basket of business sectors.
Tokopedia came on the scene at the right moment—it hosted a wider variety of products and facilitated transactions safely when there weren’t many online marketplaces operating in Indonesia. On Tokopedia, users could withhold payment if they were scammed, which was a sea change from deals made on Kaskus, a popular forum where most Indonesians bought and sold goods in the 2000s.
In its early phase, Tokopedia’s service was solely limited to selling and buying things like one might on Taobao or Amazon. Most of its merchants were small and medium business owners, and Tokopedia took a commission from every transaction.
The platform quickly built a solid user base. In 2014, they caught the eyes of SoftBank and Sequoia Capital, which resulted in an investment to the tune of USD 100 million.
In 2019, Tanuwijaya said in an interview with Reuters that he wants Tokopedia to be a “super ecosystem” for merchants and consumers. The USD 100 million from SoftBank and Sequoia gave Tokopedia a war chest for its diversification, with fintech at the top of the agenda by 2016. The platform introduced a payment channel for use cases like mobile phone credit and electricity bill credit, followed by train tickets. Eventually, Tokopedia introduced banking services like a credit card application feature developed in conjunction with Standard Chartered, UOB, and Citibank. Users were able to do all of this in one app. Again, it was a new form of convenience.
Business was booming, and Tokopedia was only about to become bigger, faster. In 2017, the company received another USD 1.1 billion in dry powder from Alibaba Group and SoftBank.
The team at Tokopedia recognized that fintech was key to their success. To convince people to spend more money on the platform, payment and financing features had to be smooth and easy to use. To make that happen, Tokopedia linked up with e-wallet Ovo and became a strategic shareholder with a 41.08% stake, according to a report by market research company M2Insights. This didn’t just integrate Ovo into Tokopedia’s payment options. It also gave Tokopedia’s users the ability to use Tokopedia itself like an e-wallet without installing Ovo on their phone.
That was the moment when Tokopedia stepped up its presence in consumer fintech offerings, truly breaking out of its own confines.
Even more collaborations were in the pipeline. A partnership with Orori meant users could invest in gold commodities through Tokopedia Emas, a shariah-compliant investment feature that was popular with Indonesia’s Muslim population. In 2019, the company moved on to link up with state-owned pawn broker Pegadaian for this service. Tokopedia also added mutual funds, another popular investment option among young Indonesians, to its catalog.
“Branching into fintech is a great move, as it promises rapid growth and adoption, it also broadens its user base,” said Institute for Development of Economics and Finance (Indef) researcher Bhima Yudhistira Adhinegara to KrASIA.
Tokopedia rolled out fintech facilities for its merchants too. Sellers could take out loans through Tokopedia Pinjaman Modal (Tokopedia Capital Loan), where the company worked with a number of banks and online lenders. The program then rebranded as Modal Toko in 2019, as Tokopedia partnered with P2P lender Modalku, the Indonesian counterpart of Singaporean P2P lending platform Funding Societies. Now, merchants can borrow up to IDR 300 million, or around USD 20,700.
In August 2020, Tokopedia launched its own peer-to-peer lending platform, Dhanapala. This vertical is specifically geared toward Indonesia’s micro, small, and medium enterprises (MSMEs). Consumption loans run in the band of IDR 2–5 million (USD 138–345) with a 3% interest ceiling, while productive loans are capped at IDR 200 million with a monthly interest of 1.5–2.5%.