Indonesian retail company Sumber Alfaria Trijaya is reinventing its online shopping service, utilizing its vast network of Alfamart convenience stores as pickup points to tackle the country’s logistical challenges.
Alfacart is expected to be officially launched this week and will replace the company’s existing shopping site Alfaonline. Sumber Alfaria aims to list one million products from third party sellers, from electronics to clothes and groceries, and generate online transactions worth roughly one trillion rupiah ($70 million) by 2016. The company is investing $2 million to upgrade its IT system.
To distinguish itself from existing players such as Lazada, Sumber Alfaria will enable Alfacart users to pay and pick up their purchases at Alfamart stores. Known for its distinctive red and yellow logo, Alfamart is of the top two convenience store chains in Indonesia with about 11,000 stores as of last December. 1,200 stores are expected to be added during 2016.
“We understand there are some players in the market but the high cost of last mile [delivery] is still a concern,” said Sumber Alfaria president Hans Prawira, at a press conference on Friday. “We have presence in the market very close to shoppers.”
Logistics are a significant challenge in Indonesia’s archipelago of more than 13,000 islands. In addition to poor infrastructure, home addresses are often chaotically numbered and unorganized, causing major headaches for courier companies, said IT director Bambang Setyawan Djojo. “We know the address of every Alfamart, so it will make delivery easy,” he said.
E-commerce is booming in Indonesia but it is a costly business. Lazada recently received an investment of $1 billion from China’s Alibaba Group Holding, while Japan’s Rakuten shut down its online shopping site in the country. Sumber Alfaria only generated 451 billion rupiah in net profit on revenue of 48 trillion rupiah in 2015, a margin of less than 1%.
Alfaonline failed to gain widespread popularity due to the perception that it only sells groceries, Bambang said. Sumber Alfaria will focus on promoting the convenience of Alfacart.