Trade Pockets Series A Funding of 163,7 Billion Rupiah, Boosts Penetration to Tier-3 and 4 Cities

Startups social commerce Dagangan announced that it has secured series A funding of $11 million or equivalent to IDR 5 billion. The round was led by Monk's Hill Ventures with the involvement of MMS Group, K163,7 Ventures, Spiral Ventures, and Plug and Play.

Previously, the startup that was founded in 2019 announced A . pre-series funding with an undisclosed value from CyberAgent Capital, Spiral Ventures, 500 Startups, and Bluebird Group in June 2021.

To DailySocial.id, Co-Founder & Commerce CEO Ryan Manafe said the company posted record revenue in mid-2020, a trend that continues today. This is suspected to be due to various restrictions during the pandemic, making it an option to fulfill daily needs independently online increasingly in demand.

In contrast to people who live in urban areas, people in rural areas have their own challenges to get their daily needs fulfilled on a regular basis online. "The situation is exacerbated by accessibility issues that persist in rural areas, where retailers have to bear the cost of inefficient logistics for commuting to and from the city. Merchandising has tried to address these issues and is now on the right track," Ryan said.

He continued, "Our vision is to enable 100 million people in underserved rural areas to have easy access to quality daily necessities at affordable prices."

The fresh funds raised are planned to be used to develop local products private label such as frozen food, groceries, and household appliances. In addition they will continue product development and add new features including paylater. Access to logistics services will also be sharpened, while talent acquisition efforts and partnership expansion will be enhanced.

Merchandise will expand expansion in towns and villages tier 3-4 in Java, Sumatra, and Kalimantan.

Business challenges

Until now, there are still some challenges faced by the company when it started to reach out to cities and villages tier 3-4. Among them is user acquisition with low technology adaptation. Education is needed so that they get used to using the application and making purchases online online. Efforts were then made to intensify user acquisition activities on a regular basis offline.

"But indirectly we are helped social distancing awareness and the willingness of users to learn and adapt [to digital services]. In the future we plan to reduce the portion of acquisitions offline by gradually shifting to digital acquisitions," said Ryan.

Another challenge that is still being faced is the dependence on local approaches. Therefore, companies need to build strong local teams in each area and establish partnerships.

Another problem is the limited logistics infrastructure. With limited infrastructure in rural areas, both suppliers and consumers face the challenge of selling and buying products. Even when service E-commerce increases, the magnitude of logistics costs is difficult to avoid. Trade implement Hub-and-Spoke to help solve this problem.

"It also gives us a challenge because we have to stay open hub new in many areas. We plan to expand our business not only to other areas, but also to other channels, such as selling products private label us through service E-commerce and exports," said Ryan.

One of the focuses of this year's Merchandise business that we want to develop is product private label. There are many local products with great potential, but usually only available for the area or focused on tourists (eg bakpia in Yogyakarta). Some of these products are then exported, but are not widely available even on the island of Java. For people in big cities, they may be able to easily buy these products through services E-commerce, however, rural markets remain underserved due to high logistics costs.

"This is where Dagangan comes to help. We want to empower these products, especially those that are in high demand and most of the products that are not widely recognized (eg honey, brown sugar, local snacks) through private label we. This is not only beneficial for the stakeholder, but can also increase profitability," said Ryan.

Social commerce outside the big city

Various startups social commerce focus on working on the market in rural areas. The concept offered is considered more relevant, because in general social commerce participate in empowering the surrounding community as part of the business, for example being reseller.

Other startups that are also playing in the vertical are Super. Having just received series B funding of IDR 405 billion in April 2021, they have operated in 17 koa in East Java. The company utilizes a hyperlocal logistics platform to distribute consumer goods to agents in less than 24 hours after ordering. Super works with thousands of agents to distribute thousands to millions of necessities every month. Most of these agents are women.

In addition, there are RateS, Evermos, KitaBeli, and others. The size of the market is tempting. According to Bain & Co. data, in 2020 the total GMV for online trading businesses in Indonesia has reached $47 billion. Although the majority came from E-commerce or online marketplace, social commerce services have a contribution that is not small, which is around $ 12 billion.