1. Startups

Elevenia's Long Breath Strategy to Compete in the E-Commerce Industry

Choose not to go with the flow and reduce discounts. Be smart in choosing subsidies to increase net income so that the business foundation is healthier

elevenia decided to withdraw from the 'unhealthy' war between e-commerce companies in order to improve its business performance by increasing the company's targeted net income. The shift in focus came from the direction of the new parent company, Salim Group, which became effective in the fourth quarter of 2017.

This directive was taken due to many triggering factors, one of which is the hustle and bustle of e-commerce competition which can now be categorized as unhealthy. The conditions that occur are massive wars of discounts, shipping costs, vouchers, and marketing gimmicks that are scattered on various sites.

Elevenia CMO Edward Killian said that Salim Group has a long-term commitment to grow elevenia. However, the strategy chosen was not to provide large financial support to participate in subsidies, but rather to focus on increasing net income (net revenue).

The trick is to reduce subsidies, not eliminate them altogether. Initially, the amount of the percentage could reach the range of 7-20 percent, supported by Elevenia's own pocket. The subsidies given by elevenia are now not that big, but at a number that the company feels is still able to subsidize it. Unfortunately, Edward is reluctant to reveal the numbers.

Net income is the positive difference between total revenue (operational and non-operational) and total cost (operational and non-operational) after deducting the estimated income tax.

Please note, elevenia monetizes one of them through transaction commissions taken from each successful transaction from its sellers. The amount is around 1-3 percent per transaction.

"We are looking for the right combination [for subsidies] because if we don't have promotions, in an extraordinary world already clustered with discounts it will be difficult. But how can we arrange promos without sacrificing our sustainability, that's what we can do "Edward explained to DailySocial.

"This is approach new with the Salim Group," he continued.

Elevenia started taking this step ahead of the acquisition effective in the fourth quarter of 2017. Gradually, net income crawled up to a positive level, whereas previously it was negative in the previous quarter. The era when companies still provide subsidies, discounts, and more.

When subsidies are reduced, he continued, it will definitely have side effects for Elevenia's business. The volume of transactions also decreased because initially the transactions came from people who wanted to use the subsidy. This effect has been calculated beforehand by the company.

Net income is the indication chosen to prepare the foundation of elevenia's financial structure to be healthier in the future. It's not about profit yet. According to Edward, Elevenia has not yet reached that stage.

"But roughly if net revenue already positive, it's just a matter of time and stairs just going forward. We growth slowly to a certain degree enter into Critical mass, should be cost underneath will be closed."

He continued, "But if net revenue- Yes, it's negative, how about closing other purchases, it doesn't make sense at all. But if it is positive, the longer it will be large because of the volume. If we live on a thin margin but with a large volume, one day we can cover all our expenses. Maybe it could be a few years. But at least the setup is correct from the start."

Get ready for the future

(L to right) Elevenia CEO Sugiharto Darmakusuma, CSMO elevenia Edward Kilian / elevenia

Edward continued that the strategy chosen by elevenia was a form of anticipation for the company to welcome the future, where people shop online because of convenience and access. Not because of a discount or marketing gimmick. He judged from a business point of view, that strategy was not setup that sustainable.

"But if we look at the current environment that is not healthy, the fight is subsidized. That's for short term just. Even though we have to look at this business as a long term, so how to play it no? matching."

"If the subsidies continue, growth [business] is getting bigger and bigger, but how long will it [give subsidies]."

He likens the current state of e-commerce to being in a marathon race. All sprint e-commerce are competing to do promotions, attracting the attention of potential consumers to transact. When sprinting, no one knows how long the breath will be. To be sure, the breath will definitely run out.

Edward believes this will also happen in the e-commerce industry, sooner or later.

"Business if it bleeds all the time, and has not found the finish point at the end of the marathon, it's strange. Businesses give subsidies every month, net revenue keep red, this is not a business."

Therefore, the Salim Group continues to provide support to elevenia, but the form is not intended for subsidies. But for elevenia's operations itself, to ensure the company remains productive.

Catch up

When choosing to reduce subsidies, it means that elevenia chooses to grow slowly. Nevertheless, the company continues to innovate in order to catch up, even though the goal is not to surpass competitors.

Some of them attract various communities of coffee and football lovers to connect with elevenia through the sale of special merchandise or limited edition products.

"The introduction is not about discounts, we want them to get to know Elevenia in a different way. If it's with a discount, surely in the future what they expect is another discount."

Then take advantage of the business network with the Salim Group, for example in collaboration with Indomaret through Indo Paket. The Indomaret outlet is a logistics place to pick up consumer goods that are closest to their location.

Next is the initiation of the eMart program to target monthly needs. The products are supplied from Indomarco and several other distributors who are already connected to elevenia.

The company also takes advantage of the collaboration with OttoPay (PT Reksa Transaction Sukses Makmur) to facilitate payments at Elevenia via electronic money. Currently, we can only work with publishers such as OttoCash and iSaku (owned by Indomaret).

Apart from that, elevenia is also still considering the possibility of expanding its business segment from the marketplace (C2C) to B2C and B2B.

"For B2C who have a warehouse, there is a possibility, it's still being seen feasible or not, B2B is also available, maybe we want to go there."

This effort was made by the company to attract consumers, who mostly come from the middle class first jobber, white collar workers with an age range of 20-35 years. Elevenia's penetration is strong in major cities throughout Indonesia.

Last year, elevenia recorded 4 million transactions with a turnover of over Rp1 trillion. Elevenia registered users reach 5,8 million people, but around 580 thousand active users.

There are 81 thousand registered sellers in elevenia, around 93% of whom are individual sellers. The total SKUs owned are around 4,5 million SKUs. The elevenia site was visited 419 million times. The application has been downloaded 1,4 million times.

"Now we see is not the time to compete, timingit's not quite right. These innovations are our efforts to catch up so you don't get too far medium-high pacebecause the moment is not to die together in this moment," said Edward.

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