It has been a mixed bag for Southeast Asia’s e-commerce market with rapid growth followed by a slowdown. This has led to hiring freezes and retrenchments, as well as a course correction for the industry.
However, markets like Indonesia are still bright spots in the region with large populations and a growing middle-class. One such brand that is help spur e-commerce growth in the region is Cosmart, Indonesia’s first membership driven e-commerce platform for essential goods. With a model similar to Costco in the US and with strong investment from major players like Lightspeed, East Ventures, and Vertex Ventures SEA & India, they are poised to grab significant market share in the local market.
Founded by Alvin Kumarga and Robert Tan, Cosmart users have to pay a small amount to become a Cosmart member, after which they get access to high quality products at competitive prices, among other membership benefits. The company just raised US$5 million in seed funding. The funds will be used to further strengthen Cosmart’s technology and data infrastructure, build a world-class team, and strong partnerships with principals and key players in the supply chain ecosystem.
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We got a chance to speak to Alvin Kumarga, the CEO and Co-Founder of Cosmart. Alvin comes with a strong resume, having previous been the Senior Vice President of Financial Services at Traveloka and was also the co-founder of Airy Rooms, where he helped grew the company from its inception in managing 1000 accommodation properties across 40+ cities in Indonesia.
Since its inception in the second quarter of 2022, Cosmart has delivered over 100,000 products, grown its volumes by 6x in the past 3 months, with its members transacting 4 times more than users on other platforms. The company has already partnered with over 80+ principals, 500+ brands and has thousands of SKUs in stock, across 10 core categories.
Congrats on the funding. Can you share how you plan to use the investment?
Thank you! With this funding, we look forward to becoming the membership platform of choice, delivering a seamless and joyful shopping experience. We will also deploy the funds to further strengthen our technology and data infrastructure, build a world-class team, and strong partnerships with principals and key players in the supply chain ecosystem.
We are looking to expand our team – currently about 50 strong – with the hiring of high-calibre, experienced talent, not only in technology but also in retail, FMCG and operations. We will look to double this number within the next year.
We will also be using the funds on marketing efforts, to introduce our brand to the wider pool of consumers in the market and highlight the various reasons why they should shop with us.
On technology infrastructure enhancements, we plan to further build our demand side technology, to introduce a more discovery-driven platform for our users. For example, we are developing tailored product layouts for each individual consumer, incentivising them to browse more and discover new brands. We have also automated pricing technology to determine the best prices for each individual SKU on a real time basis, to balance profitability and the attractiveness of the products to our users.
We are also strengthening our operations by develop the technology to streamline our packing and shipping processes. While traditional ecommerce ships on average 2 products per shipment, we ship 20+ products per shipment. This means that the packing needs to be correct, weight distribution in the box also matters for the safe delivery of our products.
Membership-based e-commerce is a relatively new concept here, as most platforms try to lower the barrier to entry. Could you explain how it works for consumers?
We think what consumers are looking for in this market is value, and that even though most platforms try to “lower” the barrier to entry, there are still many pain points in purchasing household and office essentials. For example, I would have to visit at least 10 online stores to purchase all the items I require for my monthly needs. Moreover, the fact that each store has its own set of term and conditions, and shipping prices and delivery duration, further complicates the process.
Cosmart solves this pain point by functioning as a one-stop solution for users to purchase their monthly recurring needs. Through our membership, our users will get access to high quality products from multiple brands and principals at competitive prices. Moreover, we leverage technology to make it easier for users to discover, explore and select new brands and products – even offering free samples for them to try. By providing transparency in pricing, high quality of products and other membership benefits, Cosmart gives users confidence that they are shopping smartly, and they always feel like they are winning.
What have been some of the main barriers to growth so far?
Just like any new start-up being a brand-new entrant into a competitive market, especially the Indonesian e-commerce market, Cosmart has to grow its brand awareness among its target audience in order to differentiate ourselves and compete with our more established competitors.
Concurrently, it is challenging to educate prospective users on our membership model and how the benefits of membership outweigh its cost, especially since Indonesians are familiar with the current free-to-use online purchase models of large e-commerce apps.
However, we only see these as temporary barriers to growth – as we build up our capabilities through targeted user marketing, clear and active user communication and a superior product experience, we are confident that Cosmart will grow to become a mainstay in the market.
At the end of the day, our goal is to create a product that can change people’s lives for the better – enabling them to overcome mental burden by simplifying their online purchases, saving time and money as a result.
Given the slowdown in e-commerce over the last few months, how do you foresee growth progressing for the company?
COVID-19 stay-at-home restrictions allowed e-commerce to grow at breakneck speed, accelerating digital adoption and normalising online purchase processes. However, with the easing of pandemic restrictions in Indonesia, the demand in e-commerce in the last few months has inevitably slowed down as consumers want to resolve their pent-up demand to visit physical stores to shop, after being cooped up at home for almost 3 years. Once this urge has been resolved, e-commerce demand is likely to rebound.
However, let’s take a step back – despite the temporary slowdown in e-commerce demand, the fact is that the pain points of buying essential products from physical stores will continue to exist, i.e., waiting in long lines to check out, having to carry multiple bulky items home, not knowing if the preferred items are out of stock without making a wasted trip.
Additionally, the current climate of inflation could bode well for e-commerce players such as Cosmart because consumers are increasingly price sensitive. As a result, the market will curb its irrational discounting tendencies, compelling us to focus on how to make our product more serviceable and attractive to consumers by providing them the best value for their money.
In this regard, Cosmart has already delivered over 100,000 products, grown our volume by 6x in the past 3 months, with our members transacting 4 times more than users in other platforms – we are confident that this trend will continue.
What’s next for Cosmart?
We are striving to become a household name in Indonesia. Moving ahead, we will double down on our efforts to develop our product and features such as providing our members with free samples, best prices and return guarantees, as well as partnering with more principals to stock unique SKUs. These efforts will be initially focused on the Greater Jakarta Region (Jabodetabek), with a view to expanding to the rest of the cities in the country.