With two out of five Indonesians living in rural areas, Dagangan’s Wilson Yanaprasetya tells WARC Asia Editor Rica Facundo how the e-commerce startup taps partnerships and AI to expand across the archipelago.
Download the eTail Asia agenda to find out more about Yanaprasetya’s keynote panel on Main Conference Day 2, May 16, 2024.
WARC: Give us an overview of the digital landscape in Indonesia.
Wilson Yanaprasetya: Indonesia is a unique country with over 787 ethnic groups and a population of more than 277 million people. Over 77% of the population use the internet on a regular basis. Digital adoption is rapidly growing but it doesn’t apply to all areas of Indonesia since digital infrastructure is one of the country’s challenges and the characteristics of Indonesian users have their own uniqueness, including their preferences, behaviours and purchasing power, which differ from those in the West and even other APAC countries.
What makes the retail landscape different in Indonesia compared to the West and/or the rest of APAC? What level of maturity is the landscape in and how has it evolved over the past few years?
Indonesia's retail media network landscape has been evolving in recent years but unlike the US and China – where dominant original e-commerce platforms like Amazon and Alibaba have established robust retail media networks – Indonesia's e-commerce ecosystem is a mix of local and international players competing for market share like Shopee, Tokopedia, Bukalapak, Lazada, etc, which provides advertising opportunities for brands to target users on their platforms.
However, those major players are mainly focused on the big cities here. If retailers are looking to target the wider population, particularly in rural regions, they should strongly consider leveraging digital platforms for marketing and advertising initiatives. Rural areas are frequently overlooked in favour of urban centres but they offer tremendous growth potential for businesses. According to World Bank 2022 statistics, approximately 42% of the Indonesian population reside in rural areas.
In many developing economies, the rural population constitutes a significant consumer base with rising purchasing power. Furthermore, rural areas are experiencing rapid infrastructure development, improved connectivity and rising disposable incomes, all of which contribute to their appeal as emerging markets.
What are the challenges of establishing retail media networks in rural Indonesia?
Entering rural markets has its own set of difficulties, starting with access and infrastructure. It can be challenging to develop trustworthy distribution networks in rural areas because of the lack of a strong infrastructure. In addition, limited access to the internet and technology can hinder marketing initiatives.
Second, rural areas are culturally and linguistically diverse, necessitating tailored approaches for different segments. People in rural areas are very connected with the current brands they use, a challenge for businesses when they want to introduce a new brand.
Altering consumption patterns is an additional obstacle. As rural incomes rise, patterns of consumption are changing. In order to align products and marketing strategies, it is essential to comprehend these changes. Additionally, in terms of awareness and perception, many rural consumers are less exposed to brands and rely on word-of-mouth referrals. Creating awareness and gaining trust can be a time-consuming endeavour.
Dagangan, as a rural commerce platform, partnered with several FMCG brands like Unilever, Coca Cola, Frisian Flag, etc., and we unlock previously unreachable markets, thus increasing revenue and market share for these FMCG brands. We partner them and take care of the logistics and infrastructure necessary to reach Tier 3-4 areas. Dagangan also offers FMCG brands a data analytics platform, covering their sales performance, user insights and market potential in Tier 3-4 areas.
Additionally, we leverage our know-how and data on Indonesia’s rural markets to set up effective marketing campaigns, providing access and visibility that increase product adoption and sales for our partner brands in rural areas.
Partnerships (between brands, retailers and non-retailers with first-party data) are a key component of making retail media work. What’s the criteria for picking the right platform? Are there any misconceptions to dispel?
To pick the right platform, it is necessary to align brand identity and the products or services offered to the platform in order to match the target customer profile and brand messaging based on demographics and behaviours. This will dispel the misconception of a one-size-fits-all approach; choosing retail media networks should be tailored to the unique objectives, segments, etc. Here at Dagangan, we offer a deep understanding of rural markets, including their potential, local culture, preferences, traditions and purchasing behaviours.
The data and analytics capabilities are essential for effectively optimising campaigns and ads. They need to make sure that the platform provides advanced data to be able to track results across multiple channels. Dagangan offers an integrated data analytics platform, covering the sales performance, user insights and in-app promotion activities for brands for a deeper understanding of their investment.
The other thing to consider is pricing, which is required to assess the cost-effectiveness of using the retail media network platform for ads/campaigns in order to ensure the platform delivers good value and meets the expected ROI.
At Dagangan, most of our users reside in rural areas and partnering with us will help FMCG brands to penetrate deeper into the rural communities and gain wider brand awareness and reach.
Transparency, especially with data sharing, is another component of ensuring that retail media partnerships work. What advice can you give to brands and retailers about ensuring that partnerships work? What are some common pitfalls to watch out for?
In order for safe data sharing, there should be agreement on comprehensive data usage and a privacy policy that outlines how first-party data will be collected, shared and utilised throughout the partnership.
Implement regular performance monitoring and evaluation processes to assess the effectiveness of the partnership and identify areas for improvement.
Also, define key performance indicators (KPIs) up front and regularly track and analyse performance metrics.
One of the common pitfalls in a partnership is communication. Effective and open communication is crucial for the success of any partnership. Failure to communicate regularly, openly and transparently about the objectives and expectations can result in misunderstanding and missed opportunities. Both parties should have a shared understanding of what they aim to achieve through the collaboration.
As we are focusing on the rural areas, Dagangan can provide transparent and real-time data of rural transaction-tracking to the brands as an added value and supporting data insights to expand their product reach to the rural areas.
What are examples of Dagangan’s successful partnerships with retailers and platforms that have resulted in effective advertising placements? For example, is it just in the lower funnel or are you seeing retail media formats in Indonesia being able to impact upper-funnel metrics too?
Besides having a distribution network of 88,000 stores in 25,000 villages, we also offer a platform for retailers to gain deeper insights through accurate data in rural areas, with features such as:
- Real-time sales monitoring
- Market potential analysis
- Competitor comparison analysis
Additionally, we offer collaboration opportunities for their products to conduct more extensive sales activities for the rural community through Rural Brand Activation, which offers services like:
- Product placement on shelves and racks in stores
- Placement of banners, posters and brand pamphlets in stores
- Promotion programs through vouchers and cashback online via the app or offline at community gatherings
- Collaboration programs between Dagangan's social media and store owners to boost sales
One of the immersive projects we collaborated on was with Ultra Jaya, a company that produces aseptic dairy products, beverages and healthy drinks in Indonesia. We implemented an integrated online-to-offline visibility display contest program. Through our channels, we promoted this contest, encouraging retailers to display Ultra Jaya products prominently on their shelves. The “warung” (shop) that displayed the products best would receive a gold reward. Over the course of three months, this project contributed to 106% growth in gross merchandise value (GMV) for Ultra Jaya.
Currently, we have partnered with 22 principal brands, including six multinational and national brands, for this year’s visibility promotions with Dagangan.
Retail media can also be susceptible to the same pitfalls of other media such as brand safety violations, unviewable inventory and fraudulent activity. Is this a big problem in Indonesia and how should retail media networks address this?
Indonesia has its own code of ethics and regulatory frameworks in advertising practices and consumer protection called Etika Pariwara Indonesia, which regulates overall advertising communication between products, media and consumers. These regulations can help mitigate some risks associated with brand safety violations and fraudulent activity.
It is essential for retail media networks to address the problems proactively to maintain trust with their partners. Retail media networks should provide advertisers with transparent reporting on ad placements, viewability metrics and traffic sources.
To partner with brands, clear brand safety guidelines and policies that outline acceptable content and advertising practices are required to maintain a safe and trusted advertising environment. Also, to prevent fraudulent activities, retail media platforms should invest in advanced fraud detection and prevention technologies to identify and mitigate ad fraud effectively.
Looking to the near future, what is one area in the Indonesian retail landscape that you believe the industry needs to address in order to advance the industry?
AI integration. By leveraging artificial intelligence technologies, retailers and brands in Indonesia can enhance various aspects of their operations, including customer engagement, campaign personalisation, inventory management and supply chain optimisation. AI can improve operational efficiency by automating routine tasks and embracing AI integration holds the potential to drive innovation, competitiveness and growth within the Indonesia retail industry.
Dagangan also utilises AI in our operations, such as in customer behaviour analysis and sentiment analysis. We use AI to understand the context and intent behind search queries, delivering more accurate and relevant results. Over time, it learns from each customer interaction and continuously refines its understanding of the target audience, leading to progressively better search outcomes. This makes self-service easier, so customers can find what they're looking for without human intervention. It also provides businesses with valuable insights into buying preferences and behaviours, with the end goal to increase revenue, average order value and return on investment.
Additionally, we are currently in the process of developing an AI system to assist us in detecting visibility within offline stores. As we provide integrated solutions for retailers, spanning from online to offline visibility, it is crucial to have technology that can differentiate between various types of offline stores. This involves matching their historical transaction data with our own, enabling us to precisely target campaigns that are relevant to users based on their chosen criteria for offline stores.
With the implementation of AI, we will also be able to monitor our visibility within stores, including aspects such as product placement and pamphlet distribution. This real-time monitoring allows retailers to access detailed reports promptly.
You are speaking in a keynote panel at this year's eTail Asia event. What can the audience expect to hear from you and what excites you about this event?
This year's session promises an exhilarating exploration into unlocking value through strategic partnerships. We'll delve deep into the world of integrated online-to-offline solutions and targeted advertising across digital channels, with a keen focus on partnering for rural area monetisation.
I am thrilled to be part of eTail Asia this year. This forum presents a tremendous opportunity for us to forge meaningful connections with industry peers regionally.
Last year, I had the pleasure of meeting several individuals who later became strategic partners at Dagangan. Our collaborations have led to innovative initiatives that have made a significant impact. I eagerly anticipate the chance to further expand our network and cultivate new partnerships that will drive mutual success and growth.
