High e-commerce fees squeeze margins

As of November, 10.2 million small and medium enterprises (SMEs) in Indonesia have gone digital as the pandemic pushed businesses to move online.

JAKARTA: Many small food and beverage companies feel their margins are being squeezed by high commission fees on e-commerce and food delivery platforms, putting their businesses in a tough spot, as mobility restrictions also compel them to digitalise to survive.

For Marwah Devianty, co-owner of homemade snack brand Mamichin, closing her online store on Shopee was a no-brainer as she paid higher fees and received lower profit margins compared with running her own webstore. The 26-year-old said that Shopee imposed a more than 3% fee for each successful transaction, higher than the 1% to 2% on other online selling channels.

She also sold her goods on Tokopedia, Instagram and Mamichin’s webstore, so hiking up the price of snacks on her Shopee store would render the products uncompetitive.

“Using e-commerce is actually expensive despite the many promotions offered,” she told The Jakarta Post last Monday.

“These promo events, which we have to pay to participate in, translate to low brand awareness anyway. So why join them?” she said, referring to the “Double Day” online shopping event as an example.

She opened her business in October last year, a month after being laid off from her job at a start-up due to the Covid-19 pandemic. After initially opening a store on Tokopedia, her business partner suggested selling on Shopee to attract more buyers.

However, after only three months, the duo ditched Shopee citing a complicated shipping arrangement and user interface, among other reasons. The team then focused on Tokopedia and the webstore.

“The webstore is our No.1 priority,” Devi said. “Yes, we have to invest in web development and ads, but I don’t mind because it brings more traffic.”

As of November, 10.2 million small and medium enterprises (SMEs) have gone digital as the pandemic pushed businesses to move online. Cooperative and SMEs Minister Teten Masduki set a target to have 30 million digital SMEs by 2024. Despite the digitalisation wave, not all businesses bet on online sales for their success. A case in point, Hendy Setiono, chief executive of kebab stall chain Baba Rafi, said that most of his business’s revenue came from offline sales.

He noted that it was common for entrepreneurs to experiment with using different online platforms, especially those platforms that offered promotions. Business owners also took into account additional fees, such as aggregator and delivery fees, before joining a platform.

“If we skip these promo events, we would be missing out. But, if we join, we should make sure to set the price right to avoid losses,” Hendy said in an online discussion hosted by culinary business school Foodizz on June 7.

Aside from integrating into e-commerce, businesses have also used food delivery services to expand their market. The two biggest food delivery players in Indonesia are GrabFood and GoFood, which are, respectively, operated by super-app companies Grab and Gojek.

Indonesia has the largest food-delivery service market in South-East Asia in terms of gross merchandise value (GMV) at US$3.7bil (RM15.32bil), according to a 2020 report by venture capital firm Momentum Works.

The GMV of the country’s food-delivery services accounts for about 31% of the combined food-delivery value of South-East Asia’s six biggest economies, namely Thailand, Singapore, Malaysia, the Philippines, Vietnam and Indonesia.

However, SMEs only get a fraction of profits from the billion-dollar industry as food-delivery services impose high rates on sellers. GoFood takes 20% commission plus 1,000 rupiah (29 sen) from the cost of goods sold on their platform while GrabFood takes 30% commission. Cloud kitchen and catering company YummyCorp cofounder Marbio Suntanu said that the emergence of new food-delivery services, such as ShopeeFood and Traveloka Eats, would make food-delivery platforms more competitive. “We hope and pray that platforms realise their fees are high, and that SMEs get too little margin,” he said during the discussion. Marbio said that his company recently launched Yummyshop, an app that helped businesses sell their goods through WhatsApp and Instagram.

Tokopedia product merchant assistant vice-president Puput Hidayat said the company had recently changed its merchant membership scheme. The platform now imposed a service fee between 0.5% and 2% for successful transactions, depending on the type of membership.

“Sellers can choose their membership type based on their preferences and business needs. This new scheme is in line with Tokopedia’s commitment to accelerate the digitalisation of as many local SMEs as possible,” she said.

Tokopedia’s basic merchant membership, Regular Merchant, is subject to the 0.5% service fee for transactions beyond the first 100. Under to previous membership scheme, Regular Merchants were exempted from service fees.

Shopee did not immediately respond to request for comment.

Institute for Development of Economics and Finance economist Nailul Huda expects social commerce, or selling goods through social media, to rise in popularity among sellers as it grants them more control over their brands and marketing strategies than when using e-commerce.

“SMEs board e-commerce and food-delivery services because these platforms are efficient but once they become economically inefficient, SMEs will opt for social commerce,” he told the Post, adding that social commerce such as WhatsApp for business and Instagram shops have yet to be taxed. Nailul said e-commerce and social commerce users would become increasingly segmented going forward, with home-based smaller brands preferring social commerce while bigger brands rely more on online marketplaces. — The Jakarta Post/ANN

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e-commerce , commission fees , digital


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