Creating Innovative Book Retail Business Through E-Commerce - a Case Study on an Evolving Indonesian Consumer

CREATING INNOVATIVE BOOK RETAIL BUSINESS THROUGH E-COMMERCE : A CASE STUDY ON AN EVOLVING INDONESIAN CONSUMER

MM- 5003 MARKETING MID-TERM EXAM

By

Andra Geraldy Yoseph

29317022

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BLEMBA Program

Master of Business Administration

School of Business and Management

Institut Teknologi Bandung

CHAPTER I

INTRODUCTION

1.1 Background

1.1.1 Rise of E-Commerce in Indonesia

As the era of internet and application-based technology begin to show its strength in the global business environment, Indonesia is on the middle of an e-commerce golden era. By looking deeper into Indonesian consumerism as have been researched by McKinsey&Company—Indonesia’s consumer spending, at 57 percent of its GDP^[1], is significantly higher than the figures for neighboring export-driven country, such as Malaysia, Thailand, and China. In relation to e-commerce sector, usage of Internet in the urban-areas of Indonesia has risen sharply over the last five years—by almost 40 percent—to reach about 40 million users in 2013, while social networking is by far the most popular activity, with approximately 70 percent of online users actively engaged on sites and mobile applications such as Instagram, Facebook, Twitter, Path, and others. This figure indicates a strong opportunity on Indonesian e-commerce sector.

Currently, Indonesia’s e-commerce market is quite similar to what has happened in China at the online marketplace beginnings, as huge numbers of entrepreneurial merchants selling goods purchased based majorly on social media recommendations. Moreover, e-commerce in Indonesia also similar to what happened in the early USA online marketplace industry, whose customers are not ready to trust online payments and retailers. From the current situation, Indonesia has big potential to breed various opportunities from e-commerce industry, propelling Indonesian online marketplace to the higher stage.  

1.1.2 Mobile-based Applications & Social Media

Indonesia has become one of South East Asia’s leading mobile-first nation, with a StatCounter report estimating that in 2015, more than 70 percent of Indonesia’s internet traffic originated from mobile devices^[2]. This shows that e-commerce based on mobile devices, or known as mobile-based application is showing a positive growth throughout the period in the same time encouraging strong opportunity for entrepreneurs to develop e-commerce based on mobile applications.

Further indication that Indonesians have comprised mobile-first initiatives comes from social media usage, with Indonesians having the highest mobile Facebook usage rate worldwide, with 63 million users in 2015 based on McKinsey’s report. Further projections put Indonesians’ future Facebook access via mobile being almost 99 percent by 2018, this figure shows a true dominance for mobile based application usage over desktop platforms. This unique phenomenon that Indonesia has taken also allows retailers to focus on creating truly mobile functionality, presenting a more unique yet flexible proposition to dominate in the retail space.

1.1.3 Indonesian Low Literacy Rate

Currently Indonesia is still struggling to make reading a habit based upon a recent research from UNESCO^[3]. Additionally, from a research conducted by John Miller, president of New Britain’s Central Connecticut State University, puts Indonesia in the second-lowest rank of 61 measurable countries for its literate behavior characteristics, ranging from numbers of libraries and newspapers up to years of schooling and computer availability. Based on the research, Indonesia sits in 60th place after Thailand and before Botswana, while Scandinavian countries are the champions of the research with Finland in first place, followed by Norway, Iceland, Denmark and Sweden rounding out the top five. This ranking suggested that literate behaviors are critical to the success of individuals and nations in the knowledge-based economics that define the global future.

Former Culture and Education Minister Anies Baswedan said that Indonesia has seen its illiteracy rate decrease significantly and we have many libraries, but the reading habit is still low because of a lack of passion^[4]. Anies admitted that poor reading habits are a serious problem in the country despite the many libraries available.

1.1.4 Book Retail on E-Commerce Platform

From the situation as been described above, writer decided to pick Book Retail Business on E-commerce platform according to the digital era opportunity as have been researched by McKinsey&Company, in the same time to develop socio-economic welfare by improving Indonesian literacy rate.

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CHAPTER II

BUSINESS OVERVIEW

2.1 Main Concept

Writer picks the name “Booku” for the business, to emphasize fun yet flexible value upon reading a book. While the business is mainly targeted for Indonesian market, whose people still find reading as a boring yet unpleasant experience, from this platform people can find that reading books is a very fun and satisfying experience.

The new experience that the writer put forward is the new paper-less experience of reading books, so people can read their favorite books on-the-go and on-demand. Talking about transformation from physical books to e- books is not fairly easy, but it’s not impossible to change it. We have experienced this same transformation in the music and movie business. On the music industry, over the period, it evolved from huge 12” Vinyl Records onto smaller cassettes, then transformed again into CDs, and now people just one click away from their smartphones to access music easily from Spotify, no more media is required. Same that happened onto movie industry, it evolved from Laser-Disc onto smaller VCDs and DVDs, and now people just one click away from their smartphones to access streaming services such as Netflix, Hooq, or I-flix. All of this phenomenon is relying upon the “on-demand” value and also not requiring any media other than smartphones and internet connection. So, the simplicity is becoming a big fashion nowadays, imagine that you want to bring along your favorite 800 pages books with the weight of 3kgs into the mall or coffeshop without having to bring the exact physical books, just your smartphone or laptop, that’s it.