‘The IPO is just one part of the journey’ – Bukalapak’s Teddy Oetomo

Bukalapak has transformed into a lean, sustainable business with a record IPO, but according to its president Teddy Oetomo, the journey of the Indonesian ecommerce firm has only just begun

In 2019, WeWork’s failed IPO sent shockwaves through the world of startups, leaving many companies scrambling to re-examine the ‘growth at all costs’ playbook. For those yet to learn that lesson, the COVID-19 pandemic was a harsh teacher through 2020. There were pivots, staff cuts and frenetic attempts at building a viable business model, all while trying to stay afloat.

Through these turbulent times, Indonesian e-commerce firm Bukalapak was among the few who had a distinct advantage. Having voluntarily put itself through some of this turmoil, Bukalapak was poised to reap the rewards of an influx of first-time online shoppers through multiple waves of the pandemic. Unlike its metro and tier 1 reliant competitors, Bukalapak saw 70% of its business coming from the hinterlands, which accounts for a massive 230 million people in Indonesia.

This more rational, less exuberant approach powered the firm to a record $1.5 billion IPO in 2021. But Bukalapak had started laying the foundation to this approach as far back as 2018 — a decision taken by the company that overlapped with Teddy Oetomo coming on board as chief strategy officer.

Currently president at Bukalapak, the shift marked Oetomo’s first foray into retail, having previously worked at Schroders and Credit Suisse. And yet he considered the move “a no-brainer.” He said, “The founders started Bukalapak with a vision to empower MSMEs and create a fairer economy. If Indonesia wants to avoid the middle-income trap, the first thing that needs to be solved is this sector.”

His near decade and a half in asset management left him well-equipped to deal with the shifts and high-pressure situations at Bukalapak. At Credit Suisse, he learnt the value of perseverance. He said, “You were practically doing the work of two people. You had to find a way to get things done. If that meant no sleep for two days, you just powered through.” At Schroders, Oetomo managed a senior team, many of whom had over 15 years of experience and were domain experts. Leading a more experienced team and communicating complex concepts in layman’s terms were skills he picked up on the job.

Navigating a tough transition

These skills served Oetomo well when joined Bukalapak — a company in the throes of transition in 2018. To raise more capital from investors, the e-commerce firm needed to demonstrate a sustainable business model. Which meant shifting away from magnitude of growth — necessary when Bukalapak was younger, trying to prove itself and gain market acceptance. Oetomo said, “We moved to quality of growth. To build something that will charge onwards, rather than just looking at growth for its own sake.”

Like all transformational changes, it brought a fair share of pain. Proposed long before the misadventures of WeWork and Uber became public, even the board was not entirely convinced. However, the senior management at Bukalapak had a clear vision on what the next steps ought to be.

The more sustainable approach came to life in different ways. A notable shift was in Bukalapak’s view of merchants and consumers. Oetomo said, “When a young tech company lands a customer, the underlying assumption is that acquisition is 100% targeted. It may not be true, especially when you are acquiring in the order of millions. You will be lucky to have a high hit rate.” Continuing to support this irrelevant audience meant a higher operational cost.

Another example was around how Bukalapak launched features or ran campaigns. Oetomo said, “We used to do this based on what was available and if we could collaborate to roll it out quickly. But there was no thought of ‘Is this the right thing to do?’”

Bukalapak started to track such initiatives on expected behaviour change and desired results. And to study just why a program or feature had worked out better or worse than anticipated. Oetomo said, “If something tracks better, you must ask yourself, if you struck a goldmine, or just made an unnecessarily conservative assumption, initially. If it’s bad, you need to ask why and if it’s something that can be fixed.”

It put an end to the ‘sample of one’ approach – decisions taken on gut-feel and how strongly an individual felt about a particular change. The new outlook significantly reduced feature creep – the compulsive desire to make ‘nice to have’ additions that ultimately bog down the core offering. Oetomo said, “In 2019, we had a hardware division in a tech company! We cleaned up a lot, if not all of it.” Today, all proposals go through a product committee review process and are judged on their relative merits. The committee keeps in mind the finite resources on hand, and prioritises the best ideas.

This fiscally prudent approach even affected parts of the business that were doing well like Mitra Bukalapak, an online-to-offline (O2O) platform aimed at warungs and other small business owners. Oetomo said, “Usually, when you see such a strong growth, you clap, cheer and leave it alone. But our senior management actually asked questions on whether this was sustainable and how it would affect the health of the company.”

With these steps in place, Bukalapak was well poised to take on the pandemic. Oetomo said, “By the end of our revamp, we were leaner, more focused and efficient. The financials were robust and we didn’t need to let go of anyone during the pandemic.  The only adjustment we had to make was work from home.”

A cautious approach to acquisitions

This abundance of caution is evident even in Oetomo’s philosophy when it comes to acquisitions. Speaking about his approach, Oetomo said, “We pursue an acquisition if there’s a firm readily available, reasonable priced, and most importantly, a management team, we can work with, because we take a majority stake, if not 100%.”  Another key consideration is whether Bukalapak can build the product, feature or audience, or if the time and expense involved will be too great to make it worthwhile.

This approach was evident in Bukalapak’s acquisition of  Five Jack, which owns Itemku, a marketplace for the online gaming community.  Oetomo believed his firm wouldn’t have been able to get the merchants that already existed on the platform, even after years of trying. He said, “They address a very specific community – gamers – that the founder was from. None of us had that background.”

Asked about the red flags he looks for during an acquisition, Oetomo said, “We have not gone forward with proposals where there was no cultural fit. The numbers tell their own story. When you start doing financial and legal due diligence, no acquisition is free of red flags. We just have to decide if it is solvable, or a risk that we can absorb.”

Creating the Bukalapak way

Oetomo has also spent time crafting and articulating the Bukalapak way of doing things – a philosophy that guides the actions of the firm. He said, “The first aspect is focus – how suitable is something to our target segment? We are not comparable to many companies, since we handle both online and offline, operate outside tier 1 cities and target MSMEs. Anything we do, needs to gel with that overall strategy.”

The second aspect is being very data oriented and collaborative. Projects at the company are typically never the responsibility of a single group, unless all that they require is a specialist skill set. The company is structured to avoid silos and is viewed internally as a group of startups. Oetomo said, “While they have a vertical reporting line, we challenge them to collaborate and work together. That’s why we can do this with a lot fewer people compared to many of our peers.”

IPO a waypoint and not a destination

Oetomo had a different perspective even on the company’s IPO. He said, “It’s part of a journey that’s still about empowering MSMEs. What we have done so far focuses on one vertical: the traditional convenience store.”

There are several others that demand Bukalapak’s attention: building materials, auto repair and eateries. Oetomo said, “We are far from where we want to be when it comes to bringing multiple sales channels to merchants.”  At the same time, Bukalapak is committed to delivering on numbers and meeting the performance expectations of being a public company. Oetomo said, “It’s important to show that we have taken the fiduciary duty of the investor’s capital seriously, and are turning it into a worthy performance to enhance shareholder value.

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This article was created in partnership with Bukalapak. To know more about its transformative approach to e-commerce in Indonesia, please visit the official site