Lippo’s retail arm Matahari Department Store dives into e-commerce

• Matahari aims to be an omni-channel retailer while continuing to expand offline stores
• Venture is supported by MatahariMall.com

LIPPO Group’s retail arm PT Matahari Department Store Tbk (Matahari) has dived into e-commerce with the launch of MatahariStore.com.

MatahariStore.com is not to be confused with MatahariMall.com, as the latter is Lippo’s e-commerce arm that sells a wide range of products, while the former is the online arm of brick and mortar retailer Matahari Department Store and focuses on fashion.

Towards the end of 2015, Matahari bought 14.9 million shares in MatahariMall.com, giving it a 10% stake. Matahari also signed an agreement to sell some of its products on MatahariMall.com.

However, almost a year later, Matahari decided that while the e-commerce traction was pretty good, it wanted to leverage on an online store with its own brand name, and reach more customers.

Matahari currently has 148 retail stores across 68 cities. Twenty-eight percent of the stores are in the greater Jakarta area, 40% are in Java excluding Jakarta, and 32% are outside of Jakarta. According to an internal survey, the retailer needs to open at least 400 stores to fulfill customer demand.

“We definitely do not have the power to build 400 stores, simply because we are faced with infrastructure issues. There are not enough malls across Indonesia capable of hosting our retail stores.

“This hampers our mission and eventually affects our bottomline. We should be able to reach as many middle-income consumers as possible, but we only have 148 stores and people who want to buy our products need to go to the bigger cities,” said merchandising and marketing director Christian Kurnia.

Christian said that by going online and having an e-commerce site, the retailer can reach more people with a minimum investment.

“There are now around 132 million internet users, 130 million middle-income people, and a potential 100 million who can level up to the middle-income group. This means big potential to a retailer. It’s just about how you are going to reach these people. Going online is the definite way,” he continued.

According to Christian, Matahari has a loyal customer base of 3.5 million registered under its loyalty card programme. By going online, the retailer can reach many more, though Christian did not say how many they were targeting.

In its nine-month (9M16) results report, Matahari said it had allocated Rp400-450 billion (US$30.5 - 34.4 million) for capital expenditure (capex) for the whole year in which 30-35% goes to adding new stores, 20% is for the refurbishment of 15 stores and 25% for information technology.

When asked about specific investments that Matahari had made for its e-commerce venture, Christian did not offer any details but said there was “very minimum investment, because we collaborated with MatahariMall.com for the technology infrastructure”.

Matahari posted a 10.4% increase in net revenue for 9M16 ended in September 2016 to Rp7.5 trillion (US$571.4 million) compared with Rp6.8 trillion (US$517.6 million) last year.

Omni-channel dream

It might be easy to say that the future is online for some companies, but to traditional brick and mortar retailers, going totally online without growing the legacy brick and mortar stores is not a wise idea.

“Honestly we had been so focused on expanding our brick and mortar stores all these years. We are now realising the need to have our products available online, but without killing the offline stores,” Christian said.

He added that the company is targeting to open eight brick and mortar stores this year. Five have been established and there are three more to go. They are planning to open six to eight stores next year, either in Java or outside the Java area.

“The future of retailers is omni-channel, keeping and growing offline stores, while promoting and improving their presence online. It needs to go hand in hand. People will still need the offline stores, but we are also giving them the freedom to shop online,” he explained.

The advantage of selling products online is it can be competitive in terms of pricing. There is no cost involved in hiring sales promotion girls (SPGs), no rental and the company can offer discounts of up to nearly 80% on certain products.

Even though Matahari has products being sold on MatahariMall.com, it is a limited selection. Now that it has its own e-commerce page, it will expand the online range to include all its products.

MatahariMall.com as the backbone

Being under the same roof allows for collaboration and partnership as MatahariStore.com is fully supported by MatahariMall.com’s technology and infrastructure.

Customers can access Matahari’s online store via MatahariMall.com or by going direct to MatahariStore.com.

“We are seriously tweaking Matahari’s online store. It will still be on the same platform as MatahariMall.com, but we will create a landing page for Matahari with its own look, fonts and colours, so customers can truly experience Matahari’s online store, not MatahariMall.com,” said MatahariMall.com’s chief executive officer Hadi Wenas to Digital News Asia (DNA).

All MatahariStore.com’s financial transactions and distribution of products will be handled by MatahariMall.com allowing for online to offline (O2O) pick-up at nearly 650 offline pick up points across the country.

Both companies will also work together in terms of promotions. MatahariMall.com will handle the online promotions of MatahariStore.com, while offline promotion will be handled by the retailer’s team.

Christian said that the company spent four months preparing the e-commerce venture, and has hired a small team to manage the transition.

For MatahariMall.com, managing MatahariStore.com’s landing page is a new venture in itself.

Hadi told DNA that after the launch of MatahariStore.com, MatahariMall.com decided to open up its infrastructure to help brick and mortar stores or small and medium enterprises go online.

“We will now provide a premium service for online stores to have their own landing page with desirable designs, rather than just have their products displayed and sold on MatahariMall.com’s platform,” he added.

Matahari aims to draw more fashion-minded customers to its e-commerce store by releasing a mobile app version of Matahari Store, both in Android and iOS.

“We have yet to decide on our target or how much contribution we want the online channel to bring to total revenue, but we are very optimistic that the online presence will boost both revenue and Matahari as a brand,” Christian concluded.

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